NI Act Proceedings Are Compensatory Rather Than Punitive: Madras High Court Directs Kochadaiyaan Movie Producers To Pay ₹2.52 Crore In Cheque Bounce Case
Holding that cheque dishonour proceedings are quasi-criminal and primarily compensatory in character, the Court modified the sentence to secure repayment of an admitted monetary liability, emphasising that the objective of Section 138 of the Negotiable Instruments Act is restitution to the complainant rather than punitive incarceration.
While affirming the conviction arising from dishonour of a cheque issued in connection with a financial transaction relating to the Kochadaiyaan movie, the Court directed its producers to pay ₹2.52 crore towards the outstanding liability, observing that the statutory framework prioritises restitution to the complainant over imprisonment.
The Court was hearing a criminal revision petition challenging concurrent findings of the trial court and the appellate court convicting the petitioners for dishonour of a cheque issued in connection with a financial arrangement relating to film distribution rights.
A Bench of Justice Sunder Mohan, while observing that “the proceedings under Section 138 of the Negotiable Instruments Act are intended to compensate the complainant more than the punitive aspect”, directed the producers of the movie to “pay a fine of Rs.2.52 Crores (Rupees Two Crores and Fifty-Two Lakhs only), less the amount already deposited by the petitioners and withdrawn by the respondent, within a period of four weeks from the date of receipt of a copy of this order”, or in default “….undergo simple imprisonment for six months”.
Background
The prosecution arose from a memorandum of understanding under which the respondent advertising company advanced ₹10 crores to the petitioner entertainment company in connection with the post-production and distribution of a film.
The complainant alleged that the petitioners issued a cheque for ₹5 crores towards part discharge of liability. The cheque was returned unpaid with the endorsement “stop payment by drawer.”
Following statutory notice and non-payment, a complaint under Section 138 NI Act was filed. The trial court convicted the petitioners and sentenced the second petitioner to imprisonment and compensation. The appellate court confirmed the conviction and sentence.
In revision, the petitioners argued that substantial repayments had already been made, that the cheque was issued as security, and that the complainant’s pleadings were inconsistent regarding the nature of liability.
The respondent contended that the cheque represented a legally enforceable obligation and that revisional interference with concurrent findings was unwarranted.
Court’s Observations
The High Court first reiterated the limited scope of revisional jurisdiction, noting that interference with concurrent findings is permissible only where conclusions are perverse or unsupported by evidence. The Court then examined whether the statutory presumption under Section 139 of the NI Act had been rebutted.
The Court found inconsistencies in the complainant’s version regarding the nature of the liability, whether the cheque represented repayment of principal or commission entitlement, and observed that documentary evidence did not clearly establish the exact quantum due on the date of presentation. At the same time, the Court noted that the petitioners admitted receipt of ₹10 crores and acknowledged partial repayment of ₹8.74 crores, leaving an outstanding amount.
Relying on Supreme Court jurisprudence, the Court emphasised that Section 138 proceedings are designed to secure recovery of money rather than to impose incarceration as an end in itself. The quasi-criminal character of the provision allows courts to mould relief to ensure restitution, particularly where the underlying liability is substantially established.
The Bench observed that neither party conclusively proved their full factual claims, yet the evidence supported the existence of an outstanding monetary obligation. In such circumstances, prioritising compensation over imprisonment would best serve the statutory purpose.
Conclusion
Affirming the conviction under Section 138 of the NI Act, the High Court modified the sentence imposed by the courts below. Instead of imprisonment, the petitioners were directed to jointly pay a fine of ₹2.52 crores, calculated with reference to the outstanding liability, within four weeks.
The fine, less amounts already deposited and withdrawn, was ordered to be paid as compensation to the complainant. In default of payment, the second petitioner would undergo six months’ simple imprisonment.
Cause Title: Mediaone Global Entertainment Ltd. & Anr. v. Ad Bureau Advertising Pvt. Ltd.
Appearances
Petitioners: T. Saikrishnan, Advocate.
Respondent: Abirchand Madhubala Nahar (Party In Person)