TaxTMI 
TaxTMI 
2024 (4) TMI 782
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..... Anubhav Chopra, Advocate, on instructions, at the very outset submits that the Respondent No.1- Complainant/non-applicant does not intend to pursue the matter/proceedings under Section 138 of the Negotiable Instruments Act and states that he has no objection to the aforesaid application. 3. Moreover, since respondent No.2-State is a formal party-respondent in the instant proceedings, originating under the statute i.e. Negotiable Instruments Act, 1881 [hereinafter referred to as 'Act'] therefore, the respondent No.2 not file any reply or objection to the said application. The application stands disposed of. 4. In these circumstances, the instant application i.e. Cr.MP(M) No. 628 of 2024, is allowed and the delay of 1 year 7 months and 26 days is condoned. Cr.MP No. 1173 of 2024 5. This is an application by the petitioner-accused [Sunil Kumar] under Section 482 Cr.P.C. praying for quashing the impugned judgment dated 27.11.2018 passed by the Learned Trial Court which was, affirmed by the Learned Appellate Court 08.07.2022, that the matter has been settled with the Respondent No.1-Complainnat [as per Paras No.3 and 5 of application] just to maintain good relations inter se the ....
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....ayer is not disputed by Mr. Anubhav Chopra, learned counsel for Respondent No.1- Complainant, on instructions, who confirms that the matter has been settled and the impugned Judgments may be compounded/quashed. Likewise, the Respondent No.1- Complainant [M/s Anand Automobile, NH-20 Bodh, Tehsil Nurpur, District Kangra] has filed a Cr.MP No.1153 of 2024 confirming the averments made by petitioner-accused in Cr.MP No.1173 of 2024 and stating in Para 3 that the cheque amount has been received by the Respondent No.1- Complainant. In this background, it is prayed that the offence may be compounded and the impugned Judgments may be quashed and set-aside. 10. Heard Mr. Amit Sharma, Learned Counsel for the petitioner, Mr. Anubhav Chopra, Learned Counsel for Respondent No.1 and Mr. Prashant Sen, Learned Deputy Advocate General, for Respondent No.2. 11. In order to appreciate the controversy involved in the instant case, it is