Directions issued for quicker disposal of cheque dishonour cases

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    The Supreme Court recently ruled on how proceedings for an offence under section 138 of the Negotiable Instruments Act,1881 (NI Act), can be regulated where the accused is willing to deposit the cheque amount.

    In Meters and Instruments Private Limited & Anr v Kanchan Mehta, Mehta filed a complaint in 2016 alleging that Meters and Instruments and its director were to pay a monthly amount to her under an agreement and though a cheque for ₹29,319 (US$450) in discharge of legal liability was sent, but the cheque was returned unpaid for want of sufficient funds. Mehta filed a complaint under section 138 of the NI Act on which the magistrate after considering the complaint and the preliminary evidence, summoned the appellants. The director (appellant No. 2) of the company (appellant No.1) made a statement that he was ready to make the payment of the cheque amount. Mehta however declined to accept the demand draft. The magistrate dismissed the application filed by director of appellant No. 2 for compounding (settling) the case and this order was upheld by Punjab and Haryana High Court.

    The Supreme Court set aside the order passed by the high court and held that where the cheque amount with interest and cost as assessed by the court is paid by a specified date, the court is entitled to close the proceedings in exercise of its powers under section 143 of the NI Act. It made a reference to the 213th report of the Law Commission of India, submitted in 2008, and noted that out of total pendency of 18 million cases (at that time), 3.8 million cases (about 20% of total pendency) related to section 138 of the NI Act.

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    The dispute digest is compiled by Bhasin & Co, Advocates, a corporate law firm based in New Delhi. The authors can be contacted at lbhasin@bhasinco.in or lbhasin@gmail.com. Readers should not act on the basis of this information without seeking professional legal advice.

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