Tuesday, May 4, 2010

Cheque bounce ~ Pay 20% more: SC

Cheque bounce: Delay settling defaulted amount, pay 20% more: SC
It Says Settlement Has To Be Done In First Two Hearings

From now, delay in settlement of cheque bounce cases will cost the defaulter heavy, upto 20% of the cheque amount.
The penalty for delayed settlement of the cheque amount, after conviction in the trial court, would rise steadily from 10% in the district courts, 15% in High Courts to a whopping 20% in the Supreme Court.
The SC on Monday took this radical step through a pioneering judgment which will curb the tendency among defaulters to sit over the amount tendered through a bounced cheque.
Saddled with 30 lakh cheque bounce cases, the SC accepted most of the suggestions given by attorney general GE Vahanvati. A Bench comprising Chief Justice K G Balakrishnan and Justices P Sathasivam and JM Panchal also laid down guidelines for early settlement in cheque dishonour cases under Section 138 of the Negotiable Instrument Act.
The judgment, authored by CJI Balakrishnan, indicated that defaulters going for early settlement before the trial court would have to pay just the principal amount with applicable interest.
But if they approched the district court for settlement after being convicted by the trial court, they would have to pay 10% of the cheque amount to avoid going to jail. So if a cheque amount is for Rs 1 lakh, then to compound the offence before the district court, the defaulter has to pay an additional Rs 10,000 to avoid going to jail.
Similarly, if the defaulter agrees for settlement and compounding of the offence at the HC stage, then he would have to pay 15% of the cheque amount which would increase to 20% if he moves the Supreme Court.
The amount so collected would be given to Legal Aid Authorities of the respective states which provide free legal assistance to poor litigants in various forums, the apex court said.
This judgment will go a long way in reducing the pendency of over 30 lakh cheque bounce cases in various courts across the country which has a jamming effect for the wheels of justice already slowed down by pendency of 2.7 crore cases.
During the hearing of a Section 138 case between Damodar S Prabhu and Sayed Babalal, the Bench observed that there had been an enormous rush of cases after cheque bounce was made a penal offence in 1989 followed by the amendment in 2002 providing for summary trial for early resolution of the dispute.
In most cases, the courts spend a lot of time issuing notices and summoning the accused and when the time comes to deliver the verdict, the parties reach a compromise and seek compounding of offences, the Bench had said.
The CJI had said that the rush of cheque bounce cases had affected court work and special courts had to be set up to deal with the deluge. “Recently, a corporate house filed as many as 7,300 cases under Section 138 of NI Act in Bangalore in a single day. The courts are not collecting agents of corporate lobbies,” he had said.
In the case at hand between Prabhu and Babalal, the parties had reached a settlement after the accused agreed to pay up the cheque amount and wanted compounding of the offence for a burial of the case.
Section 138 of NI Act, 1881 was introduced in 1989 making dishonour of cheques a punishable offence. The punishment could extend to two years imprisonment and a fine that could be twice the amount of the cheque that was dishonoured.

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