The Negotiable Instruments Act, 1881 (Section 138): Legal Overview
The Negotiable Instruments Act, 1881 (NI Act), particularly Section 138, addresses the criminal offence of cheque dishonour, imposing personal liability on the accused for repayment of debts or liabilities through negotiable instruments. This provision is quasi-criminal in nature, blending elements of criminal punishment (such as imprisonment) with civil recovery (such as compensation or fines). However, the death of a party involved—the accused or the complainant—raises significant legal questions about the continuation or abatement of proceedings. Indian courts, guided by the Code of Criminal Procedure, 1973 (CrPC), have established clear precedents on these matters. This article examines the legal position, supported by key judgments, emphasizing that criminal liability is personal and non-transferable, while civil remedies may persist.
Death of the Accused: Abatement of Criminal Proceedings
When the accused dies during the pendency of a trial under Section 138 of the NI Act, the criminal proceedings typically abate. This is because the offence is personal in nature, and penalties like imprisonment cannot be imposed on legal heirs. Courts have consistently held that heirs cannot be substituted as accused, as there is no vicarious liability under this provision. However, if the sentence includes a fine or compensation that affects the deceased’s estate, legal heirs may challenge the conviction in appeals or revisions to protect inherited property.
Key Legal Position
- Abatement During Trial: Proceedings end upon the accused’s death, as criminal liability extinguishes. The complainant cannot pursue the criminal case against heirs but may seek civil recovery from the estate.
- Abatement in Appeals/Revisions: Under CrPC Section 394, appeals abate on death, except where the sentence involves a fine (which may be recoverable from the estate). In composite sentences (imprisonment and fine), abatement applies only to the imprisonment component.
- Recovery Options: Compensation or fines can be recovered as arrears of land revenue under CrPC Sections 421 and 431. Heirs are liable only to the extent of inherited property, not personally.
Summary of Legal Consequences
| Situation | Legal Effect |
|---|---|
| Death During Trial | Criminal proceedings abate; no substitution of heirs |
| Death During Appeal | Appeal abates except for fine or compensation |
| Fine/Compensation | Recoverable from estate, not personal liability of heirs |
Relevant Precedents
1. Sonelal Tiwari v. State of Madhya Pradesh (1998) 2 SCC 431
The Supreme Court ruled that criminal appeals generally abate on the accused’s death, but near relatives (such as spouse) may seek leave to continue under CrPC Section 394 to clear the stigma of conviction, especially if it affects the estate. The Court noted that on the death of the sole appellant normally the appeal would have abated, but the appellant’s widow applied for resuscitation of the appeal presumably because she was not inclined to bear the stigma fastened on her late husband with the finding that he was guilty of corruption charges. The Apex Court granted liberty to the widow to continue the appeal after condoning the delay for moving the application under Section 394(2) CrPC.
2. M. Abbas Haji v. T.N. Channakeshava, (2019) 9 SCC 606
This is a direct case under the Negotiable Instruments Act, 1881 wherein the Apex Court was seized of an identical situation. The Court observed thus:
“This appeal is directed against the order dated 22.10.2008, whereby the High Court allowed the appeal of the complainant and held the original appellant before us (since deceased), whose legal representatives are on record, liable for conviction under Section 138 of the Negotiable Instruments Act (hereafter referred to as the “Act”). He was sentenced to pay fine of Rs.5,10,000/- and in default to undergo simple imprisonment for one year.
The legal heirs, in such a case, are neither liable to pay the fine or to undergo imprisonment. However, they have a right to challenge the conviction of their predecessor only for the purpose that he was not guilty of any offence. We have, therefore, allowed the application filed by the legal heirs to prosecute this appeal.”
3. Bondada Gajapathi Rao v. State of Andhra Pradesh, AIR 1964 SC 1645
This Apex Court judgment established that a criminal appeal against a sentence of imprisonment abates upon the death of the appellant, as the sentence becomes unenforceable. The Supreme Court ruled that legal representatives can only continue an appeal if the sentence affects the deceased’s property (e.g., fines), not for imprisonment sentences. This principle is applied in proceedings under NI Act with full force.
4. Harnam Singh v. State of Himachal Pradesh, (1975) 3 SCC 343
The Apex Court categorically held that in case of composite sentences, the appeal abates only for imprisonment, not fine. The Court held that it is true that an appeal from a composite order of sentence is ordinarily directed against both the substantive imprisonment and the fine, but such an appeal does not for that reason cease to be an appeal from a sentence of fine; it is something more not less than an appeal from a sentence of fine only.
Thus, even in composite sentences of fine and imprisonment, the appeal would only abate in respect of the sentence of imprisonment on the death of the accused, not against the sentence of fine.
The Court observed thus:
“Every appeal against conviction therefore abates on the death of the accused except an appeal from a sentence of fine. An appeal from a sentence of fine is excepted from the all pervasive rule of abatement of criminal appeals for the reason that the fine constitutes a liability on the estate of the deceased and the legal representatives on whom the estate devolves are entitled to ward off that liability.”
