Bounced checks are still considered a criminal offense

In 2020, India’s Finance Ministry proposed decriminalizing some minor crimes with the aim of improving business sentiment, attracting investment from domestic and foreign investors and opening up the court and prison system. It proposed decriminalization of various sections of the Insurance Act, 1938, Reserve Bank of India Act, 1934, Banking Regulation Act, 1949, Sections 138 and 143(1) of the Negotiable Instruments Act, 1881 (the Act) etc. It has invited comments from various stakeholders including members of the House of Representatives. general.

This author has submitted his comments in opposition to the decriminalization of Section 138 of the Code. (cases of check returns) because they belong to the common man. The primary objective of Articles 138 to 142 of the Law is to instill confidence in the effectiveness of banking operations and to give credibility to checks in business and daily transactions by making it a crime to dishonor these instruments. The Supreme Court has stated in many of its decisions that the aim and reason behind these rulings is to enhance the credibility of our domestic trade and industry when our international trade and industry is growing.

This proposal was objected to for several reasons, including the following:

1. A provision of law is usually withdrawn or rendered ineffective when it is no longer necessary because its purpose has been achieved. However, the use of checks is still in vogue today. They are still issued without enough balance in the account just to turn away the person who keeps claiming their dues.
2. To call it a minor offense not honoring a check is very serious and shocking. The people who suffer from it know nothing but torment, and therefore if this suggestion is carried out it will add salt to the wounds of these people.
3. The Supreme Court has declared in various cases that construction that would conflict with its purpose or have the effect of obliterating it from the legal book should be avoided and construction that would maintain the operability and effectiveness of the law should be approved. It further declared that returning a check for reasons of “closing the account”, “stopping the payment”, “returning to the drawer”, “signatures do not match” or “image not found” would also constitute disgrace within the meaning of Article 138 of the Act. If this section is removed, a complainant who initiates a criminal case in accordance with the provisions of the Convention on the Rights of the Child (CRPC/IPC) may be denied this liberal interpretation.
4. A u/s 138 complaint can only be filed by a beneficiary or landlord in a timely manner. This prevents false complaints.
5. A complaint u/s 138 can only be filed after the drawer has been given a sufficient opportunity to pay. There is therefore no risk of imprisonment for acts of omission that are not necessarily fraudulent or ill-intentioned.
6. The assumption u/s 139 is that the beneficiary receives a check to discharge any debt or other obligation, in part or in whole. This is useful and convenient for the complainant even if the presumption is rebuttable. In the event that this oath is not criminalized and the complaint is filed under criminal laws, the responsibility rests with the complainant.
7. According to Section 140 of the Code, it is not a defense that the drawer had no reason to believe when he issued the check that the check might be dishonored. This is a beneficial ruling for the complainant.
8. Under the law, the company official may not be held accountable if he proves that the crime occurred without his knowledge or that he exercised due diligence.
9. In any event, the person who has been defrauded will most likely commence criminal proceedings under the CRC/IPC or civil proceedings under the Civil Code. So decriminalization will not reduce the burden on the judiciary?
10. In the event that the government really wants to liberalize the judiciary, then the government should reconsider its litigation policy and withdraw cases that are not justified for various reasons.

Be that as it may, the Ministry of Finance in its recent response to RTI’s request informed this author that no such decision had been taken by the government to decriminalize the offense of bounced checks. It was further informed that the proposal to decriminalize various offenses under a number of different laws administered by different departments, is currently being piloted by the Department for Promotion of Industry and Domestic Trade (DPIIT) in a unified manner.

However, the decriminalization of the offense of bounced checks under the National Insurance Law does not form part of the proposals made by the Ministry of Finance to DPIIT regarding laws related to the Ministry. So what this means in effect is that the government has given up, at least for now, on proposing to decriminalize the offense of bounced checks.

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