Sentence of double the cheque amount as compensation serves both the compensatory and punitive objectives of Section 138.

The Appellants challenged the acquittal of the Respondent for offenses under Section 138 of the Negotiable Instruments Act, 1881.

The High Court, vide judgment dated 19th September 2024, set aside the Trial Court’s acquittal, finding that the Respondent admitted to issuing ten cheques (totaling Rs. 2.60 Crores) and failed to rebut the statutory presumption that the cheques for the outstanding balance of Rs. 85 Lakhs were issued toward a legally enforceable debt.

Following the conviction, the Respondent approached the Supreme Court, which, via order dated 21st November 2025, permitted the High Court to determine the sentence but requested it be kept in abeyance pending the SLP.

1. What is the appropriate quantum of sentence and compensation to be awarded to the Appellants following the conviction of the Respondent under Section 138 of the NI Act?

Section 138 of the Negotiable Instruments Act, 1881, regarding the dishonor of cheques, and Section 357(1)(b) of the Cr.P.C. concerning the award of compensation.

R. Vijayan v. Baby (2012), which establishes that compensation should be realistic, adequate, and may include interest to restitute the complainant.

Meters and Instruments (P) Ltd. v. Kanchan Mehta (2018), which posits that Section 138 proceedings are primarily compensatory in nature, with punitive elements serving to ensure compliance.

The Court observed that the Respondent’s defense—that the cheques were merely security—was unsubstantiated and failed to rebut the statutory presumption under Section 139 of the NI Act.

In determining the sentence, the Court noted the commercial nature of the transaction and the Respondent's conduct, including the adoption of inconsistent defenses and a lack of bona fide efforts to settle the debt since 2007.

Rejecting the Respondent’s plea for leniency based on the claim that the amount represented only "profit/interest," the Court found that the prolonged deprivation of funds justified a significant financial penalty.

The Court reasoned that a fine equivalent to twice the cheque amount would sufficiently balance equities and meet the compensatory objectives of the Act without requiring a separate interest calculation.

The Respondent is directed to deposit the amount within six months, failing which he shall undergo three months of simple imprisonment.

Pursuant to the Supreme Court's directions in SLP (Crl.) No. 13799–13800/2024, the execution of this sentence is held in abeyance pending further orders from the Apex Court.