2007 (3) TMI 808 - SC - Indian Laws

Summary

Issues Involved:
1. Validity of the cheque issued by the respondent.
2. Determination of liability and quantum of punishment under Section 138 of the Negotiable Instruments Act.
3. Appropriateness of compensation versus fine.

Summary:

1. Validity of the Cheque:
The appellant and respondent were partners in a business that faced disputes. The appellant alleged that the respondent withdrew money from a joint bank account without authorization. A compromise was reached, including terms for finalizing accounts and issuing a cheque for Rs. 7 lakhs as security. The cheque was dishonored, leading to a complaint by the appellant. The respondent claimed the cheque was issued under duress and was meant as security pending an audit.

2. Determination of Liability and Quantum of Punishment u/s 138 of the Negotiable Instruments Act:
The Trial Judge convicted the respondent u/s 138 of the Act, imposing a fine of Rs. 7,05,000/- and three months simple imprisonment in default. The Additional Sessions Judge modified the sentence to a fine of Rs. 5,000/- and set aside the compensation order. The High Court upheld the conviction but maintained the fine. The Supreme Court noted that the cheque was issued in anticipation of an audit, and the actual liability was yet to be ascertained. However, the respondent admitted liability for Rs. 7 lakhs, and the courts below found no merit in the defense of coercion.

3. Appropriateness of Compensation versus Fine:
The Supreme Court emphasized that the power to award compensation is not limited, unlike the imposition of fines. The purpose of compensation must be considered under Section 357 of the Code of Criminal Procedure. The Court concluded that awarding compensation would serve justice better than a substantial sentence. The respondent was directed to pay Rs. 7,00,000/- as compensation within eight weeks, failing which recovery steps would be taken.

Conclusion:
The appeal was disposed of with the respondent ordered to pay Rs. 7,00,000/- as compensation instead of the fine, aligning with the principles of justice and the specific circumstances of the case.