TaxTMI 
TaxTMI 
2023 (12) TMI 1055
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....lication seeking compounding of the offence upon full payment of cheque amount has been rejected. According to the applicants, the order suffers from non-consideration of the law laid down by the Hon'ble Supreme Court, in the case of Damodar S. Prabhu vs. Sayed Babalal : (2010) Vol.5 SCC 663 and Meters and Instruments Private Limited vs. Kanchan Mehta : (2018) Vol.1 SCC 560. 3. Having heard both sides at length, it transpires that the non-applicant no. 2 filed complaint u/s 138 of the NI Act, accusing as many as 12 entities/ individuals to be responsible for dishonour of cheque amounting to Rs. 15 lakhs. The accused nos. 1 and 2 are a Company, named and styled as Castex Technologies Limited having offices at Haryana and Rajasthan. The accused no.3- John Earnest Flintham is said to be the Managing Director of the Company; accused nos. 4 to 12 are/were the Directors of the accused nos.1 and 2 companies. The applicant No.1 herein is the accused no.8; applicant no.2 is the accused no.7; applicant no.3 is the accused no.4, applicant no.4 is the accused no.5; applicant no.5 is the accused no.10 and applicant no.6 is the accused no.11 respectively. These applicants have been arrayed as....
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.... offence. This application has been rejected by the learned Magistrate on the ground that the non-applicant no.2-Company is not ready to compound the offence. The learned Magistrate has taken aid of the judgment in the case of JIK Industries Limited and others vs. Amarlal V. Jumani & another: (2012) 3 SCC 255, which was relied upon by the non-applicant no.2 -complainant. 7. The learned counsel for the applicants has invited my attention to Damodar's case (supra). The Hon'ble Supreme Court has considered the scope of Section 147 of the NI Act which relates to compounding offence and noted that this Section does not prescribe a stage appropriate for compounding the offence and is silent on the point whether the same can be done at the instance of the complainant or with the leave of the Court. The Supreme Court has then considered various provisions of the NI Act as also the Scheme contemplated by Section 320 of the Code of Criminal Procedure, 1973 (for short, "the Code") and issued the following guidelines :- THE GUIDELINES " (a) That directions can be given that the Writ of Summons be suitably modified making it clear to the accused that he could make an application ....
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....ling separate application invoking the provisions of Section 482 of the Code if they are so advised. The Supreme Court while upholding the High Court's order, has held that the sanction of scheme u/s 391 of the Companies Act will not result in automatic compounding of offence u/s 138 of the N.I. Act without consent of the complainant(s). The Supreme Court further held that even if the complainant creditors are bound by the scheme u/s 391 of the Companies Act for civil consequences, the compounding of criminal offence can be done only as per the statutory procedure i.e. Sec.320 of the Code and only if persons aggrieved have given their consent for the same. As regards the guidelines issued in Damodar's case, the Supreme Court has noted its effect and the scope of Section 147 of the N.I. Act read with Section 391 of the Code. Para nos. 41, 76 to 80 and 82, which read thus: "41. The Court held in para 26 of Damodar that those guidelines have been issued by this Court under Article 142 of the Constitution in order to fill up the legislative vacuum which exists in Section 147 of the NI Act. The Court held that Section 147 of the NI Act does not carry any guidance on how to proc....
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....community, to prosecute, it is criminal for anyone to make such composition; even though he suffered no injury and indeed as no concern with the crime" (emphasis in original) 79. Russell on Crime (12th Edn.) also describes : " Agreements not to prosecute or to stifle a prosecution for a criminal offence are in certain cases criminal" (Ch.22 -Compounding Offences, p. 339) 80. Later on compounding was permitted in certain categories of cases where the rights of the public in general are not affected but in all cases such compounding is permissible with the consent of the injured party. 82. A perusal of Section 320 makes it clear that the provisions contained in Section 320 and the various sub-sections is a code by itself relating to compounding of offence. It provides for the various parameters and procedure and guidelines in the matter of compounding. If this Court upholds the contention of the appellant that as a result of incorporation of Section 147 in the NI Act, the entire gamut of procedure of Section 320 of the Code are made inapplicable to compounding of an offence under the NI Act, in that case the compounding of offence under th....
