2022 (4) TMI 64 - HC - Indian Laws

Court quashes Section 138 proceedings, orders compensation deposit.

The court allowed the petitions filed by the petitioners and quashed the proceedings under Section 138 of the Negotiable Instrument Act pending before the ... Dishonor of Cheque - civil wrong - compounding of offences - section 138 of NI Act - HELD THAT:- Unquestionably, the proceedings initiated under the provisions of Act, 1881’ is not the proceeding of recovery of amount of loan, but the proceeding is for getting an amount involved in the cheque, for which complaint under Section 138 of Act, 1881 has been filed. The object of introducing Section 138 of ‘Act, 1881’ was to enhance the acceptability of cheques in the settlement of liabilities. The drawer of cheque is made liable to prosecution on dishonour of cheque with safeguards to prevent harassment of honest drawers. It is basically made to facilitate smooth functioning of business transactions. The nature of offence as comes under Section 138 of Act is primarily related to a civil wrong but the same is made compoundable. The accused can make an application for compounding the offence. It is for the Court to see as to which stage application is made and what amount of compensation or fine is required to be paid to the complainants. There are no justification for remitting the matter before the trial court when it can be done here also, especially when the petitioners have filed this petition under Section 482 of Cr.P.C asking this Court to exercise its inherent power - when a petition under Section 482 of Cr.P.C has been filed asking this Court to exercise the inherent power and petitioners are ready to pay the amount involved in the cheques, there are no reason for not accepting the said offer and quash the proceedings instead of remanding the same to the trial court. Petition allowed. Issues Involved:1. Quashing of proceedings under Section 138 of the Negotiable Instrument Act, 1881.2. Maintainability of petition under Section 482 of Cr.P.C.3. Settlement proposal and compensation.Issue-wise Detailed Analysis:1. Quashing of Proceedings under Section 138 of the Negotiable Instrument Act, 1881:The petitioners sought to quash the proceedings pending against them in the Court of Additional Chief Judicial Magistrate/Special Judge, Bhopal, under Section 138 of the Negotiable Instrument Act, 1881. The case involved dishonored cheques issued by M/s Som Power Pvt. Ltd. (M/S SPPL) towards repayment of financial assistance provided by Madhya Pradesh Industrial Development Corporation (MPSIDC). The total amount of dishonored cheques was Rs. 2,87,23,562. The petitioners argued that they were ready to pay the cheque amount along with an adequate fine, and thus, the pending proceedings should be set aside.2. Maintainability of Petition under Section 482 of Cr.P.C.:The respondent opposed the petition, arguing that the petition under Section 482 of Cr.P.C. was not maintainable. They contended that the petitioners should have made this request before the trial court where the proceedings under Section 138 of the Act, 1881, were pending. The respondent emphasized that it was the prerogative of the trial court to decide on such matters, and the High Court should entertain the petition only if the trial court rejected the request.3. Settlement Proposal and Compensation:The petitioners relied on the Supreme Court decision in the case of Meters and Instruments Private Limited and another Vs. Kanchan Mehta, which observed that the provision under Section 138 of the Act, 1881, was primarily compensatory. The Supreme Court noted that even in the absence of consent from both parties, the court could close the proceedings and discharge the accused if the complainant had been duly compensated. The petitioners argued that since they were ready to pay the entire amount involved in the cheques, there was no reason to keep the cases pending or remand them to the trial court for a formal application.Judgment:The court observed that the proceedings under Section 138 of the Act, 1881, were primarily compensatory, with a punitive element to enforce the compensatory aspect. The court noted that the object of introducing Section 138 was to enhance the acceptability of cheques in the settlement of liabilities and to facilitate smooth business transactions. The court referred to the Supreme Court's judgment in Kanchan Mehta, which allowed for the closure of proceedings and discharge of the accused if the cheque amount with assessed costs and interest was paid.The court found no justification for remitting the matter to the trial court when it could be resolved by the High Court itself, especially since the petitioners had filed the petition under Section 482 of Cr.P.C. asking the court to exercise its inherent power. The court concluded that the proceedings pending before the trial court under various R.T. Nos. should be quashed, subject to the petitioners depositing Rs. 15,00,000 towards compensation in addition to the cheque amount of Rs. 2,87,23,562 before the trial court within one month. The petitioners were also ordered to pay costs of Rs. 5,00,000 to the respondent.Conclusion:The petitions filed by the petitioners were allowed, and the proceedings under Section 138 of the Negotiable Instrument Act pending before the Additional Chief Judicial Magistrate, Bhopal, were quashed, subject to the conditions specified by the court.