S.138 NI Act | Primary Concern Is Recovery Of Money, Conviction Of Accused Serves Little Purpose: Rajasthan High Court

Rajasthan High Court has recently iterated that the punishment on the drawer for a dishonoured cheque is secondary as far as Section 138 of the Negotiable Instruments Act is concerned. The court added that the primary concern would be the recovery of money since the conviction of an accused serves no significant purpose.

The single-judge bench of Justice Anil Kumar Upman, while quashing the entire criminal proceedings pending against a real estate company and its directors, pointed out that the complainants have already received the amount equivalent to the dishonoured cheque via RTGS transactions in two separate installments.

“…This admission of the complainant-respondent clearly reveals that the dishonoured cheque does not represent the enforceable debt. The complainant has filed the aforesaid complaint case regarding dishonour of cheque in question after having received first installment at his end…”, the bench sitting at Jaipur also noted that the statement of account filed along with the petition indicates two distinct payments of Rs 31,59,683.50/- made on behalf of the builders to the complainant flat buyer.

Similarly, there was a negative police report in the FIR lodged by the complainant. Consequently, the protest petition filed by the complainant was also rejected, the court added.

On the aspect of the ambit of Section 138 of the NI Act, the court, after relying on the landmark decision in M/s Gimpx Private Ltd. vs Manoj Goel, LL 2021 SC 553 , opined as follows:

“The nature of offence under Section 138 of the N.I. Act is quasi-criminal in nature…In the prosecution under Section 138 N.I. Act, the complainant is primarily concerned with the recovery of the money and conviction of the accused serves very little purpose…”, the court noted while making it clear that the accused builders have already made the payment in the initial stage of the criminal proceedings itself, as evident from the material available on record. In these circumstances, the court took the view that the accused/ petitioners shouldn't be taken undue advantage of by the complainant/respondent on the basis of technicalities.

The decision in Gimpex also placed reliance on the previous decisions in Damodar S. Prabhu v. Sayed Babalal H (2010)5SCC663 before concluding that the compensatory aspect of the Section should be given priority over the punitive aspect. Similarly, in Meters and Instruments (P.) Ltd. v. Kanchan Mehta (2017) the apex court had also held that the threat of jail acts as a 'stick' to ensure the payment of money.

After opining that the continuation of proceedings would amount to an abuse of the process of law, the court quashed the entire criminal proceedings pending against the accused before Special Judicial Magistrate (N.I. Act Cases) No.4, Ajmer.

According to the complainant, a cheque issued by the company for Rs 63,19,367/- got dishonoured upon presentation. This cheque was the part payment of the refund that the complainant was entitled to, after he cancelled a flat booking with the builder previously.

Advocates Sarthak Rastogi and Nand Kishore Dadhich appeared for the petitioners whereas Advocate Alok Chaturvedi appeared for the complainant. Public Prosecutor Sher Singh represented the state.

Case Title: Lakhani Builders Pvt. Ltd & Ors. v. State of Rajasthan, Through PP & Anr.

Case No: S.B. Criminal Miscellaneous (Petition) No. 7269/2021

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