Accused acquitted of Section 138 dishonor of cheque charge after compromising with complainant during revision

HP HC allowed compounding of Section 138 Negotiable Instruments Act offense after accused compromised with complainant during revision petition. Court quashed conviction and sentence orders dated 01.06.2018 and 07.08.2018 by CJM Hamirpur, which were affirmed by Additional Sessions Judge on 20.04.2021. Accused acquitted of dishonor of cheque charge with insufficient funds remarks. Court directed token compounding fee of Rs.10,000 to be deposited with HP State Legal Services Authority within four weeks, considering accused's financial condition.

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1. ISSUES PRESENTED and CONSIDERED

- Whether the judgment of conviction and order of sentence under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter "the Act") can be set aside and the accused acquitted on the ground of compromise between the parties during the pendency of the petition under Section 397/401 Cr.P.C.

- Whether the offence under Section 138 of the Act is compoundable after conviction and during appellate proceedings, and the legal framework governing compounding of such offences.

- The applicability of Section 147 of the Negotiable Instruments Act, 1881, vis-`a-vis Section 320 of the Code of Criminal Procedure, 1973 (Cr.P.C.), in relation to compounding of offences under the Act.

- The extent of discretion of the Court in imposing or reducing compounding fees in light of the financial condition of the accused and relevant judicial guidelines.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Compounding of Offence under Section 138 of the Negotiable Instruments Act after Conviction

Relevant Legal Framework and Precedents: Section 138 of the Act criminalizes dishonour of cheque for insufficiency of funds or other reasons. The offence is punishable with imprisonment and/or fine. Section 147 of the Act, introduced by amendment, explicitly states that offences under the Act are compoundable, overriding the general provisions of Section 320 of the Cr.P.C. which governs compounding of offences under the Indian Penal Code and other laws.

The Hon'ble Apex Court in Damodar S. Prabhu v. Sayed Babalal H. (2010) 5 SCC 663 clarified that Section 147 of the Act contains a non obstante clause, making offences under the Act compoundable notwithstanding the provisions of the Cr.P.C. Further, in K. Subramanian v. R. Rajathi (2010) 15 SCC 352, the Apex Court held that compromise can be accepted even after recording of judgment of conviction, permitting compounding of offence under Section 138 of the Act during appellate or revision proceedings.

Court's Interpretation and Reasoning: The Court noted that the complainant deposited the entire cheque amount, partly before the Trial Court and partly in the Registry of the High Court, signaling a bona fide compromise between the parties. Both parties expressed no objection to compounding the offence. The Court observed that the compounding of offence under Section 138 post-conviction is permissible under Section 147 of the Act and the Apex Court's authoritative rulings.

Key Evidence and Findings: The complainant's statement confirmed receipt of the cheque amount in full, and the accused's statement corroborated the compromise and payment. The Court considered these admissions as sufficient to allow compounding.

Application of Law to Facts: Applying the legal provisions and precedents, the Court found no impediment to accept the compromise and compound the offence, leading to quashing and setting aside the conviction and sentence.

Treatment of Competing Arguments: The Court did not find any competing arguments against compounding, as both parties consented. The Court emphasized the salutary nature of compounding provisions under the Act.

Conclusion: The offence under Section 138 of the Act was ordered to be compounded, and the conviction and sentence were quashed and set aside, resulting in acquittal of the accused.

Issue 2: Legal Framework Governing Compounding of Offences under the Negotiable Instruments Act

Relevant Legal Framework and Precedents: Section 147 of the Act provides that every offence punishable under the Act shall be compoundable, notwithstanding anything contained in the Cr.P.C. This provision supersedes Section 320 of the Cr.P.C., which ordinarily governs compounding of offences but excludes certain offences unless otherwise provided by law.

The Apex Court in Damodar S. Prabhu clarified the overriding effect of Section 147 and the non-applicability of Section 320 Cr.P.C. in strict terms to offences under the Act. The Court further reiterated this principle in K. Subramanian v. R. Rajathi, allowing compounding even after conviction and during appellate proceedings.

Court's Interpretation and Reasoning: The Court emphasized that Section 147 is an enabling provision inserted by amendment to facilitate early settlement and reduce litigation in cheque dishonour cases, which are largely private disputes. The Court noted that the legislative intent is to encourage compounding and reduce judicial burden.

Key Evidence and Findings: The Court relied on the aforementioned Supreme Court precedents to interpret the statutory provisions harmoniously.

Application of Law to Facts: The Court applied the enabling provision of Section 147 to the facts where compromise was reached post-conviction, thereby allowing the compounding application.

Treatment of Competing Arguments: No contrary legal submissions were found persuasive against the statutory mandate and judicial precedents favoring compounding.

Conclusion: The Court confirmed that offences under the Negotiable Instruments Act are compoundable at any stage, including post-conviction and appeal, under Section 147 of the Act.

Issue 3: Discretion and Guidelines Regarding Imposition or Reduction of Compounding Fees

Relevant Legal Framework and Precedents: The Apex Court in K. Subramanian v. R. Rajathi issued detailed guidelines regarding compounding fees to be imposed depending on the stage at which compounding is sought. The graded scale ranges from no costs if applied at the first or second hearing, to 10% of cheque amount if applied before the Magistrate at a later stage, 15% if before the Sessions Court or High Court, and 20% if before the Supreme Court. The guidelines also allow courts discretion to reduce fees based on facts and circumstances.

Court's Interpretation and Reasoning: The Court recognized the petitioner's submission regarding his poor financial condition and invoked the discretion vested in courts to reduce compounding fees accordingly. The Court considered the salutary nature of the compounding provisions and the need to balance justice with the accused's capacity.

Key Evidence and Findings: The petitioner's financial status was noted, though no detailed evidence was recorded. The Court relied on the general principle that bona fide litigants should not be unduly burdened.

Application of Law to Facts: The Court ordered a token compounding fee of Rs. 10,000/- to be deposited with the State Legal Services Authority, significantly lower than the prescribed percentage, reflecting the petitioner's financial constraints.

Treatment of Competing Arguments: No opposing submissions regarding compounding fees were recorded.

Conclusion: The Court exercised discretion to reduce the compounding fee to a token amount, consistent with Apex Court guidelines and the petitioner's financial condition.

3. SIGNIFICANT HOLDINGS

"Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), every offence punishable under this Act shall be compoundable." (Section 147, Negotiable Instruments Act, 1881)

"A bare reading of this provision would lead us to the inference that offences punishable under laws other than the Indian Penal Code also cannot be compounded. However, since Section 147 was inserted by way of an amendment to a special law, the same will override the effect of Section 320(9) of the CrPC, especially keeping in mind that Section 147 carries a non obstante clause." (As held in Damodar S. Prabhu v. Sayed Babalal H.)

"In view of the compromise arrived at between the parties, the petitioner should be permitted to compound the offence committed by him under Section 138 of the Code." (K. Subramanian v. R. Rajathi)

"The graded scheme for imposing costs is a means to encourage compounding at an early stage of litigation... The competent court can of course reduce the costs with regard to the specific facts and circumstances of a case, while recording reasons in writing for such variance." (Guidelines in K. Subramanian v. R. Rajathi)

Final determinations:

• The Court allowed the compounding of the offence under Section 138 of the Act despite conviction and appellate proceedings.
• The conviction and sentence dated 01.06.2018 and 07.08.2018 respectively were quashed and set aside.
• The accused was acquitted of the charge under Section 138 of the Act.
• The petitioner was directed to pay a token compounding fee of Rs. 10,000/- considering his financial condition.
• Amounts deposited by the accused in the Trial Court and Registry were ordered to be released to the complainant after verification.

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