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SC's Guidelines on Compounding Cheque Bounce Cases

NEW DELHI | MAY 04, 2010

With over 38 lakh cheque bounce cases clogging the courts, the Supreme Court has framed a series of guidelines for out-of-court settlement of the offence as in most instances the parties seek this after years of litigation. A bench of Chief Justices K G Balakrishnan and Justices P Sathasivam and J M Panchal clarified it was not making any legislation but was constrained to issue the guidelines as Section 147 of the Negotiable Instruments Act does not specify the timeframe within which the offence could be compounded (settled out of court). "So much so, that at present, a disproportionately large number of cases involving the dishonour of cheques is choking our criminal justice system, especially at the level of magistrates' courts. "As per the 213th Report of the Law Commission of India, more than 38 lakh cheque bouncing cases were pending before various courts in the country as of October 2008. This is putting an unprecedented strain on our judicial system," the bench said in an order. According to the guidelines, (a) directions can be given by court that the Writ of Summons be suitably modified making it clear to the accused that he could make an application for compounding of the offences at the first or second hearing of the case and that if such an application is made, compounding may be allowed by the court without imposing any costs on the accused. (b) if the accused does not make an application for compounding, then if an application for compounding is made before the magistrate at a subsequent stage, compounding can be allowed subject to the condition that the accused will be required to pay 10% of the cheque amount to be deposited as a condition for compounding with the Legal Services Authority or such authority as the court deems fit. (c) similarly, if the application for compounding is made before the sessions court or a High Court in revision or appeal, such compounding may be allowed on condition that the accused pays 15 per cent of the cheque amount by way of costs. (d) finally, if the application for compounding is made before the Supreme Court, the figure would increase to 20% of the cheque amount. The apex court also said high courts should impose heavy costs on those who file multiple cases arising out of a single transaction like bouncing of cheques issued in EMI-related transactions. But before imposing the penalty, an opportunity should be given to the complaint to transfer all the cases to one competent court of jurisdiction, the apex court said.

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