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2026 (6) TMI 1218 - CHHATTISGARH HIGH COURT Indian Laws

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SARFAESI Section 14 execution can proceed despite pending DRT proceedings unless interim stay is granted.
Pending proceedings under the SARFAESI Act before the DRT do not, by themselves, prevent execution of a Section 14 order where no interim stay has been granted. The authority acting under Section 14 performs a ministerial, non-adjudicatory function and is bound to assist in taking possession of the secured asset. In the absence of Tribunal protection, a writ court should not interfere with the direction to execute the Section 14 order, and no jurisdictional error or perversity is made out.

2026 (6) TMI 698 - PUNJAB AND HARYANA HIGH COURT Indian Laws

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Cheque dishonour compromise allowed; full settlement made the offence compoundable and justified modification of sentence.
A cheque dishonour dispute under Section 138 of the Negotiable Instruments Act was treated as compoundable on the basis of a voluntary, full compromise between the parties, with the complainant having received the settled amount and the execution proceedings withdrawn. The text notes that Section 147 makes offences under the Act compoundable notwithstanding the CrPC, and that the inherent power under Section 528 of the Bharatiya Nagarik Suraksha Sanhita may be used to secure the ends of justice and prevent abuse of process where the settlement is genuine and free from coercion, fraud or undue influence. The sentence was modified to the period already undergone.

Dishonour of Cheque - Compounding of offence under Section 138 of the Negotiable Instruments Act - Proceedings arising from commercial transactions - Inherent jurisdiction under Section 528 to quash criminal proceedings on compromise - Modification of the sentence already imposed - Principles for exercise of inherent jurisdiction - Voluntary compromise between the parties - Abuse of process of law - HELD THAT: - Section 528 BNSS confers inherent jurisdiction upon this Court to secure the ends of justice and to prevent abuse of the process of law. However, such extra-ordinary power is required to be exercised sparingly, and with circumspection, and can be invoked where continuation of criminal proceedings would serve no useful purpose and would merely result in unnecessary prolongation of litigation despite settlement between the parties. Hon’ble Supreme Court in K. Bharthi Devi v. State of Telangana [2024 (10) TMI 212 - SUPREME COURT], has observed that the guiding principles for exercise of inherent jurisdiction are whether such exercise would secure the ends of justice or prevent abuse of the process of Court. It was further held that criminal proceedings arising out of commercial, financial, mercantile, civil or matrimonial disputes, where the wrong is essentially private or personal in nature, stand on a different footing and may appropriately be quashed where the parties have genuinely resolved their disputes. The Hon’ble Court further emphasized that in such matters, continuation of criminal proceedings despite settlement would amount to unnecessary oppression and injustice. The Court held that offences under the Negotiable Instruments Act are compoundable by virtue of Section 147, and that proceedings under Section 138, though carrying criminal consequences, are essentially rooted in a compensatory commercial liability. On the material placed before it, the Court found that the parties had voluntarily settled the dispute, the complainant had received the entire amount in full and final satisfaction, and the execution proceedings had also been withdrawn. In those circumstances, the substratum of the dispute no longer survived, there was no indication of coercion or fraud in the settlement, and continuation of the conviction and further proceedings would serve no useful purpose. Applying the principles governing exercise of inherent jurisdiction, the Court concluded that bringing the proceedings to a close would secure the ends of justice and prevent abuse of process. Since the petitioner had also sought limited relief regarding sentence, the sentence order was modified to the period already undergone. [Paras 12, 13, 14, 15, 16] The offence under Section 138 of the Negotiable Instruments Act was compounded, the petition was partly allowed, and the sentence was modified to the sentence already undergone. Final Conclusion: The Court accepted the compromise between the parties in the cheque dishonour case, compounded the offence under Section 138 of the Negotiable Instruments Act, and exercised inherent jurisdiction to terminate the surviving criminal consequences. The sentence was modified to the period already undergone and release of the petitioner was directed.

2026 (6) TMI 1217 - PUNJAB AND HARYANA HIGH COURT Indian Laws

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Independent Section 174-A prosecution may still be quashed where the underlying cheque dispute is settled and withdrawn.
Even though proceedings under Section 174-A of the IPC are independent and may, in principle, continue after the proclamation ceases to operate, the High Court noted that compromise and withdrawal of the foundational Section 138 NI Act complaint remained relevant in deciding whether further prosecution served any useful purpose. Exercising inherent powers under Section 528 BNSS and Section 482 CrPC, it held that continuation of the FIR and connected proceedings would amount to abuse of process and would not advance the ends of justice. On that basis, the FIR under Section 174-A IPC and all consequential proceedings were quashed.

2026 (6) TMI 1003 - ALLAHABAD HIGH COURT Indian Laws

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Cheque dishonour liability requires drawer status; a non-signatory joint account holder cannot face prosecution under Section 138.
For an offence under Section 138 of the Negotiable Instruments Act, prosecution lies against the drawer and signatory of the cheque, because the cheque must be drawn by the person sought to be prosecuted on an account maintained by that person. Section 141 provides limited vicarious liability for offences by companies and similar juristic entities, but it cannot be extended to two private individuals merely because they maintain a joint account or share a joint debt. A non-signatory joint account holder without a specific role could not be proceeded against under Section 138, and the summoning order was unsustainable.

2026 (5) TMI 636 - DELHI HIGH COURT Indian Laws

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Issues: (i) Whether the challenge under Section 34 of the Arbitration and Conciliation Act, 1996 was barred by limitation; (ii) whether the arbitral award was liable to be set aside for being unsupported by evidence, unreasoned, and for ignoring the defence raised in the statement of defence.

Issue (i): Whether the challenge under Section 34 of the Arbitration and Conciliation Act, 1996 was barred by limitation.

Analysis: The claim for reimbursement arose when the additional tax burden accumulated and crossed the contractual threshold, and the Court accepted the finding that the cause of action had arisen in 2010. The subsequent claim notice and rejection followed within the contractual dispute-resolution sequence. On that basis, the challenge was held to be within time.

Conclusion: The limitation objection was rejected.

Issue (ii): Whether the arbitral award was liable to be set aside for being unsupported by evidence, unreasoned, and for ignoring the defence raised in the statement of defence.

Analysis: The contractual mechanism required proof of additional cost and reimbursement only after proper determination. The Court found no evidence of actual payment of tax at enhanced rates, no proof of compliance with the contractual threshold and deduction mechanism, and no material showing that the claim for the later financial years was properly substantiated. It further found that the award contained no meaningful discussion of the material relied upon, did not disclose reasons adequate to support the grant, and failed to deal with the notifications and other objections raised in the defence. An award based on no evidence and lacking reasons was treated as perverse and falling within patent illegality.

Conclusion: The award was held liable to be set aside.

Final Conclusion: The petition succeeded, the arbitral award was annulled, and the proceedings stood concluded.

Ratio Decidendi: An arbitral award is vulnerable under Section 34 when it is rendered without evidence, without intelligible reasons, and without consideration of a material defence, as such an award amounts to patent illegality and perversity.

Arbitral award set aside for want of evidence, inadequate reasons, and failure to address material defence in Section 34 review
A Section 34 challenge to an arbitral award was treated as within limitation because the reimbursement claim arose when the additional tax burden crossed the contractual threshold, and the related dispute process was pursued in sequence. The award was then found vulnerable because it rested on no evidence of actual enhanced-tax payment, no proof of compliance with the contractual threshold and deduction mechanism, and no proper substantiation for later financial years. It also failed to deal with the material defence and relevant notifications, so the court regarded it as unsupported by reasons and marked by patent illegality and perversity. The award was set aside.

