NI Act| Directions To Pay Compensation For Dishonour Of Cheque Should Be Practical & Realistic- P&H HC

A Punjab and Haryana High Court Bench of Justice Jasjit Singh Bedi has observed that the direction to pay compensation for the loss on account of dishonour of the cheque should be practical and realistic under Section 138 of the Negotiable Instruments Act.

Counsel Viren Jain appeared for the revisionist-complainant, while Legal Aid Counsel Rajesh Dhiman appeared for the respondents.

In this case, the petitioner instituted a criminal complaint under Section 138 of the Negotiable Instruments Act against the respondents on account of the dishonor of a cheque. Subsequently, the Trial Court convicted the respondents, but at the time of conviction, no compensation was awarded to the petitioner in terms of Section 357 Cr.P.C. 

The petitioner then filed an appeal for non-grant of compensation and enhancing the respondent’s sentence. The respondents also filed an appeal against the judgment of the trial court.

The Court analysed the relevant provisions of the law and a catena of judgments to observe that "directions to pay compensation by way of restitution in regard to the loss on account of dishonour of the cheque should be practical and realistic. Uniformity and consistency in deciding similar cases by different courts not only increase the credibility of the cheques as a Negotiable Instruments Act but also the credibility of the Courts of justice. This awarding of compensation as a reimbursement is on account of the fact that usually, when proceedings under Section 138 of the Negotiable Instruments Act are initiated, no simultaneous civil suit for recovery is filed as the complainant assumes that he would get compensation in the proceedings initiated under Section138 of the Negotiable Instruments Act."

In furtherance of the same, the Court observed that "On the other hand, such proceedings take a long time to culminate and therefore, if the complainant was not awarded adequate compensation at the culmination of such proceedings, a civil suit for recovery, if filed, would in, all probability be hopelessly time-barred. In fact, awarding such adequate compensation in proceedings under Section 138 of the Negotiable Instruments Act would also avoid multiplicity of litigation inasmuch as there would be little requirement to institute a civil suit on the one hand while enforcing the criminal liability under Section138 of the Negotiable Instruments Act on the other".

In light of the same, the petition was allowed. The respondents were sentenced to pay a fine of Rs.10,00,000/-.

Cause Title: Gaurav Khullar vs Eleven V Industries and Ors.

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