In a significant ruling on cheque-bounce cases, the Karnataka High Court has held that the default sentence imposed for non-payment of compensation or fine in cases under Section 138 of the Negotiable Instruments Act cannot exceed six months.

Justice M Nagaprasanna made the observation while ordering the release of Bengaluru resident Dinesh Kripalani, who had challenged his continued imprisonment over unpaid fines arising from dishonoured cheques.

Loan dispute led to cheque-bounce cases

According to court records, Dinesh Kripalani entered into a loan agreement with Jupiter Capital in December 2017 for ₹10 crore, of which ₹5.9 crore was disbursed.

In August 2020, he issued three cheques worth ₹50 lakh, ₹3.5 crore and ₹5 crore towards repayment of the outstanding loan and interest. All three cheques were dishonoured, leading to criminal proceedings under Section 138 of the Negotiable Instruments Act.

In December 2023, he was convicted and fined more than ₹11 crore across the three cases, with a default imprisonment of three months in each case if the fines remained unpaid.

Court examines limit on default imprisonment

Kripalani argued that under Section 65 of the Indian Penal Code, now Section 24 of the Bharatiya Nyaya Sanhita (BNS), a default sentence cannot exceed one-fourth of the maximum punishment prescribed for the offence.

Justice Nagaprasanna agreed, observing that imprisonment for non-payment of fines is intended as a coercive mechanism to ensure payment and should not become an excessive or disproportionate punishment.

Six-month ceiling reaffirmed

The court noted that the maximum punishment under Section 138 of the Negotiable Instruments Act is two years’ imprisonment. Therefore, the default sentence for failure to pay fines cannot exceed six months.

The judge also referred to a similar ruling by the Delhi High Court, which held that the statutory limit on default imprisonment is absolute.

Recovery proceedings can continue

While ordering Kripalani’s release, the court clarified that the ruling does not affect the complainant’s right to recover the outstanding amount through legal recovery proceedings.

The judgment is expected to have wider implications for cheque-bounce prosecutions and sentencing practices across the country.#KarnatakaHighCourt #ChequeBounce #LegalNews #NIAct #CourtRuling #newskarnataka