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| M J Antony: Bouncer for criminal courts |
| M J Antony / New Delhi Jul 22, 2009, 00:20 IST |
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The art of writing cheques with no money in the bank is booming despite censorship.
It is estimated that more than 70 per cent of seven lakh criminal cases pending in the subordinate courts in the national capital deal with bounced cheques. At least three times more such cheque disputes might be getting settled out of court — or even outside the law. In visual terms, there are more bounced cheques (11 lakh) in Delhi than cars on city’s crammed roads.
The situation in other business centres cannot be far different. The national figure for invalid cheque cases is 38 lakh and they greatly outnumber other crimes. A look at the recent issues of law journals shows that the list of cases under Sections 138 and 141 of the Negotiable Instruments Act is as long as that of murder. The payees seem to stop just short of that.
Some time ago, the Chief Justice asked corporate bodies to not use courts as ‘collecting agents’. While hearing a cheque bouncing case, he pointed out an instance in which an incredible 73,000 cases were filed on a single day by a private telecom company before a Bangalore court under Section 138 (cheque bouncing).
The Law Commission has taken into account this crisis and recommended in its 213rd report setting up of fast track courts, at the magisterial level, to clear the backlog. Dates for hearing cheque cases are now given some 18 months after they are filed. The commission stated in its recent report that these cases have ‘virtually paralysed the working of the criminal courts in the country’. The amendment to the Act, to make issuance of cheques without sufficient fund in the bank a crime, has proved ineffective. Therefore, the commission recently suggested that an amendment should be introduced to compel the drawer of the cheque to pay 50 per cent of the amount on receipt of summons. The final judgment may take years.
One of the recurring issues coming to the court is the extent of liability of the top echelons of a company for issuing invalid cheques. According to Section 141 of the Negotiable Instruments Act, if a company issues a cheque which is dishonoured, every person who at the time the offence was committed was in charge of or was responsible to the company shall be deemed to be guilty.
Earlier this month, the Supreme Court again dealt with such an issue in K K Ahuja vs V K Arora. Both were at the helm of their respective firms, and the question was whether a person who was in a responsible position was automatically liable for the fault of the company. While the payee lost the case in the appeal, the judgment is significant in that it summarised the law on this vexing issue in the hope of relieving the court of further such appeals.
In the four-point summary, the court stated that if the accused person is the managing director, he would be presumed to be in charge of the conduct of business of the company and could be liable for the offence. If a director had signed the cheque, it would be presumed that he was in charge of the business. In the case of a director, secretary or manager as defined in the Companies Act, the complaining payee must assert that they were responsible for the running of the business. Other officers of the company cannot be made liable under Section 141 unless there is a specific allegation that they had connived at or been negligent in issuing the cheque.
Though the courts deliver judgments on bad cheques every week, there is no finality, as the synergy produced by smart businessmen with the aid of resourceful lawyers has no limits. The courts also hand down contradictory judgments. The Supreme Court judgment cited above seem to contradict another judgment in the case involving BSNL and the chairman of Data Access Ltd. According to this decision, it would be presumed that directors were in charge of the affairs of the company and it is for them to prove that they were not responsible for the issuance of the cheque.
The high court judgments deal with a variety of problems arising on this subject. For instance, if the amount in figures is different from that in words, the drawer would not be liable. If the amount written on the cheque is more than what is due to the payee and it bounces, the drawer would again escape prosecution. Then there are scores of judgments on the arguments quibbling on ‘holder in due course’ and jurisdiction of the courts. Altogether, these two sections in the Negotiable Instruments Act have proved to be a fertile ground for delaying or denying payments — except to the lawyers.
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