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Dr. Justice AR. Lakshmanan (Former Judge, Supreme Court of India) Chairman, Law Commission of India

ILI Building (IInd Floor), Bhagwandas Road,

New Delhi-110 001 Tel.: 91-11-23384475 Fax: 91-11-23383564

DO No. 6(3)145/2008-LC(LS)

November 24, 2008

Dear Dr. Bhardwaj ji,

Subject: Fast Track Magisterial Courts for Dishonoured Cheque Cases

I am forwarding herewith the 213th Commission of India on the above subject.

Report of the Law

Section 138 of the Negotiable Instruments Act, 1881 (“Act”) deals with the offence pertaining to dishonour of cheque for insufficiency, etc., of funds in the drawer’s account on which the cheque is drawn for the discharge of any legally enforceable debt or other liability. The Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988 inserted in the Act, new Chapter XVII comprising sections 138 to 142 with effect from 1 April, 1989. These provisions were incorporated in the Act with a view to encourage the culture of use of cheques and enhancing the credibility of the instrument.

As sections 138 to 142 of the Act were found deficient in dealing with dishonour of cheques, the Negotiable Instruments (Amendment and Miscellaneous Provisions) Act, 2002, besides other amendments, amended sections 138, 141 and 142 and inserted new sections 143 to 147 in the Act aimed, inter alia, at speedy disposal of cases relating to dishonour of cheque through their summary trial as well as making them compoundable. Punishment provided under section 138 too was enhanced from one year to two years. These amendments were brought into force on 6 February, 2003.

Due to large number of pendency of dishonoured cheque cases (over 38 lacs), the entire credibility of the business within and outside

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