Courts while adjudicating issue relating to dishonour of cheque cannot impose compensation/ fine more than twice the cheque amount

Under Section 138 of the Negotiable Instruments Act, 1881, while dealing with the offence of dishonor of cheque, recovery of the amount payable under the instrument, power to levy fine is restricted to twice the cheque amount.

Under Section 138 of the Negotiable Instruments Act, 1881, while dealing with the offence of dishonor of cheque, recovery of the amount payable under the instrument, power to levy fine is restricted to twice the cheque amount. While fixing the amount of compensation courts must not to go beyond the outer limit. The Court may decide to not to send accused to prison by taking a lenient view and instead in lieu thereof and may impose a fine. Courts while doing so are expected to take into consideration the nature of the transaction, the bona fides of the accused, his conduct, the period for which the prosecution goes on, the amount of the cheque involved, the social strata to which the parties belong. There is a considerable discretion vested in the Court concerned which can and ought to be exercised in appropriate cases for good and valid reasons. In the instant case, the cheque amount (Rs. 69500/-) was directed to be paid and in addition a compensation to the tune of Rs. 80,000/- and in failure the imprisonment. The pronouncement was held to be against the spirits of the provisions of Section 138 as the sum ordered was in excess of the double the cheque amount. The dishonor of cheque being a regulatory offence aimed at ensuring the reliability of negotiable instruments, the provision for imprisonment extending up to two years was only intended to ensure quick recovery of the amount payable under the instrument. Somnath Sarkar vs. Utpal Basu Mallick & Anr. (07.10.2013, SC)