Cheque Bounce Victims Must Get Adequate Compensation

Today, we bring you an important and far-reaching judgment from the Punjab & Haryana High Court in CRR 151 of 2025 (O&M), titled Jugjit Kaur vs. Rajwinder Singh (Neutral Citation: 2025:PHHC:033187), which has reshaped how compensation under Section 138 of the Negotiable Instruments Act, 1881 must be viewed.

This case is a landmark step toward ensuring that victims of cheque dishonor are properly compensated and not left seeking civil remedies years later. Here's a detailed analysis of this significant decision:

The Petitioner, Jugjit Kaur, borrowed ₹19,00,000/- in cash from the Respondent Rajwinder Singh for business purposes.

To repay the amount, a post-dated cheque dated 02.04.2015 was issued, but it was dishonored when presented, with the bank citing "Account Closed".

After serving the mandatory legal notice, the complainant filed a case under Section 138 of the Negotiable Instruments Act.

The Trial Court convicted the petitioner, sentencing her to two years of rigorous imprisonment and imposed a fine of ₹10,000/-. However, no compensation was granted to the complainant.

The appellate court upheld the conviction and sentence, leading to a revision petition before the Punjab and Haryana High Court.

The High Court, presided over by Justice N.S. Shekhawat, focused on the key issue:

Should the criminal court award a fine or compensation in cheque bounce cases sufficient enough to reimburse the complainant’s actual loss?

The Court emphasized that while imprisonment is a punitive remedy, compensation remains the primary legislative intent behind Section 138 NI Act.

1. Legislative Intent Behind Section 138 NI Act

- Section 138 was inserted to build public confidence in the banking system and to strengthen the credibility of cheques in financial transactions.

- The punishment provisions — including imprisonment and fine — were introduced to discourage the casual issuance of cheques without maintaining sufficient balance.

 2. Compensatory Aspect Over Punitive Aspect

- Referring to Supreme Court rulings, including Damodar S. Prabhu v. Sayed Babalal H. (2010) and R. Vijayan v. Baby (2012), the Court reiterated that:

 Unlike conventional crimes, cheque bounce cases are more about ensuring recovery of the amount rather than punishing the accused."

- The priority should be compensating the complainant, not merely sending the accused to jail.

 3. Fine Must Be Commensurate with Cheque Amount

- Fine imposed must match or exceed the cheque amount, preferably with interest (recommended minimum 6% per annum) from the date of cheque till the date of judgment.

- Fine imposed under Section 138 can legally be up to twice the amount of the dishonored cheque.

 4. Application of Section 357 CrPC

- Section 357 CrPC allows fines recovered by criminal courts to be applied towards compensation to victims.

- The Court stressed that trial courts must actively use this provision to award meaningful compensation.

 5. Trial Court's Error

- The Trial Court only imposed a nominal fine of ₹10,000/- despite the cheque amount being ₹19,00,000/- — leading to gross injustice.

- This defeated the very object of the Negotiable Instruments Act.

The conviction was maintained, but the sentence and fine were set aside.

The case was remanded back to the Trial Court to freshly consider appropriate quantum of fine, compensation, and imprisonment after giving a hearing to the parties.

The Court granted interim bail to Jugjit Kaur pending the Trial Court’s fresh decision.

Further, the Registrar General was directed to circulate this judgment to all subordinate courts to ensure uniformity and consistency in sentencing under Section 138 NI Act.

Compensation is the Priority: In cheque bounce cases, securing the complainant’s dues is the first objective.

 Fine Must Match Loss: Trial Courts must award fines sufficient to cover cheque amounts with interest.

Balance Between Imprisonment and Fine: Courts are encouraged to impose minimum imprisonment and focus more on monetary recovery unless aggravated conduct is seen.

Guidance to All Courts: Uniform application across Punjab, Haryana, and Chandigarh judiciary is now mandated.

At Advocate Akanksha Roy | Best Cheque Bounce Case Lawyer in Delhi, we understand that a bounced cheque is not just a piece of paper — it often represents your hard-earned money, trust, and business credibility.  

With evolving legal interpretations like this judgment, we can build stronger cases, secure faster recovery, and deliver complete justice for our clients.

If you have been cheated by a dishonored cheque or are facing a cheque bounce complaint, expert legal guidance is critical to protect your interests and recover your dues.

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Advocate Akanksha Roy  

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