High pendency of cheque bounce cases is serious concern, says SC

New Delhi: Expressing “serious concern” over pendency of a large number of cheque bounce cases, the Supreme Court has said courts should encourage compounding of offences under the Negotiable Instruments Act if parties are willing to reach a compromise.

A bench of Justices Sudhanshu Dhulia and Ahsanuddin Amanullah set aside the conviction of a man named P Kumarasamy in a cheque bounce case, after noting that the parties have entered into a settlement agreement and Rs 5.25 lakh has been paid to the complainant.

“A large number of cases involving dishonour of cheques are pending before courts which is a serious concern for our judicial system. Keeping in mind that the ‘compensatory aspect’ of remedy shall have priority over the ‘punitive aspect’, courts should encourage compounding of offences under the NI Act if parties are willing to do so,” the bench said in its July 11 order.

The Negotiable Instruments Act governs all negotiable instruments like promissory notes, bills of exchange, and cheques. The bench said it has to be remembered that dishonour of cheques is a regulatory offence which was made an offence only in view of public interest so that the reliability of these instruments can be ensured.

“Considering the totality of the circumstances and compromise between the parties, we allow this appeal and acquit the appellants by setting aside the impugned order dated April 1, 2019 as well the trial court’s order dated October 16, 2012. Appellant no.2 (P Kumarasamy), who was exempted from surrendering by this Court, need not surrender and his sureties are hereby discharged,” the bench ordered.

The bench noted that in 2006, P Kumarasamy alias Ganesh had borrowed Rs 5,25,000 from respondent A Subramaniam but did not repay the loan.

To discharge the debt, the bench said, Kumarasamy gave a cheque for Rs 5.25 lakh in the name of his partnership firm M/s New Win Export.

“Since the cheque was dishonoured due to insufficient funds, respondent filed a complaint under Section 138 NI Act against the appellants where the trial court vide order dated October 16, 2012 convicted the appellants and imposed a sentence of one year of simple imprisonment each,” it said.

It noted Kumarasamy challenged the conviction before the appellate court, which reversed the findings of the trial court and acquitted him and the firm.