Claim for reimbursement of additional cost on account of variation in tax rates -barred by limitation - Patent illegality - Reasoned arbitral award - Non-consideration of material defence - absence of evidence to establish that the taxes at the enhanced rates were actually paid. Limitation in arbitral claims - Cause of action - HELD THAT: - The Court held that the cause of action arose when the additional cost incurred exceeded the contractual threshold of rupees one crore, which occurred in 2010. The respondent thereafter invoked the contractual mechanism under Article 11 and, upon rejection of the claim, proceeded to arbitration. On that basis, the tribunal's conclusion that the claim was not barred by limitation was found to be correct. [Paras 6] The objection of limitation was rejected. Patent illegality - No evidence - Additional cost - HELD THAT: - The Court found that, apart from tabulated statements, the respondent had led no evidence to establish either the change in tax rates after the proposal due date or actual payment of tax at the enhanced rates. Returns and proof of deposit were not produced. Since Article 11 required proof that additional cost had in fact been incurred, the absence of such evidence destroyed the foundation of the claim. In Ssangyong Engg. & Construction Co. Ltd. v. NHAI [2019 (5) TMI 1879 - SUPREME COURT], wherein it was held as under: “41. What is important to note is that a decision which is perverse, as understood in paras 31 and 32 of Associate Builders [Associate Builders v. DDA [2014 (11) TMI 1114 - SUPREME COURT], while no longer being a ground for challenge under “public policy of India”, would certainly amount to a patent illegality appearing on the face of the award. Thus, a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality. Additionally, a finding based on documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties, and therefore, would also have to be characterised as perverse.” The Court further noted that, for the later financial years, there was no proof that the contractual deduction up to rupees one crore per accounting year had been made in accordance with Article 11. Applying the principle that a claim statement by itself is not evidence, the Court held that allowing the claim on that basis rendered the award perverse and patently illegal. [Paras 9, 10, 11, 16] The award was held unsustainable for having granted the claim without evidence. Reasoned arbitral award - Non-consideration of material defence - Section 31(3) - failed to satisfy the requirement of a reasoned award - HELD THAT: - Section 31(3) of the Act mandates a reasoned award. The law is well settled that the requirement of Section 31(3) of the Act is not a mere formality. The reasoning in an appropriate case can be implied upon a fair reading of the award and the documents referred to therein. Reference is to the decision of the Supreme Court in Dyna Technologies Pvt. Ltd. v. Crompton Greaves Ltd. [2019 (12) TMI 842 - SUPREME COURT], wherein it was held as under: “34. The mandate under Section 31(3) of the Arbitration Act is to have reasoning which is intelligible and adequate and, which can in appropriate cases be even implied by the courts from a fair reading of the award and documents referred to thereunder, if the need be. The aforesaid provision does not require an elaborate judgment to be passed by the arbitrators having regard to the speedy resolution of dispute.” On reading the award as a whole, the Court found no discussion of the material on which the claimed amount was granted and no treatment of the petitioner's defence that service tax was not leviable in view of the notifications relied upon. Whether those notifications applied was a material issue requiring adjudication, but the tribunal neither noted nor decided it. The failure to consider that defence, coupled with the absence of reasoning on the evidence, made the award unreasoned and contrary to public policy. [Paras 12, 13, 14, 15, 16] The award was set aside as an unreasoned award that ignored a material defence. Final Conclusion: The Court upheld the tribunal's finding on limitation, but set aside the award on the ground that the claim for additional tax cost had been allowed without evidence and by an award lacking reasons, including failure to consider the petitioner's material defence on service tax. Questions on the substantive scope of Article 11 in relation to MAT, FBT and ST were left open.

2026 (5) TMI 429 - CALCUTTA HIGH COURT Indian Laws

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Cheque dishonour presumption under the Negotiable Instruments Act was not rebutted; revisional interference was unwarranted.
Once execution of a cheque and its dishonour were proved, the statutory presumption of debt and liability under the Negotiable Instruments Act operated in favour of the complainant. The defence that the cheque was not presented, or that procedural gaps such as absence of a deposit slip or reverse-side endorsement weakened the case, was rejected because bank officials' evidence and the return memo established presentation and dishonour for signature mismatch. The presumption was not rebutted on the preponderance of probabilities, and the concurrent findings below were not shown to suffer from perversity, jurisdictional error, or manifest illegality. Revisional interference with the conviction was therefore not warranted.

Negotiable Instruments Act - Dishonour of cheque - Legally Enforceable Debt -essential ingredients to constitute the offence under Section 138 - Statutory presumption - Proof of presentation - service of demand notice - Rebuttable Presumption - Reverse Onus Clause - Preponderance of Probabilities - Concurrent Findings of Fact - revisional interference with concurrent findings. Statutory presumption in cheque dishonour - proof of presentation and dishonour of cheque - rebuttal of presumption - HELD THAT: - The Court held that the bank evidence and exhibited records established that the cheque had in fact been presented and returned unpaid for the reason that the drawer's signature differed. The absence of a signature on the reverse of the cheque, non-production of the deposit slip, or omission of a dishonour entry in the account statement did not, by themselves, discredit the bank's evidence, particularly when the Branch Manager explained that the relevant branches had merged and that, both banks being SBI branches, the cheque was not required to be sent for external clearance under CBS. The transfer of the amount to the accused's account stood corroborated by the bank records, and the demand notice was admittedly received. In these circumstances, the statutory presumption in favour of the complainant stood attracted, and the accused did not produce convincing rebuttal material sufficient, even on the standard of preponderance of probabilities, to show absence of debt or liability. [Paras 16, 17, 18, 19] The ingredients of the offence were held proved, and the challenge founded on alleged non-presentation of the cheque and lack of liability was rejected. Revisional interference with concurrent findings - perversity in findings - HELD THAT: - The Court held that in revisional jurisdiction it would not re-analyse or re-interpret evidence merely because another view was possible. Interference with concurrent findings is warranted only where the findings are perverse, suffer from jurisdictional error, or occasion failure of justice. On the materials on record, the discrepancies pointed out by the petitioners were treated as technical inconsistencies arising from branch merger and banking procedure, and not as defects rendering the appreciation of evidence by the courts below perverse. Since the findings on issuance of cheque, its presentation, dishonour, service of notice and non-payment were supported by evidence, no revisional interference was justified. [Paras 13, 14, 19, 20] The concurrent conviction was affirmed, there being no perversity, jurisdictional error, or manifest injustice. Final Conclusion: The revision was dismissed. The Court affirmed the conviction and sentence, holding that the cheque dishonour and the underlying liability stood proved and that no perversity or other revisional ground existed to disturb the concurrent findings.

2026 (6) TMI 697 - DELHI HIGH COURT Indian Laws

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Issues: (i) whether prolonged pre-trial incarceration and alleged delay in the trial justified grant of bail despite the stringent conditions under Section 21(4) of the Maharashtra Control of Organised Crime Act, 1999; (ii) whether parity with co-accused who had been granted bail warranted release of the petitioner.

Issue (i): whether prolonged pre-trial incarceration and alleged delay in the trial justified grant of bail despite the stringent conditions under Section 21(4) of the Maharashtra Control of Organised Crime Act, 1999.

Analysis: The Court held that constitutional concerns under Article 21, including the right to a speedy trial, remain relevant even under special statutes such as MCOCA, but the inquiry must be structured by the statutory embargo and the prima facie material. The Court distinguished cases where delay alone had justified bail and noted that, on the record, the delay in the present case was not attributable solely to the prosecution or the Court, as several adjournments had also been taken on behalf of the accused. The case was found to be complex, involving multiple accused and witnesses, and the petitioner had already undergone substantial custody, but the Court considered the alleged role, statutory punishment, and trial trajectory together rather than treating passage of time as decisive.

Conclusion: Prolonged incarceration and delay did not, in the facts of the case, satisfy the statutory and constitutional threshold for bail, and this ground was rejected against the petitioner.

Issue (ii): whether parity with co-accused who had been granted bail warranted release of the petitioner.

