Dishonour Of Cheques Is A Regulatory Offence; Courts Should Encourage Compounding Of Offences Under NI Act: Supreme Court
The Supreme Court reiterated that the Courts should encourage compounding of offences under the Negotiable Instruments Act, 1881 while observing that the ‘compensatory aspect’ of remedy shall have priority over the ‘punitive aspect’.
The Court said thus while noting that a large number of cases involving dishonour of cheques are pending before Courts which is a serious concern for our judicial system.
The Court was hearing a Criminal Appeal that arose from a complaint under Section 138 Negotiable Instruments Act, 1881.
The bench of Justice Sudhanshu Dhulia and Justice Ahsanuddin Amanullah relied on the decisions in Damodar S. Prabhu v. Sayed Babalal H. (2010) 5 SCC 6631, Gimpex Private Limited v. Manoj Goel (2022) 11 SCC 7052, Meters And Instruments Private Limited And Anr. v. Kanchan Mehta (2018) 1 SCC 560 observed, “It is to be remembered that dishonour of cheques is a regulatory offence which was made an offence only in view of public interest so that the reliability of these instruments can be ensured. A large number of cases involving dishonour of cheques are pending before courts which is a serious concern for our judicial system. Keeping in mind that the ‘compensatory aspect’ of remedy shall have priority over the ‘punitive aspect’, courts should encourage compounding of offences under the NI Act if parties are willing to do so.”
Brief Facts-
In 2006, appellant No. 2 borrowed money from the respondent but failed to repay it. To settle the debt, Appellant No. 2 issued a cheque from his partnership firm, Appellant No. 1. The cheque was dishonoured due to insufficient funds, leading the respondent to file a complaint under Section 138 of the NI Act. The trial Court convicted the appellants, sentencing them to 1 year of simple imprisonment each. The Appellate Court later acquitted them, but the High Court reinstated the trial Court's conviction. Hence, this Appeal came before the Supreme Court.
The Court said that the dishonour of cheques is a regulatory offence which was made an offence only in view of public interest so that the reliability of these instruments can be ensured.
The Court mentioned the decision of the Supreme Court in Raj Reddy Kallem v. The State of Haryana & Anr. [2024] 5 S.C.R 203, where the SC quashed a conviction under the NI Act, by invoking its powers under Article 142, even though the complainant therein declined to give consent for compounding, observing that the accused has sufficiently compensated the complainant.
The Court set aside the impugned judgment and allowed the appeal after considering the totality of the circumstances and compromise between the parties.
Cause Title: M/s New Win Export & Anr. v. A. Subramaniam (Neutral Citation: 2024 INSC 535)