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....ther judgments of the Supreme Court and observed in paras 18 and 19 as under : "18. From the above discussion following aspects emerge : i) Offence Under Section 138 of the Act is primarily a civil wrong. Burden of proof is on Accused in view presumption Under Section 139 but the standard of such proof is "preponderance of probabilities". The same has to be normally tried summarily as per provisions of summary trial under the Code of Criminal procedure but with such variation as may be appropriate to proceedings under Chapter XVII of the Act. Thus read, principle of Section 258 of the Code of Criminal procedure will apply and the Court can close the proceedings and discharge the Accused on satisfaction that the cheque amount with assessed costs and interest is paid and if there is no reason to proceed with the punitive aspect. ii) The object of the provision being primarily compensatory, punitive element being mainly with the object enforcing the compensatory element, compounding at the initial stage has to be encouraged but is not debarred at later stage subject to appropriate compensation as may be found acceptable to the parties or the Court. ....
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....he fact that compensation under Section 357(3) Code of Criminal Procedure with sentence of less than one year will not be adequate, having regard to the amount of the cheque, conduct of the Accused and other circumstances." 12. The learned counsel for the applicants, by relying upon clause(iii) of paragraph 18 of the above judgment, submits that even in absence of consent of complainant, the Court on being satisfied that the complainant has been duly compensated can compound the offence. 13. Mr.Jaiswal, the learned Senior Advocate for the nonapplicant no.2 has vehemently argued that JIK's judgment has been not overruled. He further submits that, what Meters & Instrument's judgment provides is a small window where it is open for the courts to compound the offence even when there is no consent, but the Court has to see that the complainant is duly compensated. He further submits that the expression 'compensated' does not mean the value of the cheque but when the entire dispute between the parties is sorted out. He submits that the applicants herein have nowhere stated or offered to compensate the non-applicant no.2 and mere offer of paying the cheque amount does not amount to c....
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....138 cases. In doing so the Court held that attempts should be made for compounding the offences early. Therefore, the observations made in para 24 of Damodar, that the scheme contemplated under Section 320 of the Code cannot be followed "in the strict sense" does not and cannot mean that the fundamental provisions of compounding under Section 320 of the Code stand obliterated by a side-wind, as it were. 17. The importance and effect of Section 320 of the IPC vis-a-vis section 147 of NI Act has been further explained in paragraph 82 as under :- 82. A perusal of Section 320 makes it clear that the provisions contained in Section 320 and the various sub-sections is a code by itself relating to compounding of offence. It provides for the various parameters and procedure and guidelines in the matter of compounding. If this Court upholds the contention of the appellant that as a result of incorporation of Section 147 in the NI Act, the entire gamut of procedure of Section 320 of the Code are made inapplicable to compounding of an offence under the NI Act, in that case the compounding of offence under the NI Act will be left totally unguided or uncontrolled. Such an interpreta....
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....side by the subsequent Bench consisting of equal number of Judges. As stated earlier, in JIK, it has been held that there cannot be automatic compounding of offence whereas in Meters & Instrument, the Supreme Court arrived at a conclusion that in appropriate cases, the offence could be compounded without such consent. 21. The question, therefore, is whether the present case is an appropriate case where the consent of non-applicant no.2 for compounding the offence, could be ignored. The answer is as follows : In Damodar's case, the first guideline i.e. guideline stipulated in para (i) reads as under : "(a) That directions can be given that the Writ of Summons be suitably modified making it clear to the accused that he could make an application for compounding of the offences at the first or second hearing of the case and that if such an application is made, compounding may be allowed by the court without imposing any cost on the accused." The guideline clearly stipulates that when writ of summons is issued, the accused is made to know that he could make an application for compounding the offence at the first or second date of hearing of the case and that if such an....
