M/s Mediaone Global Entertainment Ltd. ordered to pay Rs. 2.52 Crores as compensation to M/s Ad Bureau Advertising Pvt Ltd, highlighting the compensatory focus of Section 138 of the Negotiable Instruments Act.
In a significant ruling, the Madras High Court has upheld the conviction of M/s Mediaone Global Entertainment Ltd. and its director under Section 138 of the Negotiable Instruments Act, 1881, for issuing a cheque that was dishonored. However, the court modified the sentence, emphasizing the compensatory over the punitive aspect of the law.
The case stems from a monetary dispute involving the post-production financing of the film 'Kochadaiiyaan.' M/s Ad Bureau Advertising Pvt Ltd, the respondent, had extended financial assistance of Rs. 10 Crores to Mediaone Global Entertainment Ltd., backed by a Memorandum of Understanding (MoU). In return, Mediaone issued a cheque for Rs. 5 Crores, which was dishonored due to a stop payment order from the drawer. This prompted Ad Bureau Advertising to initiate legal proceedings under the Negotiable Instruments Act.
The trial court had initially sentenced the second petitioner, a director of Mediaone, to six months' simple imprisonment and imposed a fine of Rs. 7.7 Crores. The judgment was upheld by the appellate court. However, upon revision, the High Court, while confirming the conviction, modified the sentence to a joint fine of Rs. 2.52 Crores, payable within four weeks. Failure to comply will result in six months' simple imprisonment for the second petitioner.
Justice Sunder Mohan noted the quasi-criminal nature of Section 138 proceedings, underscoring the objective of ensuring financial recovery for the complainant rather than focusing solely on punishment. The judgment aligns with Supreme Court precedents emphasizing the compensatory objectives of the Act, aiming for expedient recovery of the cheque amount along with interest and costs.
The court acknowledged that the petitioners had already paid Rs. 8.74 Crores towards their liability but were still obligated to clear the remaining dues. The court's decision reflects a balanced approach, ensuring that the respondent receives compensation while also considering the financial transactions and the intent behind the issuance of the cheque.
The High Court's ruling highlights the importance of Section 138 proceedings as a mechanism to facilitate financial redressal in cheque bounce cases, encouraging parties to resolve disputes through compensation rather than incarceration.
Bottom Line:
The proceedings under Section 138 of the Negotiable Instruments Act prioritize the compensatory aspect over the punitive aspect, aiming to ensure payment of money rather than imprisonment.
Statutory provision(s):
Negotiable Instruments Act, 1881 Sections 138, 139
