Dishonouring cheques now a regulatory offence, says Supreme Court; courts to encourage compounding of offences

New Delhi: The Supreme Court has said dishonouring cheques will now be a 'regulatory offence'. The order is in view of public interest so that the reliability of these instruments can be ensured.

The apex court suggested the courts to encourage compounding of offences under the Negotiable Instruments Act if parties are willing to do so.

A bench of Justices Sudhanshu Dhulia and Ahsanuddin Amanullah pointed out Section 147 of the Negotiable Instruments Act makes all offences compoundable offences so the settlement agreement can be treated to be compounding of the offence.

"Section 320 (5) of Criminal Procedure Code provides that if compounding has to be done after conviction, then it can only be done with the leave of the court where appeal against such conviction is pending," the bench said.

The court said in cases where the accused relied upon some document for compounding the offence at the appellate stage, courts should try to check the veracity of such document, which can be done in multiple ways.

"A large number of cases involving dishonour of cheques are pending before courts which is a serious concern for our judicial system. Keeping in mind that the ‘compensatory aspect’ of remedy shall have priority over the ‘punitive aspect’, courts should encourage compounding of offences under the NI Act if parties are willing to do so," the bench said.

Allowing an appeal filed by M/s New Win Export & Anr, the court acquitted them in a case of dishonour of cheque of Rs 5,25,000.

The appellants and respondent-complainant A Subramaniam informed the court that they had entered into a settlement agreement.

The complainant also admitted that the accused have paid the amount to the satisfaction of the complainant. He also said he has no objection if conviction of the appellants is set aside.

"Now, when the accused and complainant have reached a settlement permissible by law and this court has also satisfied itself regarding the genuineness of the settlement, we think that the conviction of the appellants would not serve any purpose and thus, it is required to be set aside," the bench said.