Bombay High Court Rules Default Jail Term in Cheque Bounce Cases Cannot Exceed Six Months

In an important ruling on sentencing in cheque dishonour cases, the Bombay High Court has held that a Magistrate cannot impose more than six months’ imprisonment in default of payment of compensation under Section 138 of the Negotiable Instruments Act, 1881. The Court clarified that any sentence exceeding this statutory limit would violate Section 65 of the Indian Penal Code and Section 30 of the Code of Criminal Procedure.

Justice N.J. Jamadar delivered the ruling while hearing a petition filed by a businessman convicted in 17 cheque bounce complaints involving dishonoured cheques issued towards liabilities exceeding ₹22 crore.

The trial court had sentenced him to 15 months’ simple imprisonment in each complaint and further directed 12 months’ imprisonment in default of payment of compensation. Although the substantive sentences were ordered to run concurrently, the default sentences were directed to run consecutively.

The High Court found this approach legally unsustainable. Referring to Supreme Court precedent in M.B. Manjegowda v. State of Karnataka, the Court reiterated that default imprisonment cannot exceed one-fourth of the maximum punishment prescribed for the offence. Since Section 138 NI Act carries a maximum punishment of two years, the default sentence could not exceed six months.

The Bench further observed that imprisonment for non-payment of compensation is not an additional punishment but merely a coercive measure to enforce payment. The Court warned against excessively harsh incarceration arising solely from financial inability, noting that prolonged detention for default may violate the constitutional guarantee of fairness under Article 21.

Taking into account that the petitioner had already undergone more than nine years in custody, including remission, the Court held that further imprisonment would be grossly disproportionate. Accordingly, the High Court modified the sentence and ordered the petitioner’s release, if not required in any other case.