"Cheque Dishonor Not Just Punitive but Compensatory": Punjab & Haryana HC Sets Aside Sentence, Says Courts Must Ensure Fine "Adequately Compensates" Complainant
Sanchayita Lahkar
The Punjab and Haryana High Court set aside the sentence awarded by the trial court in a cheque dishonor case and remanded the matter for fresh consideration. Justice N.S. Shekhawat stated, “The Criminal Court while convicting an accused for commission of an offence under Section 138 of the Act, cannot ignore the compensatory aspect of the remedy.” The Court directed the trial court to reconsider the sentence, observing that “the sentence of fine whenever imposed by the Criminal Court upon conviction of an accused under Section 138 of the Act must be sufficient enough to adequately compensate the complainant.”
The petitioner challenged the judgment dated January 9, 2025, passed by the Additional Sessions Judge, Bathinda, which upheld the conviction and sentence imposed by the Judicial Magistrate First Class, Bathinda, on October 25, 2017. The trial court had sentenced the petitioner to rigorous imprisonment for two years and imposed a fine of Rs. 10,000, with an additional two-month imprisonment in case of default. The High Court observed, “the respondent, who was the complainant before the trial Court, had even been deprived of an amount of Rs. 19,00,000, which had become payable to him on 02.04.2015, i.e., about 10 years ago.”
The complaint under Section 138 of the Negotiable Instruments Act, 1881 ("the Act") was filed following the dishonor of a cheque issued by the petitioner. The complainant alleged that the petitioner had borrowed Rs. 19,00,000 for business purposes and issued a post-dated cheque dated April 2, 2015, drawn from her account with the State Bank of Patiala, Goniana Mandi. When presented for encashment, the cheque was dishonored on April 3, 2015, with the remark "Account Closed.”
A legal notice was issued on April 15, 2015, but the petitioner failed to make payment. The complaint was subsequently filed, leading to the trial court convicting the petitioner and sentencing her to two years of rigorous imprisonment and a fine of Rs. 10,000. The appellate court upheld the judgment. The petitioner then filed the present revision before the High Court, contesting the sentence and asserting that she had already undergone a substantial period of imprisonment.
The petitioner contended that the complainant had not established the existence of a legally enforceable debt. The complainant, in response, submitted that the cheque was issued in discharge of financial liability and that the trial court had not awarded compensation despite the cheque amount remaining unpaid for ten years.
The High Court considered the legislative intent behind Section 138 of the Act and its compensatory nature. It referred to the purpose of Chapter XVII of the Act, stating, “The prime object of enacting Chapter XVII, which was inserted in the Act by way of Act No. 66 of 1988, was 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 Court cited the Supreme Court’s judgment in Damodar S. Prabhu v. Sayed Babalal H., which recorded, “the dishonour of a cheque can be best described as a regulatory offence that has been created to serve the public interest in ensuring the reliability of these instruments.” It further stated, “Unlike other forms of crime, the punishment for commission of offence under Section 138 of the Act is not a means of seeking retribution, but is more a means to ensure payment of money.”
The High Court referred to R. Vijayan v. Baby & Anr., where the Supreme Court stated, “The provision for levy of fine which is linked to the cheque amount and may extend to twice the amount of the cheque, thereby rendering Section 357(3) virtually infructuous in so far as cheque dishonor cases are concerned.” It further noted, “The apparent intention is to ensure that not only the offender is punished, but also ensure that the complainant invariably receives the amount of the cheque by way of compensation under section 357(1)(b) of the Code.”
The Court also relied on Suganthi Suresh Kumar v. Jagdeeshan, wherein the Supreme Court recorded, “the object of Section 138 of the Act is not only punitive, but compensatory as well. The compensatory aspect must receive priority over the punitive aspect.”
Addressing the discretion of trial courts in awarding punishment, the High Court recorded, “It is always advisable to impose a fine equivalent to the amount of cheque plus at least 6% interest per annum from the date of cheque till the date of judgment of conviction.” It added, “Before inflicting such fine, the trial Magistrate must eschew the amount of interim compensation, if any, paid under Section 143A of the Act or such other sum which the accused might have paid during the trial or otherwise towards discharge of liability.”
The High Court recorded that “The trial Court must put in mind the object of the enactment, i.e., Negotiable Instruments Act, particularly the object of engrafting the provisions of Section 138 of the Act on the statute book.” It referred to the Supreme Court’s judgment in Bir Singh v. Mukesh Kumar, which recorded, “Some Magistrates went by the traditional view that the criminal proceedings were for imposing punishment and did not exercise discretion to direct payment of compensation, causing considerable difficulty to the complainant.”
The High Court allowed the revision petition, setting aside the impugned judgment passed by the Additional Sessions Judge and remanding the matter to the trial court. It recorded, “The present revision petition is allowed and the impugned judgment passed by the appellate Court, i.e., the Court of Sh. Mahesh Grover, Additional Sessions Judge, Bathinda, and the order on quantum of sentence dated 25.10.2017 passed by the Court of Rajbinder Kaur, Judicial Magistrate 1st Class, Bathinda, are set aside and the matter is remanded back to the trial Court for considering the imposition of sentence on the present petitioner, de-novo, in the light of the legal preposition discussed and the observations made hereinabove.”
The Court directed the trial court to hear the parties afresh before imposing the sentence. It stated, “Since the petitioner is in custody, she shall be released on bail on her furnishing bail bonds/surety bonds to the satisfaction of the learned trial Court/Duty Magistrate/CJM concerned till the passing of order on quantum of sentence by the trial Court, and thereafter, the trial Court shall proceed in accordance with law.”
Additionally, the Court directed the Registrar General of the High Court to circulate the judgment to all judicial officers within its jurisdiction. It recorded, “The Registrar General of this Court is directed to circulate this judgment to all the judicial officers, subject to the jurisdiction of this Court, so that the uniformity and consistency in the matter of imposing the sentence of fine having regard to the compensatory aspect of the remedy under Section 138 of the Act is ensured.”
The Court acknowledged the assistance of Mr. J.S. Mehndiratta, Amicus Curiae, stating, “This Court places on record its deep appreciation for Mr. J.S. Mehndiratta, learned Amicus Curiae, who had rendered able assistance to the Court.”
Advocates Representing the Parties
For the Petitioner: Mr. A.P.S. Deol, Senior Advocate with Mr. Himmat Singh Deol, Advocate
For the Respondent: Mr. J.S. Mehndiratta, Advocate (Amicus Curiae) and Mr. P.K.S. Phoolka, Advocate
Case Title: Jugjit Kaur v. Rajwinder Singh
Neutral Citation: 2025:PHHC:033187
Case Number: CRR 151 of 2025 (O&M)
Bench: Justice N.S. Shekhawat
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