S.138 NI Act | Fine Imposed Must Not Exceed Double The Cheque Amount: Kerala High Court

The Kerala High Court on Wednesday said that the maximum amount of fine, including the interest, imposed in a case under Section 138 of the Negotiable Instruments Act, 1881 must not exceed twice the amount of the cheque.

Justice A. Badharudeen said the punishment provided for commission of offence under Section 138 of the N.I Act is imprisonment for a term which may extend to two years or with fine, which may extend to twice the amount of the cheque, or with both.

"Thus the statutory provision is clear that the maximum fine shall be twice the amount of the cheque and nothing more. So, a blanket order, as in a civil case, directing the accused to pay fine amount along with interest @ 9% per annum for the principal cheque amount if exceeds at the time of payment, in excess of double the cheque amount, the said course of action is not permitted under law and courts must ensure that while ordering payment of fine, the same shall not exceed double the cheque amount," said the court.

Justice Badharudeen further observed that to avoid payment of fine more than double the cheque amount, the trial court should quantify the amount to a definite sum calculating interest @ 9% per annum following the ratio laid down by the Apex Court in Vijayan case, without exceeding twice the cheque amount.

The court has directed its Registry to forward the order copy to all the criminal courts in Kerala to ensure compliance of its direction in the matter of calculation of interest for the purpose of imposing fine.

The judgement has been passed on two revision petitions. In the matter, the complainant had launched two separate proceedings against the accused, alleging the commission of an offence punishable under Section 138, consequent to the dishonour of two cheques issued by the accused for Rs. 1,50,000 and Rs. 75,000 in partial discharge of the liability towards the complainant and her husband from 1997.

The trial court tried both cases together and imposed on the accused a sentence of undergoing imprisonment till the rising of the court and of paying a fine of Rs. 1,50,000 and Rs. 75,000 with interest @ 9 % per annum from the date of dishonour till the entire realization in full under Section 138. In case of default of payment of fines, the convict was to undergo simple imprisonment for a period of three and two months, respectively.

The accused had filed an appeal before the Sessions Court. However, the appellate court concurred with the findings of the trial court. The accused then moved the revision petition before the High Court.

The counsel appearing for the revision petitioner (accused), Advocate Ann Susan Gerorge, raised the contention regarding an anomaly in the matter of legal notice in the case, and submitted that appellate court failed to appreciate and re-appreciate the evidence. The complainant failed to prove the case beyond reasonable doubt, the counsel argued.

The court in the judgement said the law is clear on the point that if there is non-consideration of any question of law or fundamental violation of the principle of law, then only the power of revision would be made available.

Relying on previous Apex Court decisions, the Court rejected the contention raised by the accused that no legal notice was given and observed that in the present case the courts below rightly held that there was proper demand within the mandate of Section 138(b) of NI Act.

After considering various other contentions raised by the accused, the bench held that nothing in the concurrent findings of the courts below needs to be interfered with by exercising the revisional power of the Court.

However, in the matter of the grant of sentence, the Court said that an anomaly was committed by the trial court, while granting interest at 9% annum from 23.04.2008 onwards, and it was not even noticed by the appellate court.

Referring to the observations made in the Apex Court decision in R. Vijayan v. Baby & Anr, the court said the statutory provision is clear that the maximum fine shall be twice the amount of the cheque and nothing more.

"Say, for example, in this particular case, interest @ 9% per annum for Rs.1,50,000/- if calculated, as ordered by the trial court as well as appellate court @ 9%, Rs.13,500/- is the annual interest. If the amount is calculated from 23.04.2008 upto 22.04.2022, the same would come to (13,500 X 14) Rs.1,89,000/-. Thus the amount of fine as on 22.04.2022 would come to Rs.3,39,000/-. That is, the fine amount would go beyond the limit of double the cheque amount as on 22.04.2022 itself. It will go on accumulating till the date of payment or realisation," it added.

The statute does not provide such accumulation beyond twice the cheque amount, said the court.

"In view of the matter, I am inclined to modify the sentence, so as to maintain the same within the statutory limit," it said.

With regard to the cheques, the court directed the appellant to pay Rs 3 Lakh and Rs 1,50,000 as fine, respectively. "Considering the request made by the learned counsel for the revision petitioner, one months' time from today is granted to the revision petitioner to pay the fine and to undergo the sentence imposed by the appellate court and modified by this Court as above. The revision petitioner shall appear before the trial court on 18.11.2022 to pay the fine and to undergo the sentence," said the court.

Case Title: M. Shabeer v. Anitha Bajee & Anr.

Citation: 2022 LiveLaw(Ker) 536

Click Here To Read/ Download The Order