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....struments Act -Tackling an avalanche of cases ( New Delhi; Universal law Publishing Co. Pvt.ltd., 2009) at p.5) ....Unlike that for other forms of crime, the punishment here ( insofar as the complainant is concerned) is not a means of seeking retribution, but is more a means to ensure payment of money. The complainant's interest lies primarily in recovering the money rather than seeing the drawer of the cheque in jail. The threat of jail is only a mode to ensure recovery. As against the accused who is willing to undergo a jail term, there is little available as remedy for the holder of the cheque. If we were to examine the number of complaints filed which were 'compromised' or 'settled' before the final judgment on one side and the cases which proceeded to judgment and conviction on the other, we will find that the bulk was settled and only a miniscule number continued. 13. It is quite obvious that with respect to the offence of dishonour of cheques, it is the compensatory aspect of the remedy which should be given priority over the punitive aspect. There is also some support for the apprehensions raised by the learned Attorney General that a majority of ....
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....sed in opting for compounding and thus suggested that, in such cases it would be desirable if parties choose compounding during the earlier stages of litigation, subject to availability of the valid defence as noted in the order. Accordingly, the Supreme Court issued directions to modify writ of summons to the accused making it clear to him of availability of option of compounding. 24. In the present case, the complaint has been filed on 29.03.2018, the summons is said to have been issued in April, 2018. Advocates appeared through counsel. On 11.12.2018 the applicants have filed an application seeking compounding of offence. Demand draft of the entire amount of cheque was also annexed. Strictly speaking, the applicants have not filed the application on 1st or 2nd hearing of the case but have filed the same on third hearing of the case which can be said to be an initial stage. This application has been filed in response to the summons issued by the Court making it clear that if the applicants would make an application for compounding of offence at the first or second hearing of the case, the compounding may be allowed. In the circumstances, unless the complainant puts forth the j....
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.... initial stage of the proceedings but not on the first or second date of hearing, the interest at the rate of 9 per cent, in my view, will be reasonable to suitably compensate the non-applicant no.2. 29. The learned counsel for the applicants has shown their willingness to pay the aforesaid amount. That being so, the application seeking compounding of offence requires favourable consideration in terms of the judgments of the Apex Court referred to in the earlier part of the order. 30. Secondly, the applicants have come up with the case that despite the proceedings u/s. 14 of the Insolvency & Bankruptcy Code, 2016 having been initiated and despite the Interim Resolution Professional being appointed, the applicants are willing to pay the amount. 31. The non-applicant no.2, thus, appears to have raised his claim for recovery of the amount on 03.01.2018 before the IRP. Admissible recovery, whether of Rs.3 crores or otherwise, will be considered before the IRP and in terms of the provisions of the IBC Code, 2016. In the circumstances, to not offer consent on the ground that the applicants owe dues to the non-applicant no.2 to the tune of Rs. 3 crores is, in my considered opinio....
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....on of the Court under Section 482 of the Code, has held as under : "4. We have taken into account the fact of the matter in question as it appears to us that no cognizable offence is made out against the appellant-herein. The High Court was wrong in holding that the F.I.R. cannot be quashed in part and it ought to have appreciated the fact that the appellants-herein cannot be allowed to suffer on the basis of the complaint filed by Respondent No.2-herein only on the ground that the investigation against co-accused is still pending. It is pertinent to note that the learned Magistrate has opined that no offence is made out against co-accused nos. 2,3,4 and 6 prima facie. 34. Similarly, in the case of Vijay Kumar Gupta vs. State Government of NCT Delhi in Criminal Misc. No.2289/2013 dated 09.03.2017, the High Court of Delhi in paragraph no.7 has observed thus:- "7. Looking into the facts and circumstances of the case and the fact that the petitioners have paid the loan/ settlement amount to the Respondent No.2 and nothing remains to be adjudicated further, to remove the hurdle in the personal life of the present petitioners for leading better and peaceful life and....