Analysis: The Court compared the petitioner's role with the roles attributed to the co-accused who had been enlarged on bail and found material distinctions. The co-accused had limited or different roles, whereas the petitioner was prima facie portrayed as a co-leader of the organised crime syndicate, involved in coordination with the principal accused during his incarceration, handling proceeds of crime, and facilitating the alleged extortion machinery. The Court held that parity cannot be applied mechanically and must turn on the similarity of role and material.

Conclusion: The petitioner was not similarly situated to the co-accused granted bail, so parity was not made out.

Final Conclusion: The bail request was rejected because the petitioner's alleged central role in the syndicate and the prima facie material against her outweighed the delay-based and parity-based grounds.

Ratio Decidendi: In bail matters under special statutes like MCOCA, prolonged incarceration is a relevant but not standalone ground; it must be weighed with the statutory twin conditions, the prima facie material, the causes of delay, and the specific role attributed to the accused, while parity depends on real similarity of role and circumstances.

MCOCA bail: prolonged custody and parity did not outweigh prima facie role, delay causes, and statutory twin conditions.
In bail proceedings under MCOCA, the Court treated Article 21 and the right to a speedy trial as relevant, but held that prolonged custody and trial delay were not, on these facts, enough to cross the statutory embargo in Section 21(4) because the delay was not solely attributable to the prosecution or court and the case involved multiple accused, witnesses and complex allegations. The Court also rejected parity, finding material distinctions between the petitioner and co-accused who had obtained bail. The petitioner was prima facie alleged to be a co-leader handling proceeds of crime and facilitating the extortion network, so she was not similarly situated. Bail was therefore refused.

Bail under MCOCA - Prolonged pre-trial incarceration - Article 21 and statutory bail restrictions - Parity with co-accused - Satisfaction of Twin conditions for bail - stringent conditions under Section 21(4) - Entitlement to bail on parity with co-accused - Prima facie satisfaction - Organised crime syndicate - Accused-specific inquiry Prolonged pre-trial incarceration - Article 21 and statutory bail restrictions - Twin conditions for bail under MCOCA - Prolonged custody of the petitioner, despite non-framing of charges, did not by itself justify bail in a prosecution under MCOCA. - HELD THAT: - The Court held that, although custody of about four and a half years without framing of charges was substantial, the constitutional plea founded on delay had to be examined in a structured manner along with the statutory rigour of Section 21(4) of MCOCA. Adopting the approach stated in decisions under UAPA and applying it to the stricter MCOCA regime, the Court held that delay is a relevant consideration but not a stand-alone ground, and must be assessed with reference to the nature of the offence, the prima facie material, the trajectory of the proceedings, the causes contributing to delay, and the role attributed to the accused. On facts, the Court found that the delay could not be attributed solely to prosecutorial or judicial inaction, as repeated adjournments had also been taken on behalf of the accused, and the case was inherently complex owing to the number of accused, witnesses and supplementary charge-sheets. The Court further held that the petitioner could not derive assistance from a possible remission claim at this stage, as the offence under MCOCA carries a sentence extending to life imprisonment. Having regard to the prima facie findings already recorded in the earlier bail judgment that the petitioner was actively coordinating the syndicate, handling proceeds of crime, and facilitating use of the mobile phone and the so-called Silent Calling App allegedly central to the extortion, the Court concluded that her attributed role was pivotal and that the material did not satisfy the statutory requirement for bail. [Paras 38, 39, 40, 41, 42] Bail was refused on the ground of delay, the Court holding that continued custody had not become constitutionally unjustifiable in the facts of the case. Parity with co-accused - Distinct role in organised crime syndicate - HELD THAT: - The Court held that parity was unavailable because the co-accused who had obtained bail stood on materially different footing. Their roles were found to be limited and distinct, such as facilitation through hawala channels, salaried assistance, arranging meetings, or jail-related acts, whereas the petitioner was attributed the role of co-leader of the organised crime syndicate, coordinating its affairs during the principal accused's incarceration. In view of the prima facie material already noticed against her, the Court found her case incomparable with that of the released co-accused. As regards one co-accused, the Court also noted that the Supreme Court had directed that the order granting bail was not to be cited as a precedent. [Paras 44, 46, 47] The plea of parity was rejected. Final Conclusion: The Court declined regular bail to the petitioner. It held that, despite substantial custody, the statutory restrictions under MCOCA were not displaced on the facts, and neither delay in the proceedings nor parity with co-accused justified release.

2026 (5) TMI 428 - BOMBAY HIGH COURT Indian Laws

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Issues: (i) whether the sentence of 12 months' imprisonment in default of payment of compensation in each complaint was lawful; (ii) whether the continued default incarceration warranted modification to the period already undergone.

Issue (i): whether the sentence of 12 months' imprisonment in default of payment of compensation in each complaint was lawful.

Analysis: The maximum default sentence for an offence punishable under section 138 of the Negotiable Instruments Act, 1881, had to remain within the limits prescribed by section 30 of the Code of Criminal Procedure, 1973, read with section 65 of the Indian Penal Code, 1860. The Court held that the outer limit for default imprisonment in such cases was six months, and a 12-month default sentence in each complaint was beyond the statutory ceiling. It further noted that default imprisonment is a penalty for non-payment and cannot be imposed as an additional punishment.

Conclusion: The sentence of 12 months' imprisonment in default of payment of compensation in each complaint was illegal and was set aside to that extent.

Issue (ii): whether the continued default incarceration warranted modification to the period already undergone.

Analysis: The Court held that default sentences cannot run concurrently and separately observed that a court may not mechanically impose the maximum default term without regard to proportionality, the nature of the offence, the position of the offender, and the constitutional mandate of fair procedure under Article 21. Since the petitioner had already undergone substantial imprisonment and the compensation could still be recovered through the execution machinery, further detention was found to be unjust, unconscionable, and disproportionate.

Conclusion: The default sentence was modified to the period already undergone by the petitioner in default of payment of compensation.

Final Conclusion: The petitioner obtained relief by reduction of the default imprisonment to the custody already undergone, and was directed to be released forthwith if not required in any other case.

Ratio Decidendi: In offences under section 138 of the Negotiable Instruments Act, 1881, default imprisonment for non-payment of compensation must remain within the statutory maximum and must also satisfy the test of fairness and proportionality; a mechanically excessive default sentence, especially where recovery remains available, is impermissible.

Default imprisonment for non-payment of compensation must stay within statutory limits and satisfy proportionality in cheque dishonour cases.
In section 138 Negotiable Instruments Act matters, default imprisonment for non-payment of compensation must stay within the statutory ceiling and cannot be treated as an additional punishment. The Bombay High Court noted that the maximum default term is six months under the relevant statutory framework, so a 12-month default sentence in each complaint was beyond power and was set aside to that extent. It further stressed that default incarceration must be proportionate and fair under Article 21; where substantial custody has already been undergone and recovery remains available through execution, continued detention is unjustified. The default sentence was therefore reduced to the period already undergone.

