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  • Writer's pictureChambers of Daksha Kumar

Imprisonment replaced with enhanced compensation u/s 138 N.I.A., Cheque Bouncing Case: Supreme Court

The Negotiable Instruments Act, Section 138, deals with cheque bouncing and other matters. Cheque bounce is classified as a civil wrong and was punished as a criminal offence until 1988.

The person(s) found guilty under section 138 of the Negotiable Instrument Act, 1881 could face up to a two-year sentence. However, individual rights to go to civil court remain unaffected. This right violated both civil and criminal law, under section 138 of the N.I. Act.

As a result, the clause has been subject to numerous revisions between 2002 and 2018, as well as judicial interpretations. The Ministry of Finance proposed decriminalising a number of minor economic offences in June 2020. Cheque bounce is one of them under section 138 of the N.I. Act.

However, the proposal is currently open for feedback, thus a final conclusion is not yet available. People support decriminalisation because they believe that the ultimate goal of this provision is compensation rather than punishment.

Following the amendment, a new section 143 (A) of the Negotiable Instrument (Amendment) Act, 2018 was added, which instructed the compensation to be paid with the cheque amount to the payee.

Furthermore, a cheque bounce is regarded as an economic offence for which the only method to induce reform is to impose appropriate compensation rather than incarceration. The supporter of decriminalization usually stated two reasons in favour of it.

The first reason in favour of decimalizing check bounces is the 'Reformative theory,' which stresses the accused's reform rather than his or her punishment. Putting the accused behind bars may not help him reform, but it may encourage him to debase himself.

The second point is that the offence of cheque bounce can be prosecuted under both civil and criminal law, causing delays in jurisdiction decisions and cases that are outstanding for longer periods of time, exceeding the jurisdiction's capacity.

Those opposed to decriminalisation argue that without punishment, individuals will lose their respect for the law. They will purposefully issue a post-dated cheque and refuse to pay.

As a result, the government has yet to make a decision on decriminalising cheque bounces and increasing compensation. The latest modifications are welcome steps, but they need to consider that the amendment should apply without hindering economic activity.

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