NI Act | HC rules Cheque Bounce fines cannot exceed Double the dishonoured amount

In a significant ruling on cheque bounce penalties, the Karnataka High Court clarified that trial courts cannot impose fines exceeding twice the dishonoured cheque value. Justice V. Srishananda partly allowed an appeal by Mahadevi, an agriculturist from Bagalkot, limiting the financial liability in a decade-old commercial dispute.

The case stems from a 2007 transaction in which Mahadevi purchased two trailers for Rs 3.8 lakh, after receiving a Rs 5,000 discount. She issued a cheque for the purchase, which was subsequently dishonoured, prompting the seller to file a complaint under the Negotiable Instruments Act. The Banahatti magistrate’s court convicted Mahadevi in 2017, ordering her to pay Rs 7.6 lakh to the seller along with Rs 5,000 to the State as defraying expenses.

Her appeal to the district court was dismissed, after which she moved the High Court, arguing that the trailers were never delivered to her.

Justice Srishananda noted that Mahadevi failed to substantiate her claim regarding non-delivery but observed that the magistrate erred in imposing additional state-related fines, as no government machinery was involved in the transaction. The Judge emphasized, “Trial courts cannot levy fines exceeding twice the dishonoured cheque amount,” upholding the Rs 7.6 lakh compensation while setting aside the Rs 5,000 payment to the State.

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