Magistrate Cannot Impose Cost Against Complainant Merely Because Accused Is Acquitted in Cheque Bounce Case: Bombay High Court

"Mere Failure to Prove Case Is Not Malicious Prosecution" — Trial Court’s ₹25,000 Compensation Order Held Unjustified Under Section 250 CrPC. In a decisive ruling that draws a sharp boundary between failed prosecution and malicious intent, the Bombay High Court (Nagpur Bench) quashed an order awarding ₹25,000 compensation to the accused in a cheque dishonour case, ruling that acquittal under Section 138 of the Negotiable Instruments Act, 1881, without more, is insufficient to attract the punitive provisions of Section 250 of the Code of Criminal Procedure, 1973.

Justice M.M. Nerlikar, allowing the appeal filed by complainant Prashant Himmatrao Jawarkar, emphatically held: “The failure of a prosecution case does not, by itself, render the complainant’s action mala fide. Acquittal is not a license to assume abuse of process.”

The Court found the trial court’s direction to pay compensation to the accused — a medical practitioner, Dr. Ganesh Pandurang Vasu — to be “legally unsustainable, perverse, and based on conjectures.”

“Signature Was Admitted, Notice Was Served, Cheque Bounced — What More Could Be a Reasonable Ground to Prosecute?”

The underlying dispute stemmed from a complaint under Section 138 NI Act, where the complainant alleged that the accused, an acquaintance, borrowed ₹3,00,000 as a hand loan, and issued a cheque drawn on State Bank of India, which was later dishonoured for “Insufficient Funds.”

The accused admitted that the signature on the cheque was his, but disputed any loan transaction, claiming the cheque was misused after being handed over as security for a friend’s loan.

Despite these claims, the complainant had placed on record:

• The dishonoured cheque

• The bank return memo

• A legal notice duly served

• The accused’s reply

• Postal acknowledgments and receipts

Yet, the Judicial Magistrate, First Class, Akola, while acquitting the accused, went further and imposed ₹25,000 as compensation under Section 250 CrPC, observing that the complaint was made “without reasonable cause” and amounted to an “abuse of the court’s time.”

Justice Nerlikar rejected this view, remarking:“The admitted signature on the cheque, coupled with procedural compliance and material evidence, clearly demonstrates reasonable cause for initiating prosecution.”

“Section 250 CrPC Is Not a Penalty for Losing a Case” — High Court Reiterates Malicious Prosecution Must Be Proved

Relying on binding precedents including State of Rajasthan v. Jainudeen Shekh (2016) 1 SCC 514, and Indian Oil Corporation v. NEPC India Ltd. (2006) 6 SCC 736, the High Court reiterated the settled position:

“To invoke Section 250 CrPC, it must be shown that the prosecution was not only groundless but also actuated by malice or ulterior motive.”

The Court found no such finding of malice or frivolous intent in the trial court’s judgment. Instead, it noted that the trial court relied heavily on evidentiary discrepancies, such as absence of a memo from the payee’s co-operative credit society, and a date mismatch in bank endorsements.

However, the High Court clarified:“Discrepancies or procedural lapses are not equivalent to mala fide prosecution. Even a failed case may be bona fide.”

The Court further highlighted that the complainant had explained the role of intermediary banks in presenting the cheque and provided justification for the absence of the credit society’s memo.

“Once a cheque is handed over to a society, the subsequent routing and endorsements are beyond the complainant’s control. The law does not demand perfection, only a prima facie case.”

Trial Court’s Findings Based on “Surmises and Assumptions” — High Court Terms the Compensation Award “Wholly Unwarranted”

The High Court dissected the trial court’s conclusion that the cheque was misused. It noted that no concrete evidence had been brought by the accused to establish that the complainant and a third party had conspired to misuse a blank cheque.

Instead, the trial court relied on assumptions, such as:

• The accused being “well-off,” hence unlikely to need a hand loan

• Date discrepancies on endorsements

• Absence of memo from credit society

The Court found these findings wholly inadequate to meet the standard required to establish malicious prosecution.

“When a cheque bearing admitted signature is dishonoured and legal notice is served, the complainant cannot be faulted for approaching the court.”

“Acquittal Is Not a Weapon to Strike Back at the Complainant” — High Court Protects Litigant’s Right to Approach Law

In a reaffirmation of the fundamental right to seek legal redress, Justice Nerlikar emphasized:“The right to prosecute, when exercised in good faith based on reasonable material, cannot be penalised merely because the case ends in acquittal. Section 250 CrPC cannot be used as a reverse bludgeon.”

Finding that the complainant had not acted with mala fide intention, nor pursued a frivolous cause, the Court set aside the order awarding ₹25,000 compensation to the accused.

The judgment concluded:“There is no finding of malicious prosecution. The trial court’s reliance on evidentiary gaps, without any cogent proof of malice, renders the invocation of Section 250 CrPC unjustified and illegal.”

Appeal Partly Allowed, Compensation Order Quashed

The Bombay High Court thus allowed the appeal only to the extent of quashing the ₹25,000 compensation ordered by the trial court. The acquittal under Section 138 NI Act was left untouched, in line with the High Court’s prior refusal to entertain an appeal against acquittal.

Date of Decision: 18 November 2025