High Court Clarifies NI Act Fine Allocation: Compensation Must Go Directly to Complainant

Jammu: In a significant clarification concerning the disposal of fine amounts in cases under the Negotiable Instruments Act, 1881, the High Court of Jammu & Kashmir and Ladakh has unequivocally stated that the fine imposed upon conviction under Section 138 must be directed towards compensating the complainant and not remitted to the government treasury.

The ruling came from the bench of Justice MA Chowdhary while hearing an application for clarification regarding a previous judgment dated June 6, 2023, in the case of Choudhary Piara Singh vs. Kuldeep Singh .

Background of the Case:

The applicant, Choudhary Piara Singh , had filed a complaint under Section 138 of the Negotiable Instruments Act against Kuldeep Singh which was initially dismissed by the trial court, resulting in the accused's acquittal. Aggrieved by this, Singh filed an appeal before the High Court (CRAA No. 83/2017). The High Court, in its judgment on June 6, 2023, reversed the trial court's findings, convicted Kuldeep Singh under Section 138, and sentenced him to a fine of Rs. 1.00 lac, with a direction to the trial court for "follow up action."

The present application arose because the trial court, in pursuance of the High Court's judgment, misconstrued the "follow up action" and directed the deposited fine amount to be remitted to the Government Exchequer instead of being paid as compensation to the complainant.

Complainant's Grievance:

The complainant's counsel argued that the Section 138 dispute was purely personal and intended to compensate the complainant for financial loss. Remitting the fine to the government treasury rendered the long-drawn litigation futile for the complainant, leaving him uncompensated despite securing a conviction. It was highlighted that the complainant might face limitation issues if forced to pursue a separate civil recovery suit.

Court's Analysis on the Nature of NI Act Proceedings:

Justice Chowdhary noted that while the NI Act itself doesn't contain specific provisions for dealing with recovered fine amounts, it does include provisions for compensation. The Court emphasized the compensatory nature of proceedings under Chapter XVII of the NI Act, stating that the injury alleged under Section 138 is primarily to the complainant, not the State.

> "Since the dispute in the complaint under Section 138 of N.I Act is purely of a personal nature between the parties as the injury was alleged to have been caused to the complainant and it does not relate to the State. Therefore, in the considered opinion of this Court, the complainant is certainly required to be compensated having lost his money, in case he is not compensated and the fine imposed is remitted to the Government Treasury, he shall be left high and dry."

The judgment referred to Section 357 of the Code of Criminal Procedure (CrPC), 1973, which allows criminal courts to order compensation out of the fine recovered.

Reliance on Apex Court Precedents:

The High Court heavily relied on pronouncements by the Supreme Court of India:

• R. Vijayan vs. Baby & Anr. (2012): The Apex Court expressed anguish that some Magistrates adhered to the traditional view of criminal proceedings being solely for punishment, often failing to exercise discretion to grant compensation. It was held that courts should , unless there are special circumstances, uniformly levy fine up to twice the cheque amount and direct its payment as compensation, noting the inconsistency arising from different courts handling similar cases differently.
• Bir Singh vs. Mukesh Kumar (2019): This judgment reiterated the concern raised in R. Vijayan about the failure to direct compensation causing difficulty to complainants whose civil suit limitation periods might expire during the criminal proceedings.
• Suganthi Suresh Kumar vs. Jagdeeshan (2002): The Supreme Court held that the compensatory aspect of Section 138 of the NI Act must receive priority over its punitive aspect.

The High Court also cited its own judgment in Yasir Amin Khan vs. Abdul Rashid Ganie (2021) , which interpreted the intent of Section 138 and held that courts should exercise discretion under Section 357(3) of CrPC to prioritize compensation when imposing a sentence.

The Clarification and Direction:

In light of these principles, the High Court clarified its judgment dated June 6, 2023. It held that the entire fine amount of Rs. 1.00 lac was intended to be paid to the complainant as compensation.

The Court directed the Trial Magistrate to pay the whole fine amount to Choudhary Piara Singh . It further ordered that if the fine amount is still with the trial court, it should be paid to the complainant directly. If the amount has already been remitted to the Government Exchequer, it must be withdrawn under the relevant rules for payment to the complainant.

This order will be considered part and in continuation of the original judgment dated June 6, 2023, and a copy has been forwarded to the Trial Court for compliance.

The clarification underscores the judiciary's emphasis on the primary object of Section 138 of the NI Act being the restoration of the complainant's financial loss through compensation awarded out of the fine amount.