Landmark Judgement: SC Stays Cheque Bounce Proceedings Across India

Supreme Court Stays Proceedings in Cheque Bounce Cases for Loans Availed in Hyderabad
In a significant development, the Supreme Court has stayed the proceedings in multiple cheque bounce cases filed under Section 138 of the Negotiable Instruments Act, 1881, in various states across the country. The cases involve loans availed in Hyderabad, Telangana, and the court’s decision is expected to have far-reaching implications for the parties involved.

The stay order was issued by a bench of justices headed by Justice BR Gavai, who directed that the matters be tagged with other transfer petitions and stayed the proceedings pending before different trial courts. The court’s decision came on a batch of transfer petitions filed by Venagro and its partners, who claimed that various Non-Banking Financial Companies (NBFCs) had instituted proceedings against them under Section 138 in different states, despite the fact that the entire cause of action arose in Hyderabad.

According to the petitioners, the NBFCs had filed cases in Calcutta, Jaipur, and Gurugram, among other places, allegedly with the intention of harassing them. The petitioners argued that the cases were filed in jurisdictions that had no connection with the loans or the parties involved, and that this was done solely to take advantage of the higher pecuniary jurisdiction of those courts.

Section 138 of the Negotiable Instruments Act makes the dishonour of a cheque a criminal offence, punishable with imprisonment for up to two years, or a fine, or both. The section was introduced to prevent the misuse of cheques and to promote the use of cheques as a reliable instrument for transactions.

In recent years, there has been a surge in cheque bounce cases, with many NBFCs and financial institutions resorting to filing complaints under Section 138 to recover their dues. However, there have been allegations that some of these institutions are misusing the provision to harass and intimidate borrowers, often by filing cases in distant jurisdictions.

The Supreme Court’s stay order in the Venagro case is significant because it highlights the need for caution in filing cheque bounce cases. The court’s decision is expected to have a ripple effect on similar cases pending in various courts across the country.

Legal experts say that the Supreme Court’s order is a welcome move, as it will help to prevent the misuse of Section 138. “The order is a clear indication that the court will not tolerate frivolous and vexatious litigation,” said a senior advocate practicing in the Supreme Court. “It will also help to reduce the burden on the courts, which are already overburdened with cases.”

The Venagro case is not an isolated one. There are numerous cases pending in various courts where borrowers have been dragged to distant jurisdictions, often at great personal cost and hardship. The Supreme Court’s order is expected to bring relief to many such borrowers who have been subjected to harassment and intimidation by NBFCs and financial institutions.

In recent years, there have been several instances where the Supreme Court has expressed concern over the misuse of Section 138. In 2017, the court had observed that the provision was being misused to harass and intimidate borrowers, and had directed the courts to exercise caution while issuing summons in cheque bounce cases.

The Venagro case is a significant development in the ongoing debate over the misuse of Section 138. The Supreme Court’s order is a clear indication that the court will not tolerate frivolous and vexatious litigation, and will take all necessary steps to prevent the harassment and intimidation of borrowers.

As the case progresses, it is likely to have far-reaching implications for the financial sector, and may lead to a re-examination of the way cheque bounce cases are handled in the country. For now, the Supreme Court’s stay order has come as a relief to the petitioners, and is seen as a positive development in the ongoing efforts to prevent the misuse of Section 138.