Cheque Bounce Cases Should Ordinarily Be Sent To Mediation: Punjab & Haryana High Court Calls For Mediation In NI Act Matters

“Offence Under Section 138 NI Act Is Primarily Compensatory, Not Merely Punitive”, Punjab and Haryana High Court has emphasised that courts dealing with cheque dishonour cases should ordinarily refer such disputes to mediation at the earliest stage to facilitate faster recovery and reduce the burden on criminal courts.

On 10 March 2026, Justice Anoop Chitkara  decided a criminal revision petition arising out of a complaint under Section 138 of the Negotiable Instruments Act, 1881. While dismissing the revision petition on merits, the Court issued important observations regarding the growing backlog of cheque bounce cases and highlighted mediation as a more effective dispute resolution mechanism.

The Court noted that cheque dishonour cases arise out of failure to discharge a legally enforceable financial obligation and that the criminal proceedings under Section 138 are primarily aimed at ensuring credibility of negotiable instruments and recovery of dues.

The Court observed: “Issuing a cheque is a solemn promise that the amount will be paid when presented. When such a cheque is returned unpaid due to reasons attributable to the drawer, the law considers it a breach of financial trust.”

Background of the Case

The case arose from a cheque bounce complaint filed by Kulbir Singh against Sonu Kumar alleging dishonour of a cheque amounting to ₹19,49,230 arising from business transactions between the parties. During the proceedings, the accused filed an application seeking permission to examine a handwriting and fingerprint expert to challenge the signatures on a Power of Attorney.

The trial court rejected the application noting that the accused had already been granted numerous opportunities to lead defence evidence and the plea of forged signatures was not raised earlier. The accused challenged this order before the High Court through a revision petition.

While upholding the trial court’s order and dismissing the revision petition, the High Court proceeded to examine the broader issue of how cheque dishonour disputes should ideally be resolved.

Nature of Proceedings Under Section 138 NI Act

The Court explained that although Section 138 proceedings are criminal in form, their core objective is compensatory in nature. The provision was introduced to strengthen confidence in commercial transactions and ensure that financial obligations represented by cheques are honoured.

Referring to the judgment of the Supreme Court in P. Mohanraj v. Shah Brothers Ispat Pvt. Ltd., the Court noted:

“A Section 138 proceeding can be said to be a ‘civil sheep in a criminal wolf’s clothing’.”

The Court observed that such proceedings blur the line between civil and criminal liability because they provide a single forum for enforcement of both the penal consequences of dishonour and recovery of the cheque amount.

Court On Growing Burden Of Cheque Bounce Cases

The High Court highlighted the massive number of cheque dishonour cases pending before courts across the country and noted that such litigation consumes substantial judicial time.

The Court observed that prolonged litigation in cheque bounce matters often defeats the very purpose of the law because delay diminishes the value of money and prolongs financial hardship for the complainant.

The Court remarked that the justice delivery system is burdened with a “tsunami” of cheque dishonour cases pending before magistrates, sessions courts and high courts.

Role Of Mediation In Cheque Dishonour Cases

The Court emphasised that mediation provides a practical and economically sensible mechanism for resolving cheque bounce disputes.

The Court observed: “Cheque bounce cases are quasi-criminal in nature: punitive yet primarily aimed at compensating the holder of the cheque.”

The Court explained that mediation allows parties to negotiate settlement of the cheque amount, interest or compensation through structured payment arrangements. It also helps preserve commercial relationships and reduces the time and cost associated with adversarial litigation.

Referring to the Mediation Act, 2023, the Court observed that courts are empowered to refer compoundable offences to mediation at any stage of proceedings.

The Court noted that offences under the Negotiable Instruments Act are compoundable under Section 147 of the Act, which reflects the legislative intent of prioritising restitution over punishment.

Directions To Refer NI Act Cases To Mediation

The Court observed that trial courts and appellate courts dealing with Negotiable Instruments Act matters should ordinarily refer such disputes to mediation once the accused has been served.

The Court held that mediation could significantly reduce the backlog of cheque dishonour cases while ensuring quicker recovery for complainants.

The Court further noted that if mediation fails to result in settlement, the trial proceedings can continue without prejudice.

Decision

While dismissing the revision petition, the High Court requested the trial court to refer the present dispute to mediation. It directed that if mediation fails to produce a settlement within thirty days, the trial proceedings shall continue in accordance with law.

The ruling highlights the judiciary’s growing emphasis on mediation as an effective tool for resolving cheque dishonour disputes and reducing the burden on the criminal justice system.

Date of Decision: 10 March 2026