J&K and Ladakh HC | Dishonour of cheque; HC advices Criminal Courts to impose fine equivalent to amount of cheque plus at least 6% interest per annum     

Jammu and Kashmir and Ladakh High Court

Jammu & Kashmir and Ladakh High Court: Sanjeev Kumar, J., held that the sentence of fine under Section 138 of N.I.Act must be sufficient to adequately compensate the complainant. The Bench stated,

“The prime object of enacting Chapter XVII, of the N.I. Act is to control and discourage the menace of cheque bouncing in the course of commercial transactions and to encourage the culture of use of cheques and enhancing the credibility of the instrument.”

The Trial Court had convicted and punished the respondent under Section 138 of Negotiable Instruments Act, 1981, and held him liable to pay compensation of Rs.2.00 lakh to the petitioner. The instant appeal had been filed by the petitioner with the grievance that the respondent-accused should have also been awarded fine sufficient enough to meet the liability of the cheque issued by him which was dishonoured. The petitioner contended that the compensation awarded was only one fifth (1/5th) of the value of the cheque as the cheque issued by the respondent was for the amount of Rs. 10 lakh.

Observation and Analysis

Apparently, Section 138 of N. I. Act states that, the Criminal Court after convicting the accused, is empowered to impose punishment of imprisonment for a term, which may extend to two years, or fine which may extend to twice the amount of cheque, or both. The Bench observed that, the Trial Court is, thus, given the discretion to impose the sentence of imprisonment or fine or both.

The Supreme Court in Assistant Commissioner, Assessment-II v. Velliappa Textiles Ltd., 2003 11 SCC 405, had held that, “where the legislature has granted discretion to the court in the matter of sentencing, it is open to the court to use its discretion. Where, however, the legislature, for reasons of policy, has done away with this discretion, it is not open to the court to impose only a part of the sentence prescribed by the legislature, for that would amount re-writing the provisions of the statute.”

Similarly, in Damoder S. Prabhu v. Sayed Babalal H., (2010) 5 SCC 663, the Supreme Court had observed, “The object of bringing Section 138 into the statute was to inculcate faith in the efficacy of banking operations and credibility in transacting business on negotiable instruments. It was to enhance the acceptability of cheques in settlement of liabilities by making the drawer liable for penalties in case of bouncing of cheques due to insufficient arrangements made by the drawer, with adequate safeguards to prevent harassment of honest drawers.”

Reliance on the decision of the Supreme Court on the aforesaid case, the Bench observed that unlike other forms of crime, the punishment for commission of offence under Section 138 of N. I. Act is not a means of seeking retribution, but is more a means to ensure payment of money and, therefore, in respect of offence of dishonour of cheques, it is the compensatory aspect of the remedy which should be given priority over the punitive aspect. The Bench opined 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, so that the fine, once imposed, can be appropriated towards payment of compensation to the complainant by having resort to Section 357 of CrPC.

Opinion and Findings       

The Bench opined that it the Court should not resort to Section 357(3) of CrPC while imposing sentence under Section 138 of N.I. Act, 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. The Bench stated,

“Indisputably, the Legislature has given discretion to the Magistrate to impose a sentence of fine which may extend to double the  amount of cheque and, therefore, the sentence of fine whenever imposed by the Criminal Court upon conviction of accused under Section 138 of N.I.Act must be sufficient enough to adequately compensate the complainant.”

Therefore, the amount of cheque and the date from which the amount under the cheque had become payable along with payment of reasonable interest may serve as good guide in this regard. To make it consistent and uniform, the Bench advised to impose a fine equivalent to the amount of cheque plus at least 6% interest per annum.

Decision

Considering that the Trial Court had awarded Rs.2.00 lakh, to be paid as compensation to the complainant, when admittedly the cheque amount was to the tune of Rs.10.00 lakhs, the Bench remanded back the matter to the trial Court for considering the imposition of sentence upon the respondent de novo in the light of legal position discussed and the observations made in the instant judgment. The appeal was allowed and the impugned order was quashed to the extent it awarded sentence to the accused. [Yasir Amin Khan v. Abdul Rashid Ganie, 2021 SCC OnLine J&K 934, decided on 22-11-2021]


Kamini Sharma, Editorial Assistant has reported this brief.


Appearance by:

For the Appellant: F.A.Wani, Advocate

For the Respondent: None

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