Default sentence in cheque-bounce cases cannot exceed 6 months: HC

Bengaluru: In a significant ruling on cheque-bounce cases, the high court has held that in prosecutions under Section 138 of the Negotiable Instruments Act, where the maximum substantive sentence is two years’ imprisonment, the default sentence for non-payment of compensation cannot exceed six months.

Justice M Nagaprasanna made this observation while ordering release of Dinesh Kripalani, a resident of Bengaluru.

In Dec 2017, Dinesh entered into a loan agreement with M/s Jupiter Capital Ltd, Bengaluru, for Rs 10 crore, and Rs 5.9 crore loan amount was disbursed. In Aug 2020, for repayment of the remaining loan amount along with interest, Dinesh issued three cheques for amounts of Rs 50 lakh, Rs 3.5 crore and Rs 5 crore. All three cheques were dishonoured on the same day and after issuance of statutory demand notices, Jupiter Capital Ltd registered a case under Section 138 of the NI Act against Dinesh in 2021.

On Dec 14, 2023, Dinesh was convicted in all the three cases. He was fined Rs 61.7 lakh, Rs 4.3 crore and Rs 6.2 crore for the three dishonoured cheques. If he defaulted in paying the fine, he was to undergo simple imprisonment for three months in each case, totalling nine months. On May 29, 2025, he was directed to serve the default sentence. Based on the same, he was sent to jail on Sept 29, 2025.

Challenging the order, Dinesh approached the high court, arguing that the default period of six months as prescribed under the NI Act was over on March 29, 2026, and that he should be released. He argued that in terms of Section 65 of the Indian Penal Code, now Section 24 of the Bharatiya Nyaya Sanhita-2023, since the default sentence cannot be more than one-fourth of the maximum punishment.

After perusing the provisions cited by Dinesh, and the judgment of the Delhi high court in a similar case, Justice Nagaprasanna noted that legislative intent underlying the provision is luminous and that the imprisonment in default is not to assume the character of a disproportionately oppressive penalty, but is intended merely as a coercive mechanism to secure payment of fine.

“The provisions of Section 65 of the IPC (now Section 24 of the BNS) make it clear that a default sentence cannot exceed one-fourth of the maximum imprisonment prescribed for the substantive offence. This reflects the legislature’s intent to prevent excessive incarceration solely for failure to discharge a monetary liability,” the judge observed.

Justice Nagaprasanna also referred to a Delhi high court ruling that held the statutory ceiling under Section 65 is absolute, and that imprisonment in default cannot exceed one-fourth of the maximum sentence prescribed for the offence.

Accordingly, in cheque-bounce cases under Section 138 of the Negotiable Instruments Act, where the maximum substantive punishment is two years’ imprisonment, the default sentence cannot exceed six months, he said. The present adjudication concerns only the legality and proportionality of continued incarceration in default of payment of fine and shall not eclipse or dilute the statutory right of the complainant or the state to pursue recovery proceedings in accordance with law, Justice Nagaprasanna specified in his order.