Negotiable Instruments Act, 1881 - Sentence in default of payment of compensation - statutory limit applicable to an offence under Section 138 - Single Transaction Rule - Default Sentence - Consecutive or Concurrent - Consecutive running of default sentences - requirement of a fair, just and reasonable procedure under Article 21. Limit on default imprisonment - Compensation under Section 357(3) - HELD THAT: - The Court held that the statutory restriction governing imprisonment in default of payment of fine equally controlled imprisonment imposed in default of payment of compensation. Reading Section 30 of the Code with Section 65 of the Penal Code, the Court found that where the offence under Section 138 is punishable with imprisonment up to two years, the maximum permissible default imprisonment could only be six months. The award of twelve months' imprisonment in default in each complaint was therefore contrary to the absolute statutory mandate and was illegal. [Paras 28, 29, 30, 31, 32] The default sentence of twelve months in each complaint was held to be illegal and unsustainable. Consecutive running of default sentences - Default sentence distinct from substantive sentence - HELD THAT: - The legal position on the aspect of the sentences in default in payment of fine running consecutively and not concurrently, is well recognized. To start with, Section 64 of the IPC, 1860 provides that, it shall be competent to the Court which sentences the offender to direct by the sentence that, in default of payment of fine, the offender shall suffer imprisonment for a certain term, which imprisonment shall be in excess of any other imprisonment to which he may have been sentenced or to which he may be liable under a commutation of a sentence. Section 64 of the Penal Code, thus, mandates that the sentence awarded for non-payment of fine, shall be in excess of any other imprisonment to which the accused may have been sentenced. Sub-section (2) of Section 30 of the Code, provides that the imprisonment awarded under the said Section may be in addition to the substantive sentence of imprisonment for the maximum term awardable by the Magistrate under Section 29. Section 428 of the Code further clarifies the position by excluding the imprisonment in default of payment of fine, from the ambit of set off to which the accused is entitled to on account of the period of detention undergone by him during the investigation, inquiry or trial of the case. Therefore, the sentences in default of payment of fine or compensation, cannot be made to run concurrently. In the case of Sharad Hiru Kolambe V/s. State of Maharashtra and Ors. [2018 (9) TMI 2177 - SUPREME COURT], the Supreme Court has held that the default sentences cannot be directed to run concurrently. The contention that the default sentences across the complaints should be treated as concurrent was rejected. Proportionality under Article 21 - Default sentence for non-payment of compensation - HELD THAT: - It is true, the offence punishable under Section 138 of the NI Act, 1881, stands on a slightly different pedestal. Ordinarily, the justice of the case demands that the drawer of the cheque be directed to pay the fine or compensation, as the case may be, to compensate the payee. The prescription of punishment for the dishonour of a cheque is predominantly for the purpose of ensuring the sanctity of the cheque as a negotiable instrument in the commercial transactions. The penal measure primarily subserves the end of compensatory justice rather than retributive or punitive element. Nonetheless, while imposing the compensation, the Court ought to have due regard to the situation in life of the parties, especially that of accused. The circumstances peculiar to the accused are of critical salience while determining the quantum of sentence of imprisonment in default of payment of fine or compensation. The maximum permissible sentence in default of payment of compensation may be legitimate. However, the Court must pose unto itself a question whether that would be reasonable and justifiable in the facts and circumstances of the given case, for there is an essential distinction between the permissibility of the action and justifiability thereof. The Court held that default imprisonment is a penalty for failure to comply with the direction to pay compensation and not an additional substantive punishment. Even where the maximum permissible default term may in law be available, its imposition must still be justified on the facts. In the present case, requiring the petitioner to suffer an aggregate period of default imprisonment vastly exceeding the substantive sentence merely on account of inability to pay compensation was found to be ex facie unreasonable, excessively harsh and disproportionate, offending the guarantee of fair and reasonable procedure under Article 21. The Court also noted that liability to pay compensation survives and remains recoverable notwithstanding imprisonment in default. In view of the imprisonment already undergone, further detention was held to be unjust and unconscionable. [Paras 42, 43, 45, 46, 47] The sentence in default of payment of compensation in all the complaints was modified to the period already undergone, and release was directed if the petitioner was not required in any other case. Final Conclusion: The petition was allowed in part on the question of sentence. While the Court did not accept concurrency of default sentences, it held that the default imprisonment awarded was illegal and, having regard to the statutory limit and the disproportionality of further detention, reduced the default sentence in all the complaints to the period already undergone and directed release forthwith if not required in any other case.

2026 (6) TMI 1354 - PATNA HIGH COURT Indian Laws

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Look Out Circulars cannot be used for civil debt recovery absent a cognizable offence or recognised exceptional ground.
A Look Out Circular cannot be justified merely as a debt-recovery measure in a loan default dispute where no cognizable offence or other recognised exceptional ground is shown. The Patna HC found that the bank had already pursued SARFAESI and DRT remedies, no charge-sheet had been filed against the petitioner, and no fresh material supported the LOC request under the governing guidelines. On that basis, the requisition and consequential LOC were held unsustainable in law and set aside, while the writ petition succeeded subject to undertakings and conditions requiring cooperation with the bank in resolving outstanding liabilities.

Look Out Circular against borrower-guarantor for debt recovery - Preconditions for restraining foreign travel under MHA LOC guidelines - Authority of Public Sector Bank Managing Director to requisition LOC - Requisition for opening the Look Out Circular and the consequential Look Out Circular issued at the instance of the bank - absence of a cognizable offence or any criminal proceeding Look Out Circular against borrower-guarantor for debt recovery - Requisition and the Look Out Circular issued against the petitioner - HELD THAT: - The Court held that under the Ministry of Home Affairs guidelines, detention or prevention from leaving the country through an LOC is permissible where a cognizable offence under penal law is made out, and in the absence of such offence the originating agency can at best seek information regarding arrival or departure. The exceptional power to decline departure is confined to cases affecting sovereignty, security, integrity, bilateral relations, strategic or economic interests of India, terrorism, offences against the State, or larger public interest. On the record, the petitioner had not been chargesheeted by the CBI, no cognizable offence was pending against him, and the reasons stated by the bank were only his status as guarantor, non-response to the bank, NPA classification, and declaration of the account as fraud. Those were not fresh or qualifying grounds under the guidelines, especially when recovery proceedings under DRT and SARFAESI were already being pursued and the pledged properties were already under attachment. The Court accepted that use of the LOC in these circumstances amounted to an impermissible coercive measure for debt recovery and followed the approach noticed in Rajesh Kumar Mehta v. Union of India [2024 (5) TMI 1706 - DELHI HIGH COURT] [Paras 23, 25, 31, 32, 33] The requisition dated 30.03.2024 and the consequential LOC dated 30.03.2024 were held wholly unsustainable and were set aside. Authority of Public Sector Bank Managing Director to requisition LOC - Challenged to the competence of the bank's originating authority to make the LOC requisition - HELD THAT: - The Court recorded the categorical stand of the respondent-bank that the requisition had been made by the Managing Director of Canara Bank and found that this factual position had not been controverted by the petitioner with any supporting material. On that basis, the Court held that the authority of the bank officer making the requisition could not be questioned in the present case. The invalidity of the LOC therefore rested not on lack of competence of the signatory, but on absence of the substantive preconditions for opening an LOC against the petitioner. [Paras 24] The requisition was not treated as without jurisdiction on the ground of incompetence of the bank's originating authority. Conditional permission to travel after quashing LOC - Undertakings to cooperate in debt recovery - HELD THAT: - The Court held that setting aside the LOC did not absolve the petitioner of his liabilities arising from the loan account. Having regard to the financial interests involved and the petitioner's offer to settle the matter in due course, the Court required undertakings regarding periodic visits to India, appearance before the bank when called, disclosure of arrival, annual visit, cooperation in pending proceedings, and sincere efforts toward resolution with other stakeholders. These conditions were imposed to balance the petitioner's right to travel with the bank's entitlement to pursue lawful recovery. [Paras 34, 35, 36] The writ petition was disposed of after quashing the requisition and LOC, subject to the petitioner's undertakings to cooperate with the bank and recovery process. Final Conclusion: The Court held that the bank could not sustain the LOC against the petitioner merely as a debt recovery measure when no chargesheet had been filed against him and no cognizable offence was pending against him. While rejecting the challenge to the competence of the bank's originating authority, it quashed the requisition and LOC and disposed of the writ petition subject to undertakings ensuring the petitioner's cooperation in recovery and settlement proceedings.