5. Ramesan v. State of Kerala, (2020) 3 SCC 45
The Apex Court laid down that even if a sentence of fine is imposed along with the sentence of imprisonment, under Section 431 of the Code of Criminal Procedure, 1898, the appeal shall not abate.
“19. We, thus, conclude that the appeal filed by accused Ramesan in the High Court was not to abate on death of the accused. The High Court rightly did not direct for abatement of appeal and proceeded to consider the appeal on merits. The appeal before the High Court being against sentence of fine was required to be heard against the sentence of fine despite death of accused-appellant.”
6. Indranil Mukherjee v. State of West Bengal in C.R.R. No. 1555 of 2021 decided in 21.04.2022
The Calcutta High Court in this case dismissed the petitioner’s revision. Magistrate had rejected Section 421 CrPC recovery of Rs. 10 lakh interim compensation under Section 143A NI Act after accused’s death. The Court held that Final Section 138 NI Act compensation is recoverable from the deceased’s estate via Section 70 IPC but interim Section 143A compensation is provisional, tied to trial outcome which is repayable on acquittal. Accused’s death abates proceedings without guilt adjudication, extinguishing no crystallized right. The final outcome is that no recovery from estate of the accused on account of interim amounts on pre-trial death.
The Court summarized thus:
“36. Section 143A (1) of the Negotiable Instruments Act, 1881, speaks of payment of interim compensation and I am unable to persuade myself to agree with Mr. Bhattacharjee that Section 143A (1) is independent of Section 143A (4) of the Negotiable Instruments Act, 1881. A bare reading of Section 143A (4) makes it clear that in the event the drawer of the cheque is acquitted, the interim compensation paid in terms of Section 143A (1) has to be repaid together with the prevalent bank interest. And again in terms of Sub-section (6) the amount of fine imposed under Section 138 of the Negotiable Instruments Act, 1881 or the amount of compensation awarded under Section 357 of the Code of Criminal Procedure, 1973 shall be reduced by the amount paid or recovered as interim compensation.
37. The order of interim compensation is, therefore, dependent on the outcome of the trial. There is no finality attached to such interim order of compensation and no right is crystallized in favour of the complainant by dint of such interim order of compensation. The order of interim compensation, which is passed in the aid of final compensation, will cease to exist when the trial comes to an end due to the death of the accused since in such eventuality there cannot be any scope to adjudicate the 138. Therefore, I am of the view that if in case of death of an accused the compensation awarded under Section 138 of the Negotiable Instruments Act, 1881 can be recovered from the estate of a deceased accused, but an interim compensation awarded under Section 143A of the said Act cannot be recovered from the estate of a deceased accused, who died before the conclusion of the trial.”
Death of the Complainant: Continuation by Legal Heirs
Unlike the death of the accused, the complainant’s death does not lead to automatic abatement. Proceedings under Section 138 are summons cases (quasi-criminal with a financial focus), allowing legal heirs or representatives to continue with court permission under CrPC Sections 256(2) and 302. This prevents unjust dismissal and ensures debt recovery.
Key Differences and Procedure
- No Automatic Abatement: The case focuses on financial liability, so heirs can step in to prosecute.
- Procedure: File an application under CrPC Section 302 for permission to continue. The court grants leave unless prejudice is shown. Heirs must act promptly to avoid dismissal under CrPC Section 256(1) for non-appearance.
- Power of Attorney or Agents: Permitted if authorized, but heirs are preferred.
Comparative Summary Table
| Scenario | Legal Position |
|---|---|
| Death of Accused (Imprisonment Only) | Appeal abates; sentence unenforceable. |
| Death of Accused (Fine or Composite Sentence) | Appeal survives to extent of fine affecting estate. |
| Interim Compensation under Section 143A NI Act | Not recoverable from estate if accused dies before trial concludes. |
| Death of Complainant | No abatement; legal heirs may continue proceedings. |
Relevant Precedents
1. Balasaheb K. Thackeray v. Venkat @ Babru, (2006) 5 SCC 298
This foundational Supreme Court case established the framework for continuation of proceedings after complainant’s death.
2. Ashwin Nanubhai Vyas v. The State of Maharashtra AIR 1967 SC 983
With reference to Section 495 of the Code of Criminal Procedure, 1898, it was held that the Magistrate had the power to permit a relative to act as the complainant to continue the prosecution.
3. Jimmy Jahangir Madan v. Bolly Cariyappa Hindley (Dead) by Lrs. (2004) 12 SCC 509
- The Apex Court held that the legal heir of the complainant can be allowed to file a petition under Section 302 of the Code to continue the prosecution.
- The Apex Court ruled that to bring in application of Section 302 of the Code, permission to conduct prosecution has to be obtained from the Magistrate inquiring into or trying a case; if any permission is sought for by the legal heirs of the deceased complainant to continue prosecution, the same shall be considered in its perspective by the Court dealing with the matter.
The Court observed thus:
“Likewise, under Section 302 of the Code, a person, who is entitled to continue the prosecution, is required to make an application himself but under both the provisions aforesaid, instead of taking steps personally, a party can be represented through a pleader. Power of attorney holder can represent the concerned party under both the provisions of the Code, in case permission for such representation is sought from the court by the concerned person and granted by it.”
