Supreme Court Urges Compounding in Cheque Bounce Cases to Address Judicial Backlog

The Supreme Court has recently reiterated that the primary purpose of criminalizing cheque bounce under the Negotiable Instruments Act, 1881, is to ensure the reliability of cheques, prioritizing the compensatory aspect over the punitive aspect. A bench comprising Justice Sudhanshu Dhulia and Justice Ahsanuddin Amanullah stressed that courts should encourage settlements in such cases.

The Court noted that cheque dishonour is a regulatory offence intended to maintain public confidence in financial instruments. The large backlog of cheque dishonour cases poses a significant challenge to the judicial system. Given this, the Court underscored that the compensatory aspect should take precedence, urging the compounding of offences under the NI Act when parties are amenable.

The case involved M/s New Win Export and its partner P. Kumarasamy, who had been convicted in a cheque bounce case. Kumarasamy had issued a cheque for Rs. 5,25,000 to A. Subramaniam, which was dishonoured due to insufficient funds. Following the complaint under Section 138 of the NI Act, the Trial Court convicted the appellants, sentencing them to one year of simple imprisonment. While the Appellate Court acquitted the appellants, the High Court reinstated the conviction upon the complainant's appeal. Before approaching the Supreme Court, the appellants and the complainant reached a settlement. As per the agreement, the appellants paid Rs. 5,25,000 to the complainant, who then agreed to settle the matter and had no objection to the appellants' conviction being set aside. The Supreme Court, referencing Section 147 of the NI Act, highlighted that offences under the Act could be compounded. The Court emphasized the need for authenticity in settlement documents at the appellate stage. In this instance, the complainant's affidavit confirmed the settlement and receipt of payment.

Recognizing the validity of the settlement, the Supreme Court concluded that maintaining the conviction was unnecessary. The Court allowed the appeal, setting aside both the High Court's order dated April 1, 2019, and the Trial Court's order dated October 16, 2012, thereby acquitting the appellants. Kumarasamy was exempted from surrendering as per the settlement terms.

CASE DETAILS

Case No.: Criminal Appeal No. 2948 of 2024

Case Title: M/s. New Win Export & Anr. v. A. Subramaniam