2026 (6) TMI 890 - ALLAHABAD HIGH COURT Indian Laws

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Cheque dishonour compounding relief: limited time to seek compromise with interim protection from coercive action.
In a cheque dishonour proceeding, the applicant was given a limited opportunity to pursue compounding through compromise. The accused was permitted to appear before the trial court within one month, file an application for compounding on deposit of 10% of the cheque amount, and seek further time as allowed by law. The trial court was directed to decide the matter in accordance with the law governing compounding of offences under the Negotiable Instruments Act. No coercive steps were to be taken during the stipulated period, or until the compounding application was decided, whichever occurred earlier.

Negotiable Instruments Act - Dishonour of Cheque - Compounding of offence under Section 138 - Interim protection to enable settlement in cheque dishonour complaint Compounding of cheque dishonour offence - Opportunity for compromise before trial court - HELD THAT: - Relying on the principles governing compounding of cheque dishonour cases laid down by the Supreme Court in Damodar S. Prabhu v. Sayed Babalal H.[2010 (5) TMI 380 - SUPREME COURT] and the later guidelines noticed in Sanjabij Tari v. Kishore S. Borcar [2025 (9) TMI 1634 - SUPREME COURT], the Court held that where the dispute is monetary in nature and the accused seeks an opportunity for amicable settlement, the trial court can be approached for compounding on deposit of the prescribed percentage of the cheque amount. The applicant was accordingly directed to move an application for compounding before the court below within the time granted, whereupon the trial court was to proceed in accordance with law and pass appropriate orders keeping the Supreme Court guidelines in view. [Paras 6] The applicant was granted time to appear through counsel before the trial court and seek compounding of the offence on deposit of 10% of the cheque amount. No coercive measures pending consideration of compounding application - HELD THAT: - Since the Court had permitted the accused to move the trial court for compounding, it directed that no coercive measures be adopted against the accused during the stipulated period or till a decision on the compounding application, whichever was earlier. At the same time, the Court made it clear that if the applicant failed to appear for compounding, he would have to face trial and the trial court would remain free to secure his attendance in accordance with law. [Paras 7, 8] Coercive measures were kept in abeyance for the limited period granted for seeking compounding, failing which the trial court was left free to proceed in accordance with law. Final Conclusion: The application was disposed of by permitting the applicant to approach the trial court for compounding of the cheque dishonour complaint in the light of the Supreme Court guidelines, with limited interim protection against coercive measures. In default of such appearance, the trial court was left free to proceed against the accused in accordance with law.

2026 (5) TMI 862 - DELHI HIGH COURT Indian Laws

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Issues: (i) Whether the arbitral award suffered from patent illegality or perversity warranting interference under Section 34 of the Arbitration and Conciliation Act, 1996; (ii) Whether the Tribunal's award of prolongation costs, GST reimbursement, minimum wage escalation, environmental compensation charges, and taxes on the awarded amount was contrary to the contract or unsupported by evidence.

Issue (i): Whether the arbitral award suffered from patent illegality or perversity warranting interference under Section 34 of the Arbitration and Conciliation Act, 1996.

Analysis: The scope of interference under Section 34 is confined to narrow grounds such as patent illegality, conflict with fundamental policy, or breach of basic justice. The court does not sit in appeal over the Tribunal's findings on fact, evidence, or contractual interpretation. Where the Tribunal has taken a plausible and reasoned view after considering the pleadings, evidence, and contract terms, the award cannot be upset merely because another view is possible.

Conclusion: The challenge under Section 34 was rejected on this ground.

Issue (ii): Whether the Tribunal's award of prolongation costs, GST reimbursement, minimum wage escalation, environmental compensation charges, and taxes on the awarded amount was contrary to the contract or unsupported by evidence.

Analysis: The Tribunal found that delay was attributable to the employer and that the claims were supported by contemporaneous records, contractual mechanisms, and documentary proof to the extent accepted. For prolongation costs, it adopted a reasonable methodology for quantification. For GST, it treated the levy as a change in law producing additional burden during the extended period. For minimum wage escalation, it held that enhanced statutory labour cost was recoverable to the extent not absorbed by the contractual formula. For environmental compensation charges, it held that the levy arose during execution and was not barred by the exclusion clause in the manner contended. The direction that legally payable taxes on awarded sums would be recoverable was treated as consequential and not as rewriting of the contract.

Conclusion: The Tribunal's findings on all challenged claims were upheld and no interference was called for.

Final Conclusion: The award was sustained in full, and the petition was dismissed because no ground for judicial interference under the Arbitration and Conciliation Act, 1996 was made out.

Ratio Decidendi: A court exercising jurisdiction under Section 34 cannot re-appreciate evidence or substitute its own contractual interpretation for a plausible and reasoned arbitral view unless the award discloses patent illegality, perversity, or a violation of the contract on its face.

Section 34 review is limited to patent illegality; a reasoned arbitral award on delay-related claims was sustained.
Under Section 34 of the Arbitration and Conciliation Act, 1996, the HC reiterated that it cannot re-appreciate evidence or substitute its own contractual interpretation for a plausible arbitral view unless the award shows patent illegality, perversity, or facial breach of the contract. Applying that standard, it upheld the award because the Tribunal had given reasoned findings on employer-caused delay and supported claims for prolongation costs, GST reimbursement, minimum wage escalation, environmental compensation charges, and consequential taxes on the awarded sums. The challenge was rejected, and the arbitral award was sustained in full.

Scope and Effect of arbitral tribunal's award of prolongation costs and overheads - Employer-attributable delay - Patent illegality or perversity - Quantification of Damages - Change in Law - Limited judicial interference with arbitral awards - Contractual interpretation in arbitration - reimbursement of GST arising during the contract period - claim for minimum-wage escalation - contractual pricing and wage clauses - Environmental Compensation Charges levied during execution - direction on applicable taxes. Prolongation costs - Quantification of damages - Section 34 review - HELD THAT: - The Court held that the Tribunal had examined the pleadings, evidence, extensions of time and the sequence of delay, and had returned a finding that the prolongation beyond the scheduled completion date was attributable to the petitioner. In that background, the Tribunal's adoption of a reasonable methodology based on contract value, accepted industry practice and material available on record was a matter falling within arbitral domain. Mathematical precision was not indispensable where exact computation was impracticable, and the use of a recognised estimation method did not amount to creation of a new case. As the challenge was essentially directed at the sufficiency of evidence and the formula adopted, it amounted to an impermissible attempt at re-appreciation of evidence under Section 34. [Paras 45, 46, 47, 48, 49] No patent illegality or perversity was made out in the Tribunal's quantification of prolongation costs, and the objection to Claim No. 1 was rejected. GST reimbursement - Change in law - Contractual interpretation - HELD THAT: - The Court held that the controversy turned on interpretation of the contractual clauses dealing with taxes and change in law. The Tribunal had construed those clauses in the factual context that GST was introduced after the scheduled completion date and during the extended period attributable to the petitioner, thereby imposing an additional financial burden on the respondent. The Court also noted that the petitioner had itself offered reimbursement at a lower rate, indicating acceptance of liability in principle. Since the Tribunal had not disregarded the contract but had adopted a possible view on its construction, mere disagreement with that interpretation could not found a challenge under Section 34 or Section 28(3). [Paras 50, 51] The objection to Claim No. 3 failed, and the GST reimbursement awarded by the Tribunal was sustained. Minimum wage escalation - Employer-caused delay - Contractual bar clauses - HELD THAT: - The Court accepted the Tribunal's interpretation that the clause excluding extra payment for increase in minimum wages during the currency of the contract could not be applied to deprive the contractor of compensation for an extended period attributable to the employer. The Tribunal had also recorded that evidence had been led to show payment of enhanced wages. The Court treated this as an exercise in contractual interpretation and appreciation of evidence, and held that the clause had not been ignored but harmoniously construed in light of the finding on delay. Such a view was neither perverse nor in direct conflict with the contract, and therefore did not warrant interference under Section 34. [Paras 52, 53] The award on Claim No. 5 relating to increased minimum wages was upheld. Environmental Compensation Charges - Additional payment under contract - Taxes on awarded amount - HELD THAT: - The Court held that the Tribunal had found ECC to be an additional charge arising during execution pursuant to directions issued during the subsistence of the works, and not squarely covered by the exclusion relating to tax, duty or levy. The Tribunal also relied on the contractual claim procedure permitting claims for additional payment under any clause of the conditions or otherwise. On that basis, the interpretation that the contractual exclusion did not unequivocally bar ECC was held to be a plausible one. As regards taxes on the awarded amount, the Court treated the direction as merely consequential, clarifying that only taxes legally leviable and payable could be recovered, and found no express contractual prohibition against such a direction. [Paras 54, 55, 56] The objections to Claim No. 8 and to the direction regarding applicable taxes on the awarded amount were rejected. Majority arbitral award - Dissenting opinion - Patent illegality - HELD THAT: - The Court held that arbitration law recognises the majority decision as the award. Once the majority award reflected a reasoned consideration of the pleadings, evidence and contractual framework, the Court could not replace that view with the reasoning contained in the dissent. On the Court's overall examination, the objections sought re-appreciation of evidence and re-interpretation of contractual clauses, and did not establish patent illegality, perversity, violation of Section 28(3), or conflict with the fundamental policy of Indian law. [Paras 58, 62, 63, 64, 65] The majority award remained binding and the petition under Section 34 was dismissed. Final Conclusion: The Court held that the majority arbitral award represented a reasoned and plausible view on delay, quantification of damages, and interpretation of the contractual clauses relating to GST, minimum wages, ECC and applicable taxes. As the objections sought re-appreciation of evidence and re-interpretation of the contract beyond the narrow confines of Section 34, the petition was dismissed.

