Negotiable Instruments Act could be amended : Supreme Court

The Supreme Court has suggested that the Negotiable Instruments Act, 1881, could be amended so that a convict in a cheque bounce case is made to pay a fine from which the complainant can be paid a compensation.

"One other solution is a further amendment to the act so that in all cases where there is a conviction, there should be a consequential levy of fine of an amount sufficient to cover the cheque amount and interest thereon, at a fixed rate of 9 percent per annum, followed by award of such sum as compensation from the fine amount," said the apex court bench of Justice R.V. Raveendran (since retired) and Justice R.M. Lodha in a recent judgment.

Speaking for the bench Justice Raveendran said: "This would lead to uniformity in decisions, avoid multiplicity of proceedings (one for enforcing civil liability and another for enforcing criminal liability) and achieve the object of Chapter XVII of the act, which is to increase the credibility of the instrument."

"This is, however, a matter for the Law Commission of India to consider," the judgment said.

The judges said that the act "strongly leant towards grant of reimbursement of the loss by way of compensation".

"The courts should, unless there are special circumstances, in all cases of conviction, uniformly exercise the power to levy fine up to twice the cheque amount (keeping in view the cheque amount and the simple interest thereon at 9 percent per annum as the reasonable quantum of loss) and direct payment of such amount as compensation".

The apex court said that the compensation by way of restitution on account of dishonour of the cheque should be "practical and realistic".

"Uniformity and consistency in deciding similar cases by different courts not only increase the credibility of cheque as a negotiable instrument, but also the credibility of courts of justice," the judgment said.

"In same type of cheque dishonour cases, after convicting the accused, if some courts grant compensation and if some other courts do not grant compensation, the inconsistency, though perfectly acceptable in the eye of law, will give rise to certain amount of uncertainty in the minds of litigants about the functioning of courts," the judgment said.

Citizens will not be able to arrange or regulate their affairs in a proper manner, as they will not know whether they should simultaneously file a civil suit or not.

The problem is aggravated since in spite of provisions for concluding such cases within six months from the date of the filing of the complaint, these seldom reach finality before three-four years, the judgment said.

These cases give rise to complications where civil suits have not been filed within three years on account of the pendency of the criminal cases.

"While it is not the duty of criminal courts to ensure that successful complainants get the cheque amount also, it is their duty to have uniformity and consistency, with other courts dealing with similar cases," the judgment underlined.

The court said this while dismissing an appeal challenging the Kerala High Court's verdict that the trial court verdict of imposing fine and awarding compensation could not co-exist.