Proceedings under NI Act are meant to recover cheque amount by showing teeth of penal clause, says Punjab & Haryana High Court

Read Order: Munshi Ram v. State of Punjab & Another 

Monika Rahar

Chandigarh, March 2, 2022: While dealing with a quashing plea in a cheque dishonor matter wherein the dispute was compromised between parties and the outstanding amount was paid by the defaulting party, the Punjab and Haryana High Court has held that the jurisprudence behind the Negotiable Instruments Act, 1881 is that the business transactions are to be honored and that the legislative intention is not to make people suffer incarceration only because their cheque bounced. 

The Bench of Justice Anoop Chitkara further added that these cheque bounce proceedings are to recover the cheque amount by showing teeth of a penal clause.  

The petitioner, in this case, was convicted by the Trial Court under Section 138 of the Negotiable Instruments Act, 1881, (NI Act). Aggrieved, he filed an appeal before the Additional Sessions Judge,Ludhiana who dismissed the same. Thus, the petitioner approached the High Court with a petition Section 401 Cr.P.C. seeking setting aside the judgment of conviction and the order of dismissal of his appeal as also the proceedings arising out of the complaint captioned above, as the parties compromised the matter. 

The counsel for the petitioner-convict also made an oral request to invoke the inherent powers of the High Court under Section 482 Cr.P.C. in order to set aside the impugned judgments in view of the compromise entered between the parties. 

The Court was informed of the fact by both counsels that the matter was compromised even at the appellate stage but due to the absence of complete payment as per the terms of the compromise, it could not be finalized. However, now that the entire settlement amount was paid, the petitioner prayed for being exempted from payment of 15% of the compensation amount. 

After having reflected on the policy and the legislative intent of the cheque bounce proceedings, Justice Chitkara referred to the Supreme Court in Damodar S. Prabhu v Sayed Babalal, (2010) 5 SCC 663, wherein it was held that when the entire money is paid, then the complainant cannot have any objection to such compromise, and 15% of the cheque amount is to be paid by the accused to the concerned State Legal Services Authority. 

Given above, because of the compromise, the Court found this case to be a fit case where the inherent jurisdiction of the High Court under Section 482 of the CrPC supported by Section 147 of the NI Act could be invoked to disrupt the prosecution and quash the proceedings mentioned above. 

Also, in the entirety of facts and circumstances peculiar to this case, the court deemed it appropriate to exempt the 15% fee of the cheque amount payable to the State Legal Aid Authority as per judgment of the Apex Court in Damodar S. Prabhu’s Case (Supra). 

Thus, the complaint, the notice of accusation and the proceedings captioned above were quashed and set aside.