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2013 (10) TMI 949 - SC - Companies LawDishonour of cheque - Compensation in lieu of incarceration - Held that - A reading of the impugned order appears to indicate that the payment of further sum of ₹ 69,500/-, in the instalments indicated in that order would be over and above the said sum of ₹ 80,000/-. This would violate Section 138 of the N.I. Act inasmuch as it would exceed the double of the cheque amount. This leads us to conclude that the intention of the High Court was that upon deposit/payment of the further sum of ₹ 69,500/- (in addition to the earlier sum of ₹ 80,000/-), the sentence of imprisonment for six months would stand withdrawn - Palpably, the convict has filed appeals all the way to the Apex Court which would have entailed further expenses of no mean measure. We think that with the receipt of ₹ 80,000/-, the complainant has received compensation for the dishonoured cheque as per the adjudication of the Trial Court. In these circumstances, any further payment would be in the nature of fine. Accordingly, we clarify that the Appellant must pay a sum of ₹ 80,000/- receivable by the complainant within four weeks from today, if not already paid. Process comprises two stages. First, when the Court determines the amount of fine and levies the same subject to the outer limit, if any, as is the position in the instant case. The second stage comprises invocation of the power to award compensation out of the amount so levied. The High Court does not appear to have followed that process. It has taken payment of ₹ 80,000/- as compensation to be distinct from the amount of fine it is imposing equivalent to the cheque amount of ₹ 69,500/-. That was not the correct way of looking at the matter. Logically, the High Court should have determined the fine amount to be paid by the appellant, which in no case could go beyond twice the cheque amount, and directed payment of compensation to the complainant out of the same. Viewed thus, the direction of the High Court that the appellant shall pay a further sum of ₹ 69,500/- does not appear to be legally sustainable - Decided partly against assessee.
Issues Involved:
1. Validity of the additional fine imposed by the High Court. 2. Compliance with Section 138 of the Negotiable Instruments Act, 1881. 3. Appropriateness of imprisonment in lieu of fine. 4. Determination of total liability and compensation. Issue-wise Detailed Analysis: 1. Validity of the additional fine imposed by the High Court: The appellant was initially sentenced by the Metropolitan Magistrate to six months of simple imprisonment and a compensation of Rs.80,000/-. The High Court later substituted the imprisonment with an additional fine of Rs.69,500/-, which led to confusion regarding the total liability. The Supreme Court clarified that the High Court's direction to pay an additional Rs.69,500/- violated Section 138 of the Negotiable Instruments Act as it exceeded twice the cheque amount. The Supreme Court held that the total compensation payable under Section 138 read with Section 357(3) Cr.P.C. is Rs.80,000/-, and any additional payment would be in the nature of a fine. 2. Compliance with Section 138 of the Negotiable Instruments Act, 1881: The appellant issued a cheque for Rs.69,500/- which was dishonored due to insufficient funds. After following the statutory provisions of the N.I. Act, the appellant was prosecuted and convicted under Section 138. The Supreme Court noted that the High Court's additional fine of Rs.69,500/- was not in compliance with Section 138, which allows for imprisonment up to two years and/or a fine up to twice the cheque amount. The Supreme Court reduced the additional fine to Rs.20,000/-. 3. Appropriateness of imprisonment in lieu of fine: The Supreme Court acknowledged that the appellant had already paid Rs.80,000/- as compensation. It was noted that the primary objective of punishment under Section 138 is to ensure payment rather than retribution. The Supreme Court decided that the ends of justice would be met if the appellant paid an additional Rs.20,000/-, failing which he would undergo six months of simple imprisonment. 4. Determination of total liability and compensation: The Supreme Court highlighted the confusion caused by the High Court's use of the term "additional sum." It clarified that the total compensation under Section 138 and Section 357(3) Cr.P.C. is Rs.80,000/-, which includes the cheque amount of Rs.69,500/- and an additional Rs.10,500/- as interest. The appellant's total liability was thus Rs.80,000/-, which had already been paid. The Supreme Court further imposed a fine of Rs.20,000/-, payable within eight weeks, with a default clause of six months imprisonment. Conclusion: The Supreme Court allowed the appeal, modifying the High Court's order to align with Section 138 of the Negotiable Instruments Act. The appellant was directed to pay a total of Rs.80,000/- as compensation and an additional fine of Rs.20,000/- within eight weeks, failing which he would face six months of simple imprisonment. The judgment emphasized the importance of adhering to statutory limits on fines and the primary objective of ensuring payment in cheque dishonor cases.
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