Cheque Bounce Compensation Cannot Be Recovered Through Separate Civil Suit: Gujarat High Court

Compensation awarded in cheque dishonour cases under Section 138 of the Negotiable Instruments Act cannot be recovered through a separate civil suit, the Gujarat High Court has ruled, holding that the law provides a procedure for recovering such amounts.

Justice Maulik J Shelat rejected a plea to amend a pending recovery suit to include compensation awarded in the criminal proceedings, interest and legal expenses incurred by the complainant.

The dispute arose from a recovery suit filed in 2014 seeking ₹31.22 lakh over dishonoured cheques issued by the original accused. Following his death, his legal heirs were brought into the proceedings.

The complainant had separately initiated criminal proceedings against the accused under Section 138 of the Negotiable Instruments Act. The trial court initially acquitted him, but the High Court overturned the acquittal in 2018 and directed him to pay ₹25 lakh in compensation across two cases.

The accused challenged the High Court's decision before the Supreme Court but died on May 14, 2021. The Supreme Court dismissed his appeals as having abated on August 23 that year.

The complainant later sought to increase the claim in the pending civil suit from ₹31.22 lakh to ₹78.85 lakh. The proposed amendment included compensation awarded in the criminal proceedings, interest, and ₹8.5 lakh towards legal expenses incurred up to the Supreme Court proceedings.

The trial court rejected the request on March 2, 2024, prompting the complainant to approach the High Court.

His counsel argued that the compensation award remained undisturbed after the Supreme Court dismissed the appeals as abated. He also sought to recover the legal expenses incurred during the criminal proceedings.

The court asked whether compensation awarded in criminal proceedings could be recovered through a civil suit. The complainant's counsel was unable to answer the question but submitted that the amount could be recovered under Sections 471 and 461 of the Bharatiya Nagarik Suraksha Sanhita, 2023, corresponding to Sections 431 and 421 of the Code of Criminal Procedure, 1973.

The court held, “According to me, the plaintiff has no right to sue against the defendant so far as recovery of amount of compensation by filing any civil suit, inasmuch as the amount of compensation is already determined by the competent Court as per the provisions of BNSS Section 395 (Cr.P.C. Section 357).”

The court ruled that the compensation awarded in the proceedings under the Negotiable Instruments Act could be recovered through the procedure prescribed under the BNSS or the CrPC. A separate civil recovery suit could not be used to recover the same amount.

The court also found that the compensation claim arose from a cause of action different from the one underlying the original recovery suit.

On the claim for legal expenses, the court observed:

“So far as the claim of legal expenses, etc. is concerned, again it is found on a new cause of action, inasmuch as such amount incurred by the plaintiff to prosecute the criminal proceeding before the different Court of law and it has no direct bearing upon the claim made in the suit in question.”

The court noted that the original recovery suit already covered the dishonoured cheques that were the subject of the Section 138 proceedings. The proposed amendment would introduce an additional claim based on a different cause of action rather than help resolve the existing dispute.

It also held that the legal expenses incurred during the criminal proceedings would have to be pursued through a separate suit.

The High Court dismissed the petition, upholding the trial court's rejection of the amendment request.

For Petitioners: Advocates PP Majmudar and VZ Bharda

For Respondents: Advocate Vashistha M Joshi and HCLS Committee