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Decriminalizing Dishonor of Cheques: The way forward?

Legislations criminalising minor offences such as cheque dishonouring are becoming redundant as the economy shifts away from cheques and toward various other means of payment.
The clause making cheque dishonour illegal was enacted as a result of an amendment to the law. The Banking, Public Financial Institutions, and Negotiable Instruments Laws (Amendment) Act, 1988 (Act 66 of 1988) was amended with the goals of instilling confidence in the effectiveness of banking operations, providing legitimacy to negotiable instruments in business dealings, and fostering banking operations efficacy.

While this clause instilled confidence in the system and people began to use this method of payment more often, technology soon took over with the introduction of the internet. The Magnetic Media-Driven Clearing System, based on electronically submitted settlement results, was implemented in the mid-1990s. The Electronic Clearing Service (Credit) system was launched in the 1990s to manage corporate and other institution's bulk and routine payment needs (such as wage, interest, and dividend payments). In 2002, the Negotiable Instruments Act was revised to facilitate the use of scanned cheque images and electronic cheques.

As citizens moved away from this form of payment and toward simpler ones like RTGS and NEFT, this clause under section 138 of the Negotiable Instruments Act,1881, which imposed criminal responsibility for cheque dishonour and specified that such an offence was punishable by incarceration, fine, or both, became increasingly obsolete.

However, Section 147 of the same act discusses the compounding of offences and states that if the original defendant returns before the Court and claims he is withdrawing from justice due to compromise and has aggravated the case, the conviction and sentencing must be overturned. There is no legal authorization to compound the offence.

Furthermore, in cases such as Gunmala Sales (P) Ltd. v. Anu Mehta, 2015, it was held that if a convict wishes to have the process under Sections 138 and 141 quashed by filing a petition under Section 482 CrPC, he must show that making him face trial will be a misuse of the court's process.

In the case of Rakesh Kumar v. Jasbir Singh and others, the single bench of Hon'ble Justice Sudhir Mittal opined that, while the crime of cheque bouncing is now a serious one, it was once considered quasi-criminal (having a criminal aspect but not being exactly criminal) and was compoundable under section 147 of the same act.

The court also noted that the legislature made the changes to the original legislation in order to speed up the trial process and prevent check bounces. As a result, the court concluded that the prisoner's two-year term was disproportionate, given the quasi-criminal aspect of the offence. It supported the appeal for a shortened sentence and reduced the penalty to the amount already served.

Award Winning Article Is Written By: Mr.Srinibash Dash
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Authentication No: MA114051099527-20-0521

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