The Supreme Court has held that in cases of conviction under Section 138 of the Negotiable Instruments Act, 1881, the sentencing must be accompanied by a fine sufficient to cover the cheque amount, along with applicable interest and compensation. A bench of Justice B.V. Nagarathna and Justice K.V. Viswanathan dismissed the appeal filed by the accused, Mohammad Ali, and upheld his conviction by the Karnataka High Court.
Case Background
Mohammad Ali was prosecuted by Sharanappa in Criminal Case No. 2378 of 2013 before the I Additional Civil Judge and JMFC, Vijayapur, for dishonour of a cheque worth ₹10,00,000. The trial court acquitted the accused on January 6, 2017. This acquittal was challenged by the complainant before the High Court of Karnataka at Kalaburagi Bench.
On October 9, 2023, the High Court allowed the appeal and convicted Mohammad Ali under Section 138 of the NI Act. It imposed a fine of ₹10,10,000, of which ₹10,00,000 was directed to be paid to the complainant as compensation under Section 357(1)(b) of the CrPC, and ₹10,000 was to be remitted to the State. In case of default, the accused was ordered to undergo simple imprisonment for six months.
Arguments
For the Appellant
Counsel for Mohammad Ali challenged the High Court’s reversal of acquittal, contending that the foundational facts necessary to invoke the presumptions under Sections 118 and 139 of the NI Act were not established. It was argued that the trial court was justified in acquitting the accused and that the High Court erred in reversing that conclusion without proper basis.
It was further submitted that the compensation of ₹10,00,000 was excessive and disproportionate, particularly because it equalled 100% of the cheque amount.
For the Respondent
Counsel for Sharanappa argued that the trial court failed to draw the presumptions mandated under the NI Act despite the complainant proving foundational facts. The accused had not stepped into the witness box or offered any rebuttal evidence, and thus the High Court was correct in reversing the acquittal and convicting him.
Supreme Court’s Analysis
The bench rejected both grounds raised by the appellant.
On the first issue, the Court observed:
“Even in the absence of any rebuttal evidence, the appellant cannot contend that there was an absence of foundational facts or that the very raising of a presumption under Section 118 read with Section 139 of the Act in favour of the respondent was incorrect.”
The Court held that the complainant had successfully established foundational facts, and in the absence of rebuttal evidence from the accused, the High Court was justified in raising the statutory presumptions and convicting him.
On the second issue regarding compensation, the Court referred to its earlier judgment in R. Vijayan v. Baby, (2012) 1 SCC 260, and noted:
“Section 138 of the Act authorises the learned Magistrate to impose by way of fine an amount which may extend to twice the amount of cheque, with or without imprisonment. In all such cases, where there is a conviction, there should be a consequential levy of fine of an amount sufficient to cover the cheque amount. There could also be interest on the cheque amount, followed by award of such amount as compensation from the fine amount.”
The Court clarified that the High Court had imposed a fine of ₹10,10,000, from which ₹10,00,000 was to be paid to the complainant as compensation. The additional ₹10,000 was to be remitted to the State. There was no separate or additional award of compensation beyond the fine.
“We do not think that the appellant has been directed to pay a fine of ₹10,10,000 and an additional amount of ₹10,00,000 towards compensation. Thus, in fact, the respondent has not been paid any amount by way of compensation at all. He is ordered to be entitled to cheque amount of ₹10,00,000 and no further amount.”
Final Order
The Supreme Court refused to interfere with the conviction or the sentence. However, upon request by the appellant’s counsel, the Court granted three months’ time from the date of judgment to deposit the fine amount. The cheque amount was to be paid to the complainant upon deposit, failing which the appellant would serve the default sentence of six months’ simple imprisonment.
The appeal was disposed of accordingly.