4. Chand Devi Daga & Ors. v. Manju K. Humatani & Ors. 2018 (1) SCC 71
- Following Balasaheb K. Thackeray, the Supreme Court held that taking assistance of Section 302 of the Code, the legal heirs can continue the prosecution upon death of the original complainant.
- The Court emphasized that the statutory intent of CrPC is not to foreclose the right of a person to continue with the prosecution upon death of the complainant, observing that the victim of a crime may die but the crime committed against him does not, nor does the guilt of the offender get washed away only because the victim is no more.
5. Netar Prakash v. Satinder Pal Dutta (2022), Delhi High Court in CRL.M.C. 3455/2022, CRL.M.A. 14482/2022 decided on 28 July, 2022
The Delhi High Court dealt with the impleadment of legal heirs of the complainant to prosecute the matter upon the death of the complainant under the Negotiable Instruments Act & observed thus:
“The offence under Section 138 of Negotiable Instruments Act is almost in the nature of civil wrong, which has been given a criminal overtones, as observed in Kaushalya Devi Massand v. Roopkishore Khore, AIR 2011 SC. In view of the nature of offence under Section 138 Negotiable Instruments Act coupled with reading of Section 256, Section 249 and Section 302 of Code of Criminal Procedure, 1973, it cannot be inferred that the intention of the legislature was to bar the legal heirs of the complainant to be brought on record during the appellate proceedings and deprive the legal heirs of the compensation awarded on completion of proceedings under Section 138 Negotiable Instruments Act.
The findings in Shri Balasaheb K. Thackeray v. Shri Venkat @ Babru (supra), do not bar the impleadment of legal heirs of the complainant to prosecute the matter upon the death of the complainant, as contended by learned counsel for the petitioner. The matter is no longer res integra in view of observations in Chand Devi Daga (supra) and the same permits the bringing of legal heirs on record to prosecute the matter on behalf of the deceased/complainant in the proceedings pending before the higher court.”
6. Sanjit Kumar Mishra v. Ranjit Mishra, Orissa High Court – 2022 Supreme (Ori) 638
- The Orissa High Court held that Section 302 of the Code can be invoked to permit the prosecution to be conducted by any person other than a police officer below the rank of inspector, allowing legal heirs to continue prosecution upon death of the original complainant.
- The Court emphasized that the death of the victim does not extinguish the crime or the offender’s liability and confirmed that one legal heir can proceed against another legal heir if the original complainant had maintained the complaint against them.
7. Gauhati High Court in CRLA 130/2001 (2004 SCC OnLine Gau 130; 2005 (3) Gau LR 491)
Section 138 trial does not abate on complainant death post-cognizance; legal heirs permitted to prosecute under CrPC Section 256.
8. Ram Avtar Agarwal v. State of U.P., 2025 (0) Supreme (All) 2636 (Allahabad High Court)
This is a direct case under Section 138 of the Negotiable Instruments Act wherein it confirmed heirs’ right to continue after permission, rejecting automatic dismissal.
Practical Implications and Recommendations
For Complainants / Legal Heirs
- Immediate Notification: Upon death of accused, promptly inform the court to ensure proper procedures for estate recovery.
- Civil Remedies: File civil suit for recovery from the deceased’s estate within limitation period (typically 3 years from accrual of cause of action).
- Substitution Applications: If complainant dies, legal heirs should immediately file application under Section 302 CrPC for permission to continue prosecution, ideally within reasonable time to avoid delay-related issues.
- Documentation: Maintain proper documentation of legal heir status, succession certificates, or letters of administration as may be required by court.
For Accused / Legal Heirs of Deceased Accused
- Challenge Convictions: Legal heirs can appeal convictions under Section 394(2) CrPC to clear the deceased’s name and protect estate from fines / compensation.
- File Applications Promptly: Applications for leave to continue appeals should be filed within 30 days of death as per Section 394(2) CrPC, though courts may condone delay.
- Liability Limitation: Understand that liability extends only to the estate, not personal liability of heirs.
- Interim Compensation: Be aware that interim compensation under Section 143A NI Act may be recoverable from the estate even after death although the Calcutta High Court judgment cited above has categorically denied recovery of interim compensation on death of the accused.
Summary Table
| Category | Key Action | Relevant Provision |
|---|---|---|
| Complainant / Heirs | Inform court and pursue civil recovery | Limitation Act, Civil Law |
| Complainant / Heirs | File substitution application | Section 302 CrPC |
| Accused / Heirs | Appeal conviction | Section 394(2) CrPC |
| Accused / Heirs | Limit liability to estate | General Principles of Criminal Law |
| Accused / Heirs | Interim compensation issue | Section 143A NI Act |
Conclusion
The death of the accused under Section 138 NI Act leads to abatement of criminal proceedings due to the personal nature of liability, shifting focus to civil recovery from the estate. In contrast, the complainant’s death allows heirs to continue, preserving the quasi-criminal intent of debt enforcement. These positions, rooted in Supreme Court and High Court precedents, balance criminal justice with financial remedies.
