Procedural leniency under the Negotiable Instruments Act

Over the past few years, the Supreme Court has gone a long way towards reducing the use of section 138 of the Negotiable Instruments Act (“Act”) as the basis for the vicarious liability of directors. In February last year, National Small Industries v. Harmeet Singh Pantial, the Supreme Court emphasised the high standards required in order to invoke vicarious liability of creditors under section 141 of the Act. As discussed earlier, this is a stance which has been adopted by the Supreme Court in K.K. Ahuja v. V.K. Vora. Hence, under section 141 of the Act, being ‘in charge of, and was responsible to, the company for the conduct of the business of the company’ has been held to contain two independent requirements of both being legally in charge of, and factually responsible for the day-to-day affairs of the company. Further, the Court has held that the complaint needs to have a specific averment of the role played by the director in the particular case. While this may be unexceptional, a decision of the single judge of the Kerala High Court in TGN Kumar v. State of Kerala, was much more far-reaching. The Court had issued a set of directions to Magistrates to treat ‘technical’ offences like section 138, involving ‘no moral turpitude’ to be treated differently from other offences.

The case involved an application by an accused to dispense with personal appearance at trial for an offence under section 138. The High Court judge allowed the application, and held that there was a “great need for rationalising, humanising and simplifying the procedure in criminal courts with particular emphasis on the attitude to the “criminal with no moral turpitude” or the criminal allegedly guilty of only a technical offence, including an offence under Section 138 of the N.I. Act”. For this purpose, the High Court had provided detailed guidelines to the trial courts, which exempted all accused of offences under section 138 of the Act from personal appearance at any stage of the trial, and also provided that only bailable warrants may be issued in such cases. Although the High Court did provide for this procedure to be departed from in exceptional cases, the guidelines were quite wide-ranging and significantly impinged on the discretion of the trial court.

These guidelines were appealed against to the Supreme Court, which reversed the decision of the High Court. It held that the discretion of the trial judge must be left untrammelled, and that the Supreme Court in Bhaskar Industries Ltd. v. Bhiwani Denim & Apparels Ltd. was right in saying that “it is within the powers of a Magistrate and in his judicial discretion to dispense with the personal appearance of an accused either throughout or at any particular stage of such proceedings in a summons case, if the Magistrate finds that insistence of his personal presence would itself inflict enormous suffering or tribulations on him, and the comparative advantage would be less. Such discretion need be exercised only in rare instances where due to the far distance at which the accused resides or carries on business or on account of any physical or other good reasons the Magistrate feels that dispensing with the personal attendance of the accused would only be in the interests of justice”. To this dictum, the Court only adds that the order of the Magistrate should be such which does not result in unnecessary harassment to the accused and at the same time does not cause any prejudice to the complainant. The Court must ensure that the exemption from personal appearance granted to an accused is not abused to delay the trial”.

Thus, it is clear that the Supreme Court has firmly set its face against allowing a greater degree of leniency in cases involving section 141 of the Act, even when dealing with matters of criminal procedure. Given the language of the Code of Criminal Procedure, and the scope of appellate interference permitted into the exercise of discretion by the trial court, the decision is based firmly on statutory language and past precedent. Equally however, given the proactiviness of the Supreme Court in laying down guidelines for the exercise of discretion in other areas of the law, a watered down version of the High Court’s recommendations would not have been unjustified. The requirement that personal presence should be done away with only when it inflicts “enormous suffering or tribulations” or when it is justified “due to the far distance at which the accused resides or carries on business or on account of any physical or other good reasons” is surely setting the bar too high, especially when dealing with offences under the provisions like section 138 or section 141 of the Act. However, as the law stands today, it appears that barring the satisfaction of the detailed requirements of section 141, there are no other procedural safeguards for persons accused of offences under the Act.

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