2026 (5) TMI 635 - DELHI HIGH COURT Indian Laws

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Director liability under cheque dishonour law fails when liquidation removes control over company accounts before notice.
A complaint under Section 138 of the Negotiable Instruments Act, 1881 is not maintainable against a director where liquidation proceedings and appointment of a provisional liquidator had already displaced the directors' control over the company's bank accounts and affairs before dishonour and statutory notice. Once that transition occurs, the directors are functus officio for operating the account or ensuring payment, and the cheque cannot be treated as one that the accused director could practically or legally honour. On that basis, the complaint was found legally non-maintainable and the criminal proceedings were quashed insofar as they concerned the petitioner.

Negotiable Instruments Act - Dishonour of the cheques and issuance of the statutory notice - Maintainability of complaint under section 138, after appointment of Provisional Liquidator - Account maintained by drawer - Directors becoming functus officio on provisional liquidation - essential ingredients - legal impossibility - control over bank account - drawer liability - winding up. - HELD THAT: - The Court held that appointment of a Provisional Liquidator does not dissolve the company, but displaces the board and renders the directors functus officio, with business operations, assets and contractual dealings thereafter remaining under the supervision and authority of the liquidator. Once that position arose, the petitioner, as director, had neither legal nor practical control over the company's bank accounts and could not ensure encashment of the cheques or comply with the demand notice. The use of expression “an account maintained by him” in section 138 NI Act also suggests one of the prerequisite ingredient for constituting an offence thereunder is that accused must have control over the account. In view of the settled legal position as rendered in M/S PEC LTD [2026 (5) TMI 575 - DELHI HIGH COURT] and M.L Gupta [2006 (11) TMI 346 - HIGH COURT OF DELHI] the appointment of a Provisional Liquidator, occurring prior to the dishonour of the cheques and the issuance of the demand notice, effectively divested the petitioner of his managerial authority and control over the company’s bank accounts. Since the statutory mandate of Section 138 of the N.I. Act requires the account to be “maintained” by the accused at the time of the offence, the transition of executive power to the Provisional Liquidator created a legal and practical impossibility for the petitioner to satisfy the demand or operate the accounts. Concomitantly, as the petitioner was neither in charge of the company’s affairs nor capable of ensuring the encashment of the cheques on the date the cause of action crystallized, therefore, the essential ingredients of the offence are not met, and the complaint against the petitioner is held to be legally non-maintainable. Since the appointment of the Provisional Liquidator had preceded the dishonour of the cheques as well as the demand notice, the essential ingredients of the offence were not satisfied and the complaint against the petitioner was legally non-maintainable. [Paras 27, 28, 29, 30, 31] The complaint and all consequential proceedings, insofar as they concerned the petitioner, were quashed. Final Conclusion: The petition was allowed. Since the Provisional Liquidator had been appointed before the cheques were dishonoured and before the statutory notice was issued, the petitioner-director had ceased to control the company's affairs and bank accounts, and the complaint under Section 138 of the Negotiable Instruments Act was held not maintainable against him.

2026 (5) TMI 193 - BOMBAY HIGH COURT Indian Laws

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Security cheque under Section 138: acquittal upheld where enforceable debt was not proved and presumptions were rebutted.
An appeal against acquittal under Section 138 of the Negotiable Instruments Act failed because the cheque was not shown to have been issued towards an existing enforceable debt or liability. The contract did not refer to the cheque, the instrument was treated as security, and the complainant gave inconsistent accounts about how it was obtained. Non-examination of the person said to have delivered the cheque justified an adverse inference, and the cheque was presented before the report relied on to show defective goods, so liability had not crystallised by presentation or dishonour. The trial court's view was a possible one and was not perverse or legally untenable, so interference was refused.

Negotiable Instruments Act - Dishonour of cheque - Security cheque - Legally enforceable debt or liability - Presumption as to enforceable liability - statutory presumptions - acquittal in a prosecution under Section 138 - Preponderance of probability - Presumption of innocence - HELD THAT: - The Court found that the contract between the parties did not refer to the cheque at all, and the complainant's stands in the cheque case and in the separate cheating complaint were materially inconsistent on the manner in which the cheque came into its possession. In that background, and particularly in view of the non-examination of the person through whom the cheque was alleged to have passed, the complainant failed to establish the foundational facts necessary to invoke the presumptions in its favour. The cheque was also treated as a security instrument, and the material on record did not show that, on the date of its presentation, any liability corresponding to the cheque amount had crystallised. The allegation regarding inferior quality of ore was unsupported at that stage, since the cheque had been presented before the analyst's report, and disputes arising out of contractual performance had not yet matured into an ascertained liability. [Paras 16, 17] The cheque could not be enforced under the Act as one issued against an existing debt or liability, and the complainant's case failed on merits. Appeal against acquittal - Presumption of innocence - HELD THAT: - Applying the settled principles governing an appeal against acquittal, the Court held that interference is unwarranted unless the acquittal is palpably wrong, based on an erroneous view of law, or likely to result in grave injustice. Since the Sessions Court's view that there was no enforceable liability and that the complainant had failed to lay the factual foundation for statutory presumptions was a possible and legally sustainable view, the strengthened presumption of innocence in favour of the respondents could not be displaced. [Paras 13, 17, 18] The acquittal was affirmed and the appeal was dismissed. Final Conclusion: The Court upheld the order of acquittal, holding that the complainant had failed to establish that the cheque represented a legally enforceable liability on the date of presentation. Finding the appellate acquittal to be based on a possible and legally sound view, the appeal was dismissed.

2026 (5) TMI 1823 - ALLAHABAD HIGH COURT Indian Laws

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Deposit requirement under the Negotiable Instruments Act upheld where no exceptional ground justified relaxation of the statutory condition.
In an appeal arising from a conviction under Section 138 of the Negotiable Instruments Act, the appellate court may ordinarily require deposit of at least 20% of the fine or compensation under Section 148, while retaining discretion to waive or relax that condition in an exceptional case for recorded reasons. Where the record shows repeated delay by the accused and no exceptional basis to depart from the statutory norm, the deposit condition is a proper exercise of discretion and need not be interfered with.

