Interim restitution in cheque dishonour cases is impermissible where settlement money was voluntarily paid and liability remains for trial.

In pending cheque dishonour prosecutions under the Negotiable Instruments Act, a Magistrate cannot direct interim refund or restitution of settlement money voluntarily paid under a mediation settlement before liability is finally adjudicated. The payment was made pursuant to the parties' settlement, while the underlying liability on the dishonoured cheques still remained for trial determination. A criminal court cannot be turned into a forum for mid-proceeding recovery of the settlement amount; any restitutionary relief, if warranted, can arise only at final adjudication. The refund direction was therefore unsustainable and was set aside, leaving liability to be decided in the pending proceedings.

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Issues: Whether, in pending prosecutions under Section 138 of the Negotiable Instruments Act, 1881, the Magistrate could direct refund or restitution of the amount paid under a mediation settlement before final adjudication of liability.

Analysis: The settlement was arrived at voluntarily between the parties and the payment of Rs. 38 lakhs was made on that basis, not pursuant to any direction of the Magistrate. The liability, if any, arising from the dishonoured cheques remained an issue to be decided at trial. In such circumstances, the criminal court could not be converted midway into a forum for restitution, refund, or recovery of the settlement amount. Any appropriate restitutionary direction, if ultimately required, could arise only at the stage of final adjudication.

Conclusion: The refund direction was unsustainable and was set aside in favour of the petitioner.

Final Conclusion: The impugned orders directing return of the settlement amount were quashed, leaving the question of liability to be determined in the pending cheque dishonour proceedings.

Ratio Decidendi: A criminal court dealing with a pending cheque dishonour complaint cannot order interim restitution of settlement money voluntarily paid by one party, because the underlying liability must be determined in the trial itself.

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