High Court Rules in Favour of Compounding in Cheque Bounce Cases, Stresses on Adequate Compensation Over Punishment

In a significant ruling, the Punjab and Haryana High Court has set a new precedent in cases of cheque dishonour under Section 138 of the Negotiable Instruments Act, 1881. The Single Bench, presided over by Justice Harpreet Singh Brar, emphasized the importance of adequate compensation over punitive measures in such cases.

The judgment, delivered on December 7, 2023, revolved around 15 petitions led by Manohar Infrastructure & Construction Pvt. Ltd., challenging an order passed by the Sessions Judge, which had set aside a decision of the Judicial Magistrate and remanded the matter for fresh adjudication. The controversy stemmed from the Magistrate's order permitting the petitioners to pay the cheque amount with an additional Rs. 5000 as interest and costs.

Justice Brar, in his ruling, underscored, "Once the offence under Section 138 of the NI Act has been made compoundable and the recovery of the cheque amount has already been effected, there would be no justification to make the petitioners suffer the ordeal of trial." This observation signifies a shift towards a more reconciliatory approach in dealing with cheque bounce cases, focusing on restitution rather than criminal prosecution.

The High Court observed that the proceedings under Section 138 are quasi-criminal in nature and are intended more to compensate the aggrieved party rather than to punish the offender. Referring to various Supreme Court judgments, the Court highlighted that the primary goal is the expeditious recovery of money.

In the present case, the respondent had initially accepted the cheque amount along with the additional costs but later contested the order in a revision petition. Addressing this, the Court remarked, "A perusal of the statement of the respondent-complainant indicates that she accepted the cheque amount of Rs.5,78,125/- along with Rs.5000/- as interest and costs. There was not even a whisper in the said statement that she accepted the amount under protest."

In a move to ensure adequate compensation, the Court directed the petitioners to pay interest at 5% per annum on the cheque amount from the date of its issuance till its realization. On compliance with this directive, the proceedings against the petitioners would be dropped, treating the matter as compounded.

This judgment is expected to have significant implications for the handling of cheque bounce cases, potentially reducing the burden on the judicial system by encouraging settlements and focusing on compensatory rather than punitive outcomes.

Decided on : 07-12-2023

MANOHAR INFRASTRUCTURE & CONSTRUCTION PVT. LTD. AND OTHERS vs MONIKA SODHI AND OTHERS