Decriminalising Section 138 Of Negotiable Instrument Act, 1881
Written by Purvi Raheja
First Year, Vivekananda Institute of Professional Studies, New Delhi
Disclaimer: Please note that the views expressed below represent the opinions of the article's author. The following does not necessarily represent the views of Law & Order.
“Government is not the generator of economic growth, working people are.”
Recently the Ministry of finance proposed to decriminalize a host of minor offences under 19 legislations and suggestions were asked from the public about the same, deadline to which was 23rd June 2020. There are a total of 36 sections of these 19 legislations that the government had proposed to decriminalise.
Decriminalisation is defined under the Oxford dictionary as the action or process of ceasing to treat something as illegal or as a criminal offence.
The most prominent out of these sections is the Section 138 of the Negotiable Instruments Act, 1881 which has been analysed by the author in this article.
The penal provisions provided under Sections 138 to 142 of the Act have been enacted to ensure that obligations undertaken by issuing cheques as a mode of deferred payment are honoured by the respective individual.
Section 138 of the Act particularly provides for circumstances under which a case for the dishonour of cheques is filed.
An offence under section 138 of Negotiable Instrument Act (hereinafter NIA) 1881 is a criminal offence which is a non-cognizable and a bailable offence. It is defined in the act as “Dishonour of the cheque for insufficiency, etc., of funds in the account. Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provisions of this Act, be punished with imprisonment for [a term which may be extended to two years], or with fine which may extend to twice the amount of the cheque, or with both.”
The main objective of introducing section 138 in the year 1988 was to increase and strengthen the use of cheques by promoting the efficiency of the banking sector. Decriminalising this section would in absolute terms cease the very aim and objective with which it was formed.
Reasons provided by the Government
The ministry of finance (hereinafter MoF) had provided certain reasons for the decriminalization of sections.
MoF stated that decriminalisation of this section would help in promoting domestic and international businesses and will encourage investors to invest with a free mind and create confidence among investors where they wouldn’t have to worry about the stringent Indian laws. What MoF forgot to mention was that decriminalisation of Section 138 would also vanish fear from the minds of accused as there would be no criminal punishment for the same.
The other reasons provided were that it would control and reduce the sharply increasing cases of economic offences in courts. People would stop the misuse of cheques which would also result in reducing the crowd in jails and courts. The main objective behind such decriminalisation was to promote economic growth and ease of doing business in the country. The government by decriminalising this section also intends to promote their motto of "Sabka Sath, Sabka Vikas, Sabka Vishwas.”
It was rightly said by, Saint Augustine that "Punishment is justice for unjust”
Decriminalisation of section 138 of NIA would remove the fear of going to jails in the minds of deceitful accused and such individuals would openly commit crime as there would be no criminal punishment resulting in more cases of dishonour of cheque, therefore, increasing the number of cases filed in civil court.
Cheques would lose its legal sanctity as people would no longer trust taking cheques. After decriminalisation of this section; it will become a civil offence and civil proceedings take a lot of time to come to a verdict. Furthermore, the complainant will also have to pay some amount of money while filing a civil suit which isn’t possible for everyone to pay and hence this would discourage people from filing a suit.
Therefore, once cheque loses its legal sanctity it would do no good to economic growth rather it may increase the cases of economic fraud. People would stop considering repayment of loans as a serious issue. When cases of economic fraud would increase the government would
again have to make amends which would technically lead to wastage of time of both government and the public.
Cashless economy- The government clearly aims to make the economy cashless and decriminalisation of section 138 of NIA would definitely serve as a stepping stone for achieving this aim. But considering the disadvantages and consequences associated with this move, the government should refrain from taking such steps at a time like this where the country’s economy is already unstable.
The government has proposed to decriminalise cheque bouncing cases because of COVID 19 crisis with the aim of improving business sentiments. But it can be clearly seen that the government here is looking only from the investor’s perspective and not from businessmen who accept payments through cheques.
The government and the people of our country are well aware of the fact that businessmen have to provide goods on credit and various people also buy products on credit with a promise of payment of requisite money on time. Most people in such cases often draw cheques for future payment and businessmen without any doubt accept payments made through cheques as they are certain that there is a law protecting them in case of dishonour of cheque. Thus decriminalising section 138 of NIA would create confusion, hesitation and suspicion in the minds of businessmen while accepting cheque payments.
In order to reduce the rising cases of cheque bounce, the government can put 1% or 2% court fees on cases filed under section 138 of NIA as this would make people file cases with the genuine amount of money. Mala fide and dishonest cases would decrease and cease gradually as nobody would pay 1% or 2% court fees for a false suit. The government could also give cases below or equal to rupees 1 lakh to Alternate Dispute Resolution ADR for crowd controlling and saving the precious times of the courts which can be utilized in solving more important issues. If these suggestions are taken into consideration by the government, it would not only be good for the Indian legal system but also for the economic growth of the country.
In the author’s opinion, the government should not decriminalize section 138 of NIA. The government said there would be economic growth but how would they ensure that there would surely be any growth? What steps would be taken by the government?
Making amendments and decriminalising sections to encourage investors to infuse capital during this pandemic won’t serve the economy for a long term as this pandemic is temporary and would eventually fade out but the economy and its growth is something that needs to be protected in the long run. If section 138 of NIA is decriminalised the number of cases of economic fraud would increase and bring instability which surely the government would not want to entertain at this time.
 The Economic Times, Finmin proposes to decriminalize host of minor offences under 19 legislations (June 10, 2020,05:11 PM), https://economictimes.indiatimes.com/news/economy/policy/finmin-proposes-to-decriminalize-host-of-minor-offences-under-19-legislations/articleshow/76302412.cms.  Krrishan Singhania, India: Section 138 of Negotiable Instrument Act: Overview, SINGHANIA & CO. (June 06, 2019), www.mondaq.com/india/financial-services/812822/section-138-of-negotiable-instruments-act-overview.
 UNIVERSAL LAW PUBLISHING CO. PVT. LTD, THE NEGOTIABLE INSTRUMENTS ACT 1881, 33-35 (S.krishnamurthy Aiyer 9th ed. 2006)(2007). BIBLIOGRAPHY
The Economic Times, Finmin proposes to decriminalize host of minor offences under 19 legislations (June10,2020,05: 11 PM) https://economictimes.indiatimes.com/news/economy/policy/finmin-proposes-to-decriminalize-host-of-minor-offences-under-19-legislations/articleshow/76302412.cms.
Krrishan Singhania, India: Section 138 of Negotiable Instrument Act: Overview, SINGHANIA & CO. (June 06, 2019), www.mondaq.com/india/financial-services/812822/section-138-of-negotiable-instruments-act-overview.
UNIVERSAL LAW PUBLISHING CO. PVT. LTD, THE NEGOTIABLE INSTRUMENTS ACT 1881, 33-35 (S.krishnamurthy Aiyer 9th ed. 2006)(2007).