To be or not to be: Decriminalising Section 138 of the Negotiable Instruments Act

The Ministry of Finance this week issued a notification asking stakeholders for suggestions on the decriminalisation of around 39 sections which contain minor offences under 19 different Acts, in order to improve ease of doing business in India and help unclog the court system and prisons.

Out of the list of proposed sections for decriminalisation, Section 138 of the Negotiable Instruments Act, 1881 is probably the most important one, as it has a direct impact on a huge number of people.

Though the Negotiable Instruments Act was passed in the year 1881, Chapter XVII of the Act comprising Section(s) 138 to 142 was inserted by the Banking, Public Financial Institutions and Negotiable Instruments Law (Amendment) Act, 1988.

Section 138 provides that in case of dishonour of cheque for insufficiency of funds or for any of the prescribed reasons, the defaulter can be punished with imprisonment for a term which may extend to two years, or with fine which may extend to twice the amount of the cheque, or both.

The 213^th Report of the Law Commission of India pointed out that over 38 lakh cheque bouncing cases were pending in various courts in the country as of then, and over 7.6 lakh cases were pending in the criminal courts in Delhi at the Magisterial level alone.

The number of cases that are pending in several courts in India under Section 138 has seriously cast a shadow on the credibility of our trade, commerce and business. Due to the huge backlog of cheque bouncing cases, the trial of other important and rather more serious cases are sidelined, resulting in the litigants and the public losing faith in the judicial system.

The offence under Section 138, from the criminality point of view, has been a petty offence due to its nature. Any such criminal complaint, if the aggrieved person requires, can be filed under Section 420 (Cheating) of the Indian Penal Code, 1860, and there is no reason to have another penal provision for trying the same offence.

Further, its criminality has also been substantially decreased by inserting Section 147 in the Negotiable Instruments Act in 2002, making the offence punishable under Section 138 of the Act compoundable, which means that the parties on reaching a settlement can mutual agree and drop the charges against the accused.

With the enactment of statutes in recent times, it has been observed that there have been instances of interweaving and blurring of legal forms, especially under provisions like Section 138 of the Negotiable Instruments Act, where the civil remedies sit alongside some criminal offences. This mutation of legal forms tends to often erase the functional distinction between a criminal law proceeding and a civil law proceeding.

Criminal law across all liberal democracies including in India provides for certain protection to accused like the ones mentioned and interpreted by courts under Articles 20, 21 and 22 of the Constitution of India and also several protections mentioned under the European Convention of Human Rights, International Convention on Civil and Political Rights etc. But when a proceeding against a person is labelled as a civil proceeding and has a tendency to provide punishments like imprisonment or something equivalent, then the entire purpose of these protections afforded to the accused gets defeated.

Thus, cloaking a civil claim as a criminal claim has the impact of diluting provisions that guarantee a fair trial. This is often is the case under Section 138 of the Negotiable Instruments Act.

According to penal theorists, what distinguishes criminal law from civil law is the stigma that it attaches on the wrongdoer. The tag of being a ‘criminal’ invites ostracization. This impact is seen throughout criminal jurisprudence. The prospects, for instance, of standing for public office or getting employed go down for a criminal. The same impact is not seen in civil wrong doings. A tortfeasor, for instance, is not seen as morally culpable, certainly not in the same way as a thief or a murderer is. The loaded language of being a convict has a lot of authority, both in the courts and outside.

The distinction between criminal and civil law is also reflected in other spheres, for example, in the standard and burden of proof. In a criminal case, the burden rests with the prosecution and the case must be made beyond reasonable doubt. In a civil claim on the other hand, it is on preponderance and she who asserts must prove. This has to be thought through in context of cases of cheque bouncing. What values do we attribute to this claim and what underpins it? What level of moral culpability do we attribute to it?

There are, of course other considerations, including pending costs, time spent in litigation and economic interests. Nonetheless, principles of criminal jurisprudence cannot be suspended. Any derogation of these has to be robust, clear and justifiable.

Vishavjeet Chaudhary is an Advocate and a Barrister-at-Law. Arindam Bharadwaj is a student at Jindal Global Law School.