The question that arose before the Hon’ble Supreme Court of India was that what happens to the money receivable by the Complainant in the form of Compensation when the Accused undergoes jail term, in default of the compensation, under such circumstances is the Compensation still recoverable by the Complainant?

The Hon’ble Supreme Court observes that that the gravity of offences under the Negotiable Instruments Act cannot be associated with offences under the provisions of the Penal Code, 1860 or other criminal offences. An offence under Section 138 of NI Act is in the nature of a civil wrong which has been given criminal implications.

The statutory remedy in Negotiable Instrument Act appears to be both punitive as well as compensatory in nature.

The punishment under Section 138 of NI Act is not merely seeking retribution,but it is more a means to ensure payment of money to the holder of the Complainant as his interest lies largely in recovering the money rather than seeing the drawer of the cheque behind bars.

In the matter of Kumaran versus State of Kerala & Anr the Hon’ble Supreme Court has held that:

“so long as compensation has been directed to be paid under Section 357(3), Section 431, Section 70 IPC and Section 421(1), even though a default sentence has been suffered, yet, compensation would be recoverable in the manner provided under Section 421(1) of the Code of Criminal Procedure.”