Sentence Of Fine U/S 138 NI Act Must Be Sufficient To Adequately Compensate Complainant: J&K&L HC Specifies Guiding Factors For Courts

In a significant Judgment, the Jammu & Kashmir And Ladakh High Court recently issued certain guiding factors for Magistrates to consider when they pass conviction orders under Section 138 of the Negotiable Instruments Act.

The Judgment by the Bench of Justice Sanjeev Kumar stresses that 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.

Case in brief 

On January 24, 2020, the Special Mobile Magistrate convicted a man and punished him with simple imprisonment for a term of six months in a cheque bounce case (of 10 lakhs), and in addition, he was held liable to pay compensation of Rs.2.00 lac to the petitioner.

The Complainant (petitioner) moved the High Court against the Magistrate court's order with his grievance that the respondent-accused should have also been asked to pay a fine sufficient enough to meet the liability of the cheque issued by him which later on was dishonored.

Considering the facts of the case, the Court noted that the questions that were to be determined in this case were as follows:

• What should be the approach of the trial Court while awarding punishment to an accused convicted for commission of offence under Section 138 of the NI Act;
• Whether the trial Court should, with or without the punishment of imprisonment, impose a fine that is sufficient enough to meet the liability of the accused towards the complainant as represented by the bounced cheque?

Here, it may be noted that under Section 138 of the NI Act, the Criminal Court after convicting the accused, is empowered to impose punishment of imprisonment for a term, which may extend to two years, or a fine which may extend to twice the amount of cheque, or both. Meaning thereby, discretion is given to the Magistrate.

Court's observations

At the outset, the Court noted that the Criminal Courts, while convicting an accused of commission of offence u/s 138 of NI 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.

"(This) fine, once imposed, can be appropriated towards payment of compensation to the complainant by having resort to Section 357 of Cr.P.C...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." the Court further added.

Against this backdrop, the Court opined that 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 cheque bounce cases. 

Therefore, the Court formulated/specified the following guiding factors for the magistrates who are dealing with Section 138 NI Act cases:

• 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.
• The amount of cheque and the date from which the amount under the cheque has become payable along with payment of reasonable interest may serve as a good guide in this regard.
• To be consistent and uniform, 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 the judgment of conviction.

However, the Court did add that before inflicting such a fine, the trial Magistrate must eschew the amount of interim compensation, if any, paid under Section 143A of N.I. Act or such other sum which the accused might have paid during the trial or otherwise towards discharge of liability.

"It may or may not accompany the sentence of simple imprisonment. It is purely in the discretion of the trial Magistrate but having regarding to the object of legislation, it shall be appropriate if the sentence of imprisonment imposed is kept at the minimum unless, of course, the conduct of accused demands otherwise," the Court added.

Regarding the instant case, noting that the trial Court had miserably failed to take all these aspects into consideration and has awarded Rs.2.00 lac, to be paid as compensation to the complainant, when admittedly the cheque amount was to the tune of Rs.10.00 lacs, the Court allowed the petition and the impugned order was set aside to the extent it imposed the sentence upon the respondent.

Further, the Court remanded the matter back to the trial Court for considering the imposition of sentence upon the respondent de novo. 

Case title - Yasir Amin Khan v. Abdul Rashid Ganie

Click Here To Download Order

Read Order