40 lakh cheque cases clog judiciary: SC

The Supreme Court on Monday sought suggestions from the Centre and state governments to resolve the grave problem of over 40 lakh pending cheque bouncing cases, which slowed down the justice delivery system already over burdened by more than 2.7 crore cases.

Entertaining a PIL filed by Indian Banks' Association (IBA), a bench of Justices K S Radhakrishnan and Dipak Misra said: "It is a very serious issue, but how to solve it? Just highlighting the problem will not do. Tell us a solution without seeking setting up of special courts." The IBA said amount involved in such cases relating to its member banks exceeded Rs 1,200 crore.

Appearing for IBA, senior advocate Shyam Divan said time has come for the Supreme Court to issue effective guidelines to streamline the procedure for hastening disposal of cases of cheque bouncing instituted under Section 138 of the Negotiable Instruments Act. "This will not only render speedy justice in cheque dishonour cases but improve functioning of the justice delivery system as a whole," he added.

"Despite categorical findings of the Supreme Court to the contrary, magistrates continue to summon complainant's witnesses to depose in examination in chief with respect to matters stated in complainant's affidavit. This is resulting in enormous delays and inconvenience apart from defeating the summary procedure prescribed by Parliament," he said.

Moreover, this also provided an opportunity to the accused to approach the high courts further delaying the trial, the IBA said and drew court's attention to guidelines laid down by the Delhi High Court and few other HCs for speedy adjudication of cheque dishonour cases. "We need a guideline for streamlining adjudication of these cases across the country," Divan said.

In a 2010 judgment, the SC had laid down guidelines for early settlement in cheque dishonour cases under Section 138 of the Negotiable Instrument Act. It had ruled that defaulters going for early settlement before the trial court would have to pay just the principal amount with applicable interest.

But if they approached the district court for settlement after being convicted by the trial court, they would have to pay an additional 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. 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 SC had said.