Proposal to decriminalize section 138 of NI Act Strongly opposed by Bar Council of Maharashtra and Goa, Letter Addressed to Ministry of Finance

(Judicial Quest News Network)

The Elected members of the Bar Council of Maharashtra & Goa have expressed their Strong Objection and Protest to the proposed Decriminalization of Section 138 of the Negotiable Instruments Act.

They expressed their worries and said that the proposed Decriminalization will cause enormous suffering, hardship on investors, traders and businessman at large, who would lose hopes in the judicial and democratic system and which will eventually encourage them to resort to old modes of recovery.

On the contrary proposed Decriminalization will erode public and investors’ confidence since the entire settled business and trade cycle which works of post-dated cheque will be totally hampered.

“We object this attempt of classifying the offence under Section

138 of the Negotiable Instruments Act and terming the same as “Minor Offence”, “Merely as Procedural Lapse” and “Minor Non Compliance” as totally unreasonable and unrealistic approach thereby giving total go bye to the consistent judicial pronouncements and contrary to the legislative history, intention, statement and objects of the past amendment brought in from time to time to make the same as more and more stringent and deterrent

The proposed move virtually tends to negate the very basic scope and object of Section 138 of the Negotiable Instruments Act which was brought into action to inculcate the faith and confidence of trading community in the commercial transaction. The proposal is inconsistent with the letter and spirit of the very provisions of the Section 138 of the Negotiable Instruments Act and the amendments therein from time to time.

The sentence imposed will be hardly executable if the offence is decriminalised since there are insurmountable hurdles for recovery of the fine imposed by the sentence in absence of fear of imprisonment thereby rendering the judgement to remain on papers only. It would be merely paper order making it mockery of the otherwise entire well-established existing system.

With the proposed Decriminalization of Section 138 of the Negotiable Instruments Act, the trading and investor community in particular in the present situation Post COVID19, is likely to be more adversely affected as it is impracticable for the trading community to conduct business without having any guarantee of payment of cheque and recourse to Section 138 as criminal prosecution in event of dishonour

Earlier this month the Ministry of Finance had issued a notification citing the suggestion in this regard.

 Criminalizing procedural lapses and minor non-compliances increases burden on businesses and it is essential that one should re-look at provisions which are merely procedural in nature and do not impact national security or public interest at large.

The following principles should be kept in mind when deciding on reclassification of criminal offences to compoundable offences: (i) Decrease the burden on businesses and inspire confidence amongst investors; (ii) Focus on economic growth, public interest and national security should remain paramount; (iii) Mens rea (malafide/ criminal intent) plays an important role in imposition of criminal liability, therefore, it is critical to evaluate nature of non-compliance, i.e. fraud as compared to negligence or inadvertent omission; and (iv) The habitual nature of non-compliance.

That the proposed Decriminalization of Section 138 of the Negotiable Instruments Act is likely to encourage the gullible offenders having similar criminal tendency to issue the Cheque in commercial transaction casually without realizing or worrying the consequences of dishonour of such Cheque.

In order to carry out the legislative object of the provisions of the Section 138, it is absolutely just proper and reasonable to give it more teeth, make it more stringent, further deterrent and scrap the proposed move to Decriminalization of Section 138 of the Negotiable Instruments Act and to set an example in the minds of such gullible offenders to prove the commission of such offences in future.

In order to carry out the legislative object of the aforesaid provisions of Section 138, it is absolutely just proper and reasonable not only to scrap/drop the proposal of Decriminalization but rather make it more stringent and deterrent so that such matters could be resolved expeditiously as per Section 143 of the Negotiable Instruments Act.