[S.138 NI Act] Trial Court Shall Order Payment Of Future Interest On Compensation Amount To Protect Complainant: Karnataka HC

The Karnataka High Court has said that trial courts, while passing an order of sentence in cases under the Negotiable Instruments Act, after determining the fine/compensation, shall also pass orders to pay future interest on the compensation amount payable to the complainant, so that even if the matter is challenged, the complainant will be protected.

Justice Shivashankar Amarannavar said, “In view of Section 143(3) the trial for offence under Section 138 of N.I.Act has to be completed within six months. If the said provision is not adhered to and the trial for the offence under Section 138 of N.I.Act takes 4 to 5 years, in the mean time, the claim of the complainant for recovery of the cheque amount by filing civil suit becomes barred by limitation...Not only that the accused who is convicted for offence under Section 138 of N.I.Act challenges the same before the Sessions Court wherein the matter takes 2 to 3 years. The accused unsuccessful in the said appeal prefers revision petition before the High Court and it is seen that the disposal of revision takes more than 5 years. After all this, if the complainant has to receive the fine/compensation as awarded by the trial Court, if it is a cheque amount or little higher than the cheque amount, he will be at loss and put to injustice.”

"Therefore, while passing the order of sentence after determining the fine/compensation, the Court shall also pass an order to pay future interest @ 9% p.a. on the compensation amount payable to the complainant by fixing time of one/two months to deposit compensation amount so that even if the matter is challenged before the Sessions Court in appeal and High Court in revision the interest of the complainant will be protected," he added.

Further, it was clarified that in cases where the amount is deposited, pursuant to the orders passed under Section 143-A of N.I. Act (interim compensation), the Court can consider for exclusion of the interest on the amount deposited by the accused.

Court noted that section 357 Cr.PC (Criminal Procedure Code) provides that when the court imposes a sentence of fine, the court may, while passing judgment, order the whole or any part of the fine recovered to be applied in defraying the expenses properly incurred in the prosecution and also for payment of compensation.

It emphasised that the word 'fine' is normally used in legal phraseology for the penalty imposed and typically payable to the Treasury of the State. “Therefore, whenever a fine is imposed typically it shall go to the State and out of that fine amount, compensation can be awarded. Fine is a mode of punishment. Therefore, normally, when the fine is imposed, the first right upon the fine is to the State as it is a punishment for the offence. While collecting the fine a portion can also be given as compensation to the victim,” it said.

Further, it said, “Even in a complaint filed for the offence punishable under Section 138 of N.I.Act, the role of the State is involved in adjudication of the dispute, execution of the summons, warrants, imprisonment of accused, etc,. Therefore the burden on the exchequer in a proceedings under Section 138 of N.I. Act cannot be ignored.”

Background

The court held thus while allowing a petition filed by M/s Banavathy & Company, challenging the order of the session court which in appeal filed by the accused Mahaveer Electro Mech (P) Ltd and its directors had affirmed the conviction under Section 138 of the Act and sentence imposed by the trial court but had reduced the compensation amount from Rs.7,10,000/- to Rs.4,70,000.

The petitioner argued that the transaction between the petitioner/complainant and respondents/accused is a commercial transaction and considering the same, the trial Court has awarded a fine and compensation, taking into account interest on the cheque amount. Since, there was no prayer of the accused persons before the appellate Court for reduction of fine amount.

Court held “The appellate Court without assigning any reasons has reduced the fine/compensation amount. The trial Court taking into consideration that the transaction between the complainant and accused is a commercial transaction and also taking into consideration Section 80 of the N.I.Act has rightly awarded fine of Rs.7,10,000/- and out of that Rs.7,00,000/- has to be paid as compensation to the complainant. Therefore, the appellate Court has erred in reducing the sentence of fine/compensation.”

It added that the matter is pending before the Court for nearly 9 years. Since the complainant has not challenged the sentence of fine and award of compensation passed by the trial Court, the sentence of fine/compensation cannot be enhanced in the present revision petition. Therefore, the petitioner/complainant has to be satisfied with the fine/compensation awarded by the trial Court.

Accordingly, it allowed the petition.

Appearance: Advocate Sona Vakkund for Petitioner.

Advocate Dinesh Goankar for Respondent.

Citation No: 2025 LiveLaw (Kar) 241

Case Title: M/s Banavathy & Company AND Mahaveer Electro Mech (P) Ltd & Others

Case No: CRIMINAL REVISION PETITION No. 996 OF 2016

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