High Court Acquits Director in Cheque Bounce Case After Full Payment; Invokes Section 482 to Set Aside Conviction

A Single‑Judge bench of Justice M. Nirmal Kumar heard a criminal revision arising from conviction under Section 138 of the Negotiable Instruments Act, challenging the conviction and sentence recorded in C.C. No. 2840 of 2010 and the modification of sentence by the XVI Additional Sessions Judge in Crl.A. No. 286 of 2019. The petitioner, a director and second signatory to a cheque issued by a company in liquidation, moved the High Court under Section 397 r/w 401 Cr.P.C. to set aside the conviction and sentence.

The High Court allowed the criminal revision and set aside the conviction and sentence imposed on the petitioner, acquitting him of the offence under Section 138 N.I. Act. The court recorded that the entire cheque amount of Rs.40,00,000/- had been paid to the complainant bank through earlier mediation payments, deposits before the trial court and subsequent demand drafts, and therefore exercised its inherent jurisdiction under Section 482 Cr.P.C. to remove the criminal consequences. The Court, in its reasoning, observed: "Despite the A1-company is in distress, the entire cheque amount has been paid. Recording the same, this Court, invoking inherent jurisdiction under Section 482 of Cr.P.C., inclined to set aside the conviction of the petitioner." The court directed that any amount still lying in credit of C.C. No. 2840 of 2010 could be withdrawn by the complainant on filing an appropriate memo before the trial court and that the trial court shall return such amount, "along with interest if any", dispensing with notice to the petitioner.

Background
The dispute arose after Pyramid Saimira Theatre Limited (A1), represented by its directors including the petitioner and another director (A2), obtained cash credit facilities from Axis Bank. A1 had availed part of the sanctioned facility and allegedly owed the bank over Rs.13.50 crores. The company issued a cheque (Ex.P2) dated 29.09.2009 for Rs.40,00,000/-, which was dishonoured on presentation on 06.10.2009 for "Funds Insufficient". A statutory notice was issued on 15.10.2009 and no satisfactory reply was received, leading to the complaint and criminal trial under Section 138 N.I. Act. The trial Court convicted the accused on 27.04.2019 and sentenced the petitioner to six months simple imprisonment with compensation of Rs.80,00,000/-. The Sessions Court, in Crl.A. No. 286 of 2019, reduced the sentence to three months but confirmed compensation.

The petitioner contended that the cheque was not issued in discharge of the bank's entire claim, that the company was already in liquidation and the Official Liquidator ought to have been made a party, and that the petitioner was only a second signatory with limited role. During proceedings, the parties recorded an understanding before this Court and the petitioner made multiple payments: Rs.14,00,000/- during Lok Adalat/mediation, Rs.6,00,000/- deposited in the trial court, and further demand drafts and deposits totalling the cheque amount of Rs.40,00,000/-, as acknowledged by the bank. The High Court noted those payments, the company’s liquidation status and the death of A2, and, invoking Section 482 Cr.P.C., set aside the conviction and sentence and acquitted the petitioner. The court permitted the complainant to withdraw amounts credited to the trial court and directed return of any residual sums with interest, dispensing with notice to the petitioner. The criminal revision was allowed and the matter was disposed accordingly.

Case Details:
Case No.: CRL R.C.No.548 of 2022
Case Title: N. Narayanan v. Axis Bank Limited
Appearances:
For the Petitioner(s): Mr. R. Sagadevan, Advocate
For the Respondent(s): Mr. R. Sreedhar, Advocate

Source: 2026 CaseBase(MAD) 38