AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2023 (12) TMI 1055
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....nce 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 accused in the capacity as Directors of t....
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....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 for compounding of the offences at the first or second hear....
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.... 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 proceed with the compounding of the offence under the NI Act and the Court felt that Section 32....
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....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 the NI Act will be left totally unguided or uncontrolled. Such an interpretation apart from being an absurd or unreasonable one will also be contra....
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....er 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. (iii) Though compounding requires consent of both parties, even in absence of such consent, the court, in the interests of justice, on being satisfied that the complainant has been ....
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....nd 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 compensation. 14. The learned senior counsel has then invited my attention to paragraph 24 of the judgment of the Supreme Court in Suo Motu Writ Petition (Cri) No.2/2020 decided on 16.04.2021 and submit....
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....not 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 interpretation apart from being an absurd or unreasonable one will also be contrary to the provisions of Section 4(2) of the Code, which has been discussed above. There is no other statutory procedure for compounding of offence under the N....
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....sion 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 application is made, the compounding may be allowed by the Court without imposing any costs on the accused. Thus, the accused is made to believe that if he files an application for compounding offence at the initial stage of the case, the compou....
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....ore 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 the cheque bounce cases are indeed being compromised or settled by way of compounding, albeit during the later stages of litigation thereby contributing to undue delay in justice-delivery. The problem herein is with the tendency of litigants to belatedly choose compounding as a means ....
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....fy 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 justifiable reason to not give consent, in my considered view, the cumulative effect of the law laid down in Damodar's case read with JIK and M eter & Instrument ' s case would require the trial Court to consider the application seeking compounding of offence favourably, else the very pur....
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....unt. 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 opinion, an abuse of process of law and, therefore, by invoking the jurisdiction u/s 482 of the Code, this attempt will have to be and stands nipped down. 32. The last question that requires answer is whether it will be permissible for six accused (the present applicants) out of twelve, to seek compounding....
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....ppreciated 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 to meet the ends of justice, I deem it appropriate to quash the FIR No. 1087/2003, under Section 406, 420, 468, 471 of the Indian Penal Code, 1860 registered at Police Station Parliament Street, Delhi qua against the petitioners, namely Vijay Kumar Gupta, Rajkumar Sharma and Vinod Choudhary only to the extent of their role in commission....