2026 (5) TMI 634 - ORISSA HIGH COURT Indian Laws

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Pre-cognizance hearing in cheque dishonour cases rejected; written objections did not justify setting aside the cognizance order.
In a prosecution under Section 138 of the Negotiable Instruments Act, 1881, the accused was not treated as entitled to a pre-cognizance hearing on the basis of a written objection, because the proceedings are meant to move within the statutory scheme of speedy disposal. The Court held that the materials relied on by the accused were matters to be raised at trial and declined to interfere with the cognizance order. The challenge founded on Section 223 of the Bharatiya Nagarik Suraksha Sanhita, 2023 was also not accepted on the facts, and the revision against the cognizance order was dismissed.

Negotiable Instruments Act, 1881 - Dishonour of cheque - entitlement to be heard before cognizance - Pre-cognizance hearing - statutory scheme of speedy disposal - Challenged to cognizance in proceedings under Section 138 - Power of Court to try cases summarily. - HELD THAT: - The Apex court “being Concerned with the large number of cases filed under Section 138 of the Negotiable Instruments Act, 1881 pending at various levels,” “decided to examine the reasons for the delay in disposal of these cases”. For which, suo motu writ petition (criminal) captioned as "Expeditious Trial of Cases under Section 138 of the NI Act, 1881" was registered and the same was disposed of by the order of constitution bench dated 16.04.2021 in Expeditious Trial of Cases Under Section 138 of NI Act, 1881, In re Expeditious Trial of Cases Under Section 138 of NI Act, 1881, In re, [2021 (4) TMI 702 - SUPREME COURT]". The Court held that, in view of Sanjabij Tari vs. Kishore S. Borcar & Another [2025 (9) TMI 1634 - SUPREME COURT], there is no requirement of issuing summons to the accused at the pre-cognizance stage in complaints under Section 138 of the Negotiable Instruments Act, and the statutory scheme of the Act for expeditious disposal cannot be diluted by directing reconsideration of cognizance on such objection. Although the observation of the trial court that several opportunities had been granted to the accused was found to be de hors the record, that defect was not treated as sufficient to invalidate cognizance. The Court accepted that criminal prosecution causes hardship and noted the principle in Harshendra Kumar D. v. Rebatilata Koley [2011 (2) TMI 1278 - SUPREME COURT] that, in an appropriate case, the High Court may look into material having significant bearing at the prima facie stage; however, on the facts of the case, it was not persuaded to interfere with the cognizance order. The Court clarified that the grounds taken in the accused's objection could be urged during trial, and the trial court was to proceed in the light of the directions noticed in Sanjabij Tari regarding recording of the accused's responses and determining whether the complaint should be tried summarily. [Paras 8, 10, 11, 12] The revision was dismissed, with liberty to the accused to press the grounds raised in the objection before the trial court during the course of trial, and without any expression of opinion on the merits of the rival stands on maintainability. Final Conclusion: The High Court declined to interfere with the cognizance order in the cheque dishonour complaint and held that the accused's objections could be raised before the trial court during trial in accordance with the procedure indicated by the Supreme Court. The revision was accordingly dismissed without any opinion on the merits of the rival stands on maintainability.

2026 (5) TMI 501 - ALLAHABAD HIGH COURT Indian Laws

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Honorific entitlement for public functionaries cannot be denied on grounds of personal familiarity or grievance.
An Hon'ble Member of Parliament and other constitutional or statutory functionaries entitled to protocol are to be addressed with the applicable honorific. Omission of that honorific cannot be justified on the basis of personal familiarity or any grievance against the functionary or their family. The material therefore affirms the protocol-based entitlement to respectful address and disapproves dispensing with the honorific where the office-holder is otherwise entitled to it.

2026 (5) TMI 195 - SC Order Indian Laws

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Criminal process cannot be used for debt recovery in a commercial dispute when materials do not disclose a sustainable case of cheating.
Criminal proceedings based on a commercial supply dispute cannot be sustained where the materials disclose a debt-recovery attempt without a sustainable foundation for criminality. The Court noted that the parties had already pursued cheque-bounce proceedings ending in settlement, and the later complaint relied on limited material that did not establish cheating or link the alleged email acknowledgement to any antecedent criminal act. It also held that, since the company had been ordered to be wound up before the alleged acknowledgement, the director could not bind the company in the manner suggested. The impugned order was set aside and the criminal case was quashed against the appellants.

2026 (6) TMI 1216 - DELHI HIGH COURT Indian Laws

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Issues: (i) Whether the arbitral award was liable to be set aside on the ground that it rewrote the contract by granting accidental damage cover despite non-compliance with the contractual conditions for coverage. (ii) Whether the award was unsustainable for want of evidence and for failure to give reasons for the quantification of the claims.

Issue (i): Whether the arbitral award was liable to be set aside on the ground that it rewrote the contract by granting accidental damage cover despite non-compliance with the contractual conditions for coverage.

Analysis: The contract required timely payment of premium and furnishing of product details as twin conditions for coverage under the accidental damage cover scheme. The subsistence of the agreement did not dispense with those conditions. By treating mobile phones and laptops as covered even though the mandatory requirements were not satisfied, the award effectively diluted the contractual stipulation and travelled beyond the agreed terms. Such a course amounted to patent illegality.

Conclusion: The finding extending coverage contrary to the contract was unsustainable and was against the petitioner.

Issue (ii): Whether the award was unsustainable for want of evidence and for failure to give reasons for the quantification of the claims.

Analysis: The tribunal accepted the claims on the basis of an expert report even though the quantification was not established by evidence and the award did not record any rational basis for the substantial reductions and deductions made while computing the amount. The sale invoices and repair documents did not prove accidental damage, and the respondent failed to discharge the burden of showing that the claimed repairs were covered under the accidental damage scheme. A reasoned award under the Arbitration and Conciliation Act, 1996 must disclose the basis of quantification, and an award founded on no evidence or unsupported guesswork cannot stand.

Conclusion: The award was invalid for want of evidentiary support and reasons, and this issue was decided against the respondent.

Final Conclusion: The arbitral award suffered from patent illegality and perversity, and the petition under Section 34 succeeded, resulting in the award being set aside.

Ratio Decidendi: An arbitral award is vulnerable under Section 34 of the Arbitration and Conciliation Act, 1996 if it grants relief by rewriting the contract or if it is unsupported by evidence and does not disclose a rational basis for quantification, because a reasoned award must remain within the contractual framework and the evidentiary record.

Contractual coverage cannot be rewritten in arbitration, and unsupported quantification can render an award vulnerable under Section 34.
An arbitral award was found vulnerable where it extended accidental damage cover despite non-compliance with the contract's twin conditions of timely premium payment and furnishing product details. Treating mobile phones and laptops as covered on terms different from the agreement was treated as rewriting the contract and amounted to patent illegality. The award was also attacked for lack of evidentiary support and for failing to give reasons for quantifying the claims, because invoices, repair papers and an expert report did not establish accidental damage or a rational basis for deductions. The Section 34 petition succeeded and the award was set aside.

