Imprisonment in Default of Fine Under Section 138 NI Act Cannot Exceed Six Months Per Prosecution

The Petitioner was the director of a company that allegedly owed Respondent No. 2 approximately Rs. 22.68 crores for goods sold. To discharge this debt, 60 cheques were issued, all of which were dishonored in July 2014.

The Respondent filed 17 separate complaints under Section 138 of the Negotiable Instruments Act.

On May 9, 2017, the Metropolitan Magistrate convicted the Petitioner in all 17 cases, sentencing him to 15 months of simple imprisonment per case (to run concurrently) and awarding compensation with a default sentence of 12 months in each case to run consecutively.

This meant the Petitioner faced 17 years of imprisonment if he failed to pay compensation.

The Sessions Court dismissed the appeals in January 2025.

The Petitioner approached the High Court seeking a declaration that the sentences be modified or deemed served.

The court primarily applied Section 30 of the CrPC and Section 65 of the IPC, which mandate that imprisonment in default of fine shall not exceed one-fourth of the maximum term prescribed for the offence.

As Section 138 of the N.I. Act provides a maximum of two years, the default limit is six months.

The court relied on Sharad Hiru Kolambe v. State of Maharashtra, which establishes that default sentences cannot run concurrently.

Jolly George Varghese v. The Bank of Cochin, which emphasizes that incarcerating a person for inability to pay debts due to poverty violates Article 21 unless there is "willful failure" despite having means.

The Court found the trial court’s order of 12 months’ default imprisonment per case "clearly illegal" as it doubled the statutory limit of six months permitted under Section 65 IPC.

While acknowledging that default sentences must legally run consecutively, the Court noted that a cumulative default sentence of 17 years for a 15-month substantive sentence was "shockingly disproportionate" and "manifestly illegal".

Applying the principles of Sanjay Vasudeva v. State of NCT of Delhi, the Court observed that the Petitioner had already served over seven and a half years (reaching nine years with remissions), which far exceeded the substantive sentence.

The Court reasoned that since Section 421 CrPC allows for the recovery of compensation even after a default sentence is served, further detention served no punitive purpose and violated the Petitioner’s right to personal liberty under Article 21.

The High Court allowed the petition and modified the 12-month default sentences in all 17 complaints to the period of sentence "already undergone" by the Petitioner. The Court ordered the Petitioner to be released forthwith, provided he was not required in any other case, effectively treating the nine-plus years already served as sufficient punishment for the defaults.