2021 (11) TMI 988 - HC - Indian Laws

Dishonor of Cheque - fine sufficient enough to meet the liability of the cheque issued, or not - what should be the approach of the trial Court while awarding punishment to an accused convicted for commission of offence under Section 138 of N.I. Act? - whether the trial Court should, with or without the punishment of imprisonment, impose fine which is sufficient enough to meet the liability of the accused towards the complainant as represented by the bounced cheque? HELD THAT - From a reading of provisions of Section 138 of N. I. Act in the context of laudable object sought to be achieved by Chapter XVII of N.I Act, it is abundantly clear that the Criminal Court while convicting an accused for commission of offence under Section 138 of N.I. Act, cannot ignore the compensatory aspect of remedy and the compensatory aspect can only be given due regard if the sentence imposed is at least commensurate to the amount of cheque, if not more, so that this fine, once imposed, can be appropriated towards payment of compensation to the complainant by having resort to Section 357 of Cr.P.C. Before we proceed, it would be appropriate to set out the provisions of Section 357 as well. The law with regard to grant of compensation under Section 357 (3) of Cr.P.C in the cases arising under Section 138 of N.I. Act is now well settled. As observed above, the object of Section 138 of N.I. Act is not only punitive, but is compensatory as well. As the supreme Court says, the compensatory aspect must receive priority over the punitive aspect of Section 138 of N. I. Act - it cannot be contended that while imposing sentence under Section 138 of N.I.Act, the Court should exercise its discretion in imposing fine by having regard to Section 357 (3) of Cr.P.C. Rather, the Criminal Court should bear in mind the laudable object of engrafting Chapter XVII containing Section 138 to 142 of NI Act and give priority to the compensatory aspect of remedy. In the instant case, the trial Court has miserably failed to take all these aspects into consideration and has awarded ₹ 2.00 lac, to be paid as compensation to the complainant, when admittedly the cheque amount was to the tune of ₹ 10.00 lacs. The petitioner, who was complainant before the trial Court, has been deprived of a sum of ₹ 10.00 lac which amount had become payable to him on the date of issuance of cheque i.e 10.12.2018. The matter is remanded back to the trial Court for considering the imposition of sentence upon the respondent de novo - petition allowed by way of remand.

Summary

Issues Involved:
1. Validity of the trial court's discretion in sentencing under Section 138 of the Negotiable Instruments Act (N.I. Act).
2. Adequacy of compensation awarded to the complainant.
3. The trial court's failure to consider the compensatory aspect of the remedy under Section 138 of the N.I. Act.

Issue-wise Detailed Analysis:

1. Validity of the trial court's discretion in sentencing under Section 138 of the Negotiable Instruments Act (N.I. Act):

The petitioner filed the petition under Section 482 Cr.P.C seeking to set aside the order dated 24.01.2020 passed by the Special Mobile Magistrate (Sub-Judge), Srinagar. The trial court had convicted the respondent-accused under Section 138 of the N.I. Act and sentenced him to six months of simple imprisonment and compensation of ?2.00 lac. The petitioner contended that the trial court should have imposed a fine sufficient to meet the liability of the dishonored cheque amounting to ?10.00 lac. The court emphasized that Section 138 of the N.I. Act allows for imprisonment for up to two years, or a fine up to twice the amount of the cheque, or both, giving the trial court discretion in sentencing. However, the court must exercise this discretion in line with the legislative intent to control the menace of cheque bouncing and enhance the credibility of cheques in commercial transactions.

2. Adequacy of compensation awarded to the complainant:

The petitioner argued that the compensation of ?2.00 lac was inadequate as it was only one-fifth of the cheque amount. The court highlighted the compensatory aspect of Section 138, stating that the punishment should ensure the complainant receives the cheque amount. The Supreme Court in Damoder S. Prabhu vs Sayed Babalal H. and other judgments emphasized that the compensatory aspect should take precedence over the punitive aspect. The court noted that the trial court failed to consider this and awarded an insufficient compensation amount.

3. The trial court's failure to consider the compensatory aspect of the remedy under Section 138 of the N.I. Act:

The court reiterated that the primary objective of Section 138 is to ensure the complainant is compensated for the dishonored cheque. The Supreme Court in R. Vijayan vs Baby & Anr and other cases stressed the importance of compensating the complainant adequately. The court noted that the trial court did not take into account the compensatory aspect and failed to impose a fine commensurate with the cheque amount. The court suggested that a fine equivalent to the cheque amount plus reasonable interest should be imposed to ensure adequate compensation.

Conclusion:

The petition was allowed, and the impugned order was set aside to the extent it imposed the sentence upon the respondent. The matter was remanded back to the trial court to reconsider the imposition of the sentence in light of the legal position discussed. The trial court was directed to put both parties on notice before proceeding. The Registrar General was instructed to circulate the judgment to all Judicial Magistrates under the court's jurisdiction to ensure uniformity and consistency in imposing fines under Section 138 of the N.I. Act.