Patent illegality in arbitral award - Construction of contractual coverage conditions - Award based on no evidence - Reasoned award - Expert report in arbitration Contractual preconditions for accidental damage cover - Illegal termination vis-a-vis subsisting contractual obligations - Rewriting of contract by arbitral tribunal - HELD THAT: - The Court held that clause 2(c) made coverage conditional upon receipt of both payment and product details within the stipulated time, subject only to the contractual grace period. The tribunal itself had found that the respondent was in breach of these mandatory conditions and that such finding had attained finality. Although the tribunal was justified in holding that immediate termination was contrary to clause 6 and that the agreement continued till 30.06.2014, subsistence of the agreement did not by itself extend cover to all laptops and mobile phones sold during that period. By nevertheless allowing claims and, in the case of mobile phones, granting a further thirty-day grace period not found in the contract, the tribunal rewrote the bargain between the parties and rendered its own findings contradictory. The Court held that an arbitral tribunal cannot travel beyond the contract or make the contractual conditions otiose. [Paras 14, 17, 18, 19, 20] The award of accidental damage cover claims was held patently illegal, notwithstanding the finding that the agreement subsisted till 30.06.2014. Expert report without adjudication of objections - No evidence to sustain claim - Unreasoned quantification of arbitral claim - HELD THAT: - The Court noted that the expert had been appointed to verify the tabulated claims and supporting documents, but the tribunal accepted the report without specifically dealing with the objections raised to it, even though allegations of bias and excess of reference had been made. The tribunal itself recorded that apart from the expert report no independent evidence had been led to prove the claims. It was also undisputed that quantification had not been done by the expert, yet the tribunal reduced the assessed amount for certain mobile phone claims by fifty percent without disclosing any basis. Such guesswork could not substitute proof. The Court further held that sale invoices and repair bills did not establish that the damage was accidental, and the respondent had failed to prove that the repairs fell under the accidental cover rather than the regular warranty. In these circumstances, the award violated the requirement of a reasoned award and was vitiated by patent illegality and perversity. [Paras 22, 23, 24, 25, 26] The award was set aside as being based on no sufficient evidence, unsupported quantification, and absence of reasons. Final Conclusion: The Court held that while the agreement could be treated as subsisting till 30.06.2014 because immediate termination was contrary to the contractual termination clause, that finding did not dispense with compliance with the contractual conditions for accidental damage cover. As the tribunal awarded claims by rewriting the contract, relying on an inadequately dealt with expert report, and quantifying claims without sufficient evidence or reasons, the award was set aside.

2026 (6) TMI 1215 - GUJARAT HIGH COURT Indian Laws

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Issues: (i) whether the appellate court could take into account payment or deposit made in a parallel civil proceeding while considering a request for interim compensation under the Negotiable Instruments Act and the connected operation of Section 357(5) of the Code of Criminal Procedure, 1973; (ii) whether the order refusing to consider the material produced by the applicant and imposing the condition without examining the relevant documents required reconsideration.

Issue (i): whether the appellate court could take into account payment or deposit made in a parallel civil proceeding while considering a request for interim compensation under the Negotiable Instruments Act and the connected operation of Section 357(5) of the Code of Criminal Procedure, 1973.

Analysis: The discretionary power to direct interim compensation under Section 143A of the Negotiable Instruments Act, 1881 has to be exercised on a prima facie evaluation of the complaint and defence, with brief reasons and consideration of relevant factors. The reasoning also drew support from the approach adopted for appellate deposits under Section 148 of the same Act, namely that the condition is ordinarily justified but exceptions may arise where it would be unjust or would impair the right of appeal. On that basis, deposit or payment in a parallel civil proceeding arising from the same cheque transaction was treated as a relevant circumstance that could be considered and was not excluded by Section 357(5) of the Code of Criminal Procedure, 1973.

Conclusion: The appellate court was required to consider the parallel deposit as a relevant factor while deciding the prayer for interim compensation.

Issue (ii): whether the order refusing to consider the material produced by the applicant and imposing the condition without examining the relevant documents required reconsideration.

Analysis: The impugned order proceeded without giving the applicant an effective opportunity to place the relevant documents on record, including the order reflecting deposit in the summary suit and the connected order of the High Court. Since those materials were relevant to the exercise of discretion under Section 143A of the Negotiable Instruments Act, 1881, the matter called for fresh consideration by the appellate court after permitting their production.

Conclusion: The order required reconsideration after allowing the applicant to place the relevant documents on record.

Final Conclusion: The impugned order was set aside and the matter was sent back for fresh consideration with an opportunity to the applicant to produce the necessary documents.

Ratio Decidendi: While exercising discretion on interim compensation under Section 143A of the Negotiable Instruments Act, 1881, the court must consider all relevant prima facie factors bearing on fairness and the right of appeal, including payments or deposits made in parallel proceedings arising from the same transaction, and must give a reasoned opportunity before declining such consideration.

Interim compensation discretion requires consideration of parallel civil deposits and relevant evidence before imposing payment conditions.
Interim compensation under the Negotiable Instruments Act requires a prima facie assessment of the complaint and defence, brief reasons, and consideration of factors affecting fairness and the right of appeal. A payment or deposit made in a parallel civil proceeding arising from the same cheque transaction is a relevant factor and is not excluded by the Code of Criminal Procedure provision governing compensation. Relevant documents, including material evidencing such deposit, must be permitted before exercising this discretion. The appellate court was required to reconsider the interim-compensation request after allowing production of the necessary records.

2026 (5) TMI 259 - BOMBAY HIGH COURT Indian Laws

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Cheque Dishonour Presumption and disputed defences were insufficient to quash process at the threshold.
A complaint under the Negotiable Instruments Act may proceed where a cheque was issued towards another legally enforceable liability, because Sections 138 and 139 refer to "any cheque" and raise a presumption that it was issued for discharge of a debt or other liability. At the quashing stage, absence of privity, reliance on a settlement, and the plea of a without prejudice arrangement or gift raised disputed factual issues that could not be finally resolved. Where the complaint and supporting documents disclosed a prima facie case and the statutory presumption remained unrebutted, process could not be quashed against the accused.

Negotiable Instruments Act, 1881 - Dishonour of cheque for other liability - Legally enforceable liability of another person - Absence of privity - Limits of quashing at process stage - Expressions "any cheque" and "any debt or other liability". Dishonour of cheque for other liability - Legally enforceable liability of another person - Absence of privity - HELD THAT: - In the case of ICDS Ltd. V/s. Beena Shabeer and Anr.[2002 (8) TMI 577 - SUPREME COURT], the import of the expressions “where any cheque” and “other liability” was expounded by the Supreme Court In the case of Bijoy Kumar Moni V/s. Paresh Manna and Anr. 2024 (12) TMI 1231 - SUPREME COURT, the Supreme Court further clarified that, Section 138 of the NI Act does not envisage that only those cases where a cheque was issued towards the discharge of the personal liability of the drawer towards the payee gets dishonoured would come within the ambit of the provision. The Court held that Section 138 uses the expressions "any cheque" and "any debt or other liability", and its ambit is not confined to a cheque drawn towards the drawer's own personal liability. If a cheque is drawn in discharge of a legally enforceable liability of another person, the drawer may still attract penal liability upon dishonour. On that construction, the petitioner's contention that no complaint could lie merely because it was not a party to the consent award, or because no direct privity existed between it and the complainant, was untenable. The Courts below were therefore justified in proceeding on the basis that the cheque could prima facie have been issued towards an other liability within the meaning of Section 138. [Paras 20, 21, 22, 23, 27] The challenge founded on want of privity and absence of the petitioner's own liability was rejected. Quashing of complaint - Prima facie case - Defences at trial - HELD THAT: - The Court held that, at the stage of testing the legality of issuance of process, it could examine only whether the complaint and accompanying material disclosed a prima facie offence. The petitioner's case that no amount was payable, that the cheque was issued by way of gift, and that it formed part of a without prejudice settlement, raised disputed factual matters and defence pleas which could not be adjudicated in proceedings under Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023. The Court also observed that the documents relied on by the petitioner from other proceedings were not of such unimpeachable and sterling quality as would justify quashing on that basis. These matters were left to be pursued at trial for rebuttal of the statutory presumptions. [Paras 25, 26, 27, 28] The plea for quashing the complaint against the petitioner company was declined, leaving all such defences open for trial. Final Conclusion: The writ petition was dismissed. The Court upheld the order issuing process, holding that a cheque drawn towards a legally enforceable liability of another person may fall within Section 138, and that the petitioner's remaining objections were defences to be examined at trial.

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