Cheque bounce cases

In the era of liberalisation with several financial institutions having direct impact on consumers, the Supreme Court has extended the scope of vicarious liabilities in the cheque bouncing cases apart from criminal liabilities, holding that the trial courts can grant compensation to victims who suffered injury due to the dishonouring of cheques.

Making a distinction between fine imposed for criminal liabilities and the grant of compensation, the court ruled that where the offenders sentenced to jail term but no fine is imposed, they are liable to pay compensation to the complainant in terms of the provision of section 375 of the Criminal Procedure Code (CrPC).

Though the fine could be imposed in terms of the provision of the Negotiable Instrument Act applicable to cheque bouncing cases, but “when the fine is not imposed, compensation can be directed to be paid for loss or injury cause to the complainant by reasons of commission of the offence,” a Bench of justice S.B. Sinha and justice Dalveer Bhandari ruled.

Although the purpose of section 375 was to achieve the same, fixing vicarious liabilities on offenders, but legal difference between fine and compensation was that the amount of compensation can be directed to be recovered and the fine is imposed, thus the fine stands on a higher footing than compensation awarded by the courts.

Ordinarily, the fine should be lesser than the amount, which could be granted as compensation by the civil court upon appreciation of the evidence for losses, which might have been reasonably suffered by the complainant, the apex court said.

“The jurisdiction of civil court, in this behalf, for realisation of the amount (of cheque) in question must also be borne in mind. A criminal case is not a substitution for a civil suit.”

“While the trial courts shall give due weight to the need of the victims, it cannot ignore the right of the accused… the discretionary jurisdiction must be exercised judiciously,” the court said.

The ruling came in a cheque bouncing case filed against Goodvalue Marketing Company Ltd by Kotak Mahindra and the trial court in Mumbai imposing a fine of Rs 25,000 on the former, failing which its chairman was sentence to a month’s jail term.

Besides, the Goodvalue chairman was directed by the trial court to pay Rs 15 lakh as compensation for dishonouring the cheque issued by the company.

When the case went in appeal before the High Court, it directed Goodvalue and its chairman to deposit Rs 5 lakh each within four weeks towards the compensation amount with it, which the company challenged in the apex court. The apex court, however, ruled that the compensation of Rs 1 lakh would be the reasonable compensation for the loss suffered by Kotak Mahindra.

Courtesy:By Sri S.S.Negi