Compensation in cheque dishonour cases may replace nominal fine where liability is admitted and security-cheque defence fails.

In a prosecution under Section 138 of the Negotiable Instruments Act, the Court accepted that the cheque was issued towards an admitted liability and rejected the defence that it was only a security cheque pending audit. While declining to interfere so as to record an acquittal or impose substantive imprisonment, the Court held that the object of the proceedings would be better served by awarding compensation rather than a nominal fine. It recognised that criminal law may direct compensation having regard to the facts and the complainant's entitlement should not be reduced to a token amount. The fine was accordingly replaced with compensation payable to the complainant.

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Issues: Whether, in a prosecution under Section 138 of the Negotiable Instruments Act, the sentence imposed by the High Court should be altered so that the complainant receives compensation of Rs. 7,00,000/- instead of the nominal fine of Rs. 5,000/-.

Analysis: The cheque was treated by the courts below as issued towards an admitted liability of Rs. 7,00,000/-, and the defence that it was merely a security cheque pending audit was not accepted. The Court held that, although the case did not justify interference to record an acquittal or to impose a substantive imprisonment, the object of the proceedings would be better served by awarding compensation. It emphasized that compensation under criminal law can be directed having regard to the facts and that the complainant's entitlement to the amount should not be reduced to a nominal fine.

Conclusion: The sentence of fine was replaced by a direction to pay compensation of Rs. 7,00,000/- to the appellant, and the appeal succeeded to that extent.

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