by In the realm of financial transactions, cheques are a widely accepted method of payment, known for their convenience and reliability. However, when a cheque is dishonored due to insufficient funds or other reasons, it can lead to legal consequences under Section 138 of the Negotiable Instruments Act, 1881. The recent Supreme Court judgment in the case of Raj Reddy Kallem vs. The State of Haryana and ANR (Criminal Appeal No. 2210 OF 2024) has brought forth significant clarity on the issue of compounding such cases and the court’s powers in relation to the same.
Understanding Section 138 NI Act 2024:
Section 138 of the Negotiable Instruments Act, 1881 provides for criminal liability in case of dishonor of a cheque due to insufficient funds or other reasons mentioned under the Act. It outlines a specific procedure that needs to be followed by the aggrieved party (payee) to seek redressal for the dishonored cheque, including issuing a legal notice to the drawer demanding payment.
Compounding of Cheque Bounce Cases:
Compounding refers to the settlement of disputes between the parties outside the court by mutual agreement. In the context of cheque bounce cases, compounding typically involves the payee agreeing to withdraw the complaint upon receiving the cheque amount from the drawer.
Supreme Court’s Ruling:
The case of Raj Reddy Kallem V/s The State of Haryana has laid down important principles regarding the compounding of cheque bounce cases:
Both Parties’ Consent Required: The Supreme Court emphasized that for a cheque bounce case to be compounded, consent from both parties—i.e., the payee and the drawer—is essential. This ensures that both parties voluntarily agree to settle the matter outside the court.
Court’s Power to Quash: However, the court noted that if the accused (drawer of the cheque) makes the payment to the payee even after the initiation of legal proceedings, the court has the inherent power under Section 482 of the Criminal Procedure Code (CrPC) to quash the proceedings.
Importance of Consent: The judgment highlights that mere compromise between the parties is not sufficient if either party does not agree to compound the case. The court cannot force compounding if there is no mutual agreement.
Key Takeaways:
Voluntary Agreement: Compounding of cheque bounce cases requires voluntary agreement from both the payee and the drawer.
Court’s Discretion: If the drawer makes the payment before or during the legal proceedings, the court may exercise its discretion to quash the case under Section 482 of the CrPC.
Legal Clarity: The judgment provides clarity on the procedural aspects of cheque bounce cases, emphasizing the importance of mutual consent and adherence to legal requirements.
Conclusion:
The Supreme Court’s decision in Raj Reddy Kallem vs. The State of Haryana underscores the significance of mutual consent in compounding cheque bounce cases under Section 138 of the Negotiable Instruments Act, 1881. It reaffirms the court’s role in upholding legal standards while also recognizing the possibility of settlement outside the court if both parties agree. Understanding these nuances is crucial for businesses and individuals involved in financial transactions, ensuring compliance with legal obligations and fostering efficient resolution of disputes.
This judgment serves as a benchmark in interpreting Section 138 NI Act 2024, guiding future cases and promoting clarity in the application of law concerning cheque bounce incidents in India’s legal framework.
Raj Reddy Kallem vs. The State of Haryana and ANR
(Criminal Appeal No. 2210 OF 2024)
Disclaimer :
This information is provided for general guidance purposes only and should not be considered as legal advice. It is recommended to seek personalized advice from a qualified lawyer that is tailored to your specific situation.
Author –
Adv. CS, CMA Jagannath Mane
