This seems to be the year of retrospection for the Supreme Court. From changing its stance in foreign arbitration matters to insurance and now cheque bouncing under Sec 138.
In 1998, the court had held that you could not file a case on second dishonour of a cheque, if you had not acted on the first default. A new SC order changes this.
Approaching the courts to seek justice is a game of chance, to say the least. The end result is totally uncertain. Apart from cumbersome procedures, litigants are subject to the vagaries of law. While the law is enacted by the legislature, it is interpreted by the judiciary; therefore, any judicial pronouncement, particularly by the Supreme Court, becomes the law of the land. It is not uncommon to find contradictory views taken by different judges on the same issue. But, what can one do when the highest court itself finds that its judgement 14 years earlier was wrong? This is what is called ‘the vagaries of law’.
Cheques are the normal mode of payment for most transactions. To maintain the sanctity of the system, it is imperative that a cheque issued is duly honoured by the banker when presented. However, quite often, cheques presented for payment are dishonoured, making it imperative to take up the matter with the drawer. The process of trying to recover the amount; a simple process becomes a painful exercise.
Being aware of the hardships payees of dishonoured cheques have to undergo, while trying to recover their legitimate dues, a few years back, the legislature amended the Negotiable Instruments Act (the Act) and provided speedy remedy. The amended Act promised to solve the problem of bounced cheques within six months of filing of a complaint before the magistrate of competent court. Unfortunately, good intentions do not necessarily translate into easier and simpler processes. What was expected to be over in six months can now take three to four years in a magistrate’s court and a few more years, if the matter goes into appeal.
As if procedural problems were not enough, the games played by the drawers of cheques add further misery to the harried payees; in such a scenario, the apex court gave a judgement in 1998 in the case of Sadanandan Bhadran vs Madhavan Sunil Kumar [1998] 6 SCC 514 which only helped defaulters to evade the law and further complicate the process.
In the normal course, when a cheque bounces for non-payment and the matter is taken up with the drawer of the cheque, it is not uncommon to find the drawer asking the payee to re-deposit the cheque on the assurance that it will be honoured on presentation. If it is honoured, there is no further issue; the problem arises when the cheque is returned unpaid for the second or third time.
In Sadanandan’s case, the apex court held that while a second or successive presentation of the cheque is legally permissible so long as such presentation is within the period of six months or the validity of the cheque whichever is earlier, the second or subsequent dishonour of the cheque would not entitle the holder/ payee to issue a statutory notice to the drawer nor would it entitle him to institute legal proceedings against the drawer in the event he fails to arrange the payment.
This worked in favour of the defaulter as he could ask the payee to re-deposit the already bounced cheque a second or even a third time and dishonour it each time. In the process, a payee, who had not filed a complaint after the first time that the cheque had bounced, was denied the opportunity of filing a complaint on the ground that there was no fresh cause of action. The interpretation given by the court worked wonders in favour of defaulters while heaping misery on the victims.
Precedents play a crucial role in dispensation of justice. Lawyers, as well as judges, love to quote and abide by precedents and, at times, it would seem, without much application of mind. Since 1998, when the Sadanandan judgement was delivered, the apex court had several opportunities to correct the law. But, in case after case, it followed the same decision. It is mind-boggling to imagine the person hours lost and the economic cost to the country over all these years; also, in the process, gross injustice was done to several victims.
Recently, the apex court, once again, had the opportunity of considering a similar issue in a criminal appeal about the filing of complaint by a payee after the second or successive dishonour of a cheque. The apex court thought of taking a fresh look at the entire issue in the case of MSR Leathers vs Palaniappan [2012] 116 SCL (SC)].
While considering the MSR Leathers case, the Supreme Court drew pointed attention to Sadanandan’s case and raised the question as to “whether the judgment of the Supreme Court in Sadanandan Bhadran v. Madhavan Sunil Kumar [1998] 6 SCC 514 laid down the correct law.” The apex court noted that since Sadanandan’s case, several cases involving a similar issue were decided based on the precedent without taking a re-look on the relevant provisions of the Negotiable Instruments Act. In fact, the apex court made a reference to its own earlier judgement in 2008 in the case of Subodh S Salaskar vs Jayprakash M Shah [2008] 13 SCC 689. In this case, the apex court had observed that the Act had been amended in 2002 whereby additional powers were given to the court to take cognisance even after the expiry of the period of limitation by conferring on it the discretion to waive the one month period.
The Court noted that the intention of the provisions of the Negotiable Instruments Act was to punish unscrupulous persons who issue cheques for discharging their liabilities without really intending to honour the promise. The Court observed that one of the principles of interpretation of statutes was to promote the objective sought to be achieved by the legislation, in preference to an interpretation which defeated such objective. The apex court also remarked that, in the past, in several decisions, it has recognised ‘purposive’ interpretations as a sound principle for the courts to adopt while interpreting statutory provisions [New India Sugar Mills Ltd vs Commissioner of Sales Tax AIR 1963 SC 1207].
In the circumstances, the Supreme Court applied this rule of interpretation to the provisions of Section 138 of the Act and held that a prosecution based on a second or successive default in payment of the cheque amount should not be denied simply because no prosecution on the first default followed by a statutory notice and a failure to pay had not been launched. The apex court went on to remark that the entire purpose of Section 138 of the Act was to compel the drawers to honour their commitments made in the course of their business.
The Court further questioned why such a defaulter, “who fails to make payment despite statutory notice served upon him be immune to prosecution simply because the holder of the cheque has not rushed to court with a complaint based on such default or simply because the drawer has made the holder defer prosecution promising to make arrangements for funds or for any other similar reason.”
The Court concluded that there was no real or qualitative difference between a case where default has been committed and prosecution launched immediately and another where the prosecution was deferred until the cheque presented again got dishonoured for the second or successive time.
As a result, the Supreme Court overruled its decision in the Sadanandan Bhadran case and held that prosecution on the second or successive dishonour of the cheque was also permissible as long as it satisfied the requirements stipulated in the proviso to Section 138 of the Negotiable Instruments Act.
The latest judgement was excellently laid down by the Hon'ble judges. There are many instances of such incorrect judgments which still prevail. Let us hope that they would be looked into and corrected soon.
However, before we sit down and give rein to our skepticism, we should understand that law (in any country) is a complex and everchanging process. The legislative and the judiciary try to formulate laws keeping the modern thinking in mind and try to make it as broad based as possible in order to cover as much loopholes as possible. Obviously, that is practically impossible. Thus, there would always be some points through which an accused will wriggle through. When that becomes a regular issue, the authorities try to plug that. It is an ongoing process. One of the many reasons for the courts being overburdened with litigation (apart from the under staffing of the judiciary) is that cases are filed against which there are many clear judgments. There are several reasons for this :-
a) A litigation is a matter of arguing before the Judge who after listening to both sides and take a decision. So, who ever gives the better argument should (but not always....now that's another story) normally wins. This leaves a window for both sides to have hope and fight in the court
b) The clients always feel that they should win, only if the lawyer applies his/her mind and makes the effort. Trying to explain to the client that he has a weak case is viewed as a sign of weakness and offer of compromise is viewed with deep suspicion.
c) No two matters are exactly similar. Further, different high courts give different judgments on same type issues thereby giving hope of changes at other locations.
c) Judgments gets reversed often. All lawyers have their own opinion of most cases viewed by them and because of the changing stances of the judges feel that their argument would be the one to change the previous incorrect one.
Our judicial system is a rambling structure left behind by the british. And it still works. The delays in legal system is not an Indian concoction. Its there in the western countries as well. Only in ours poor,overpopulated and corrupt country, the problem is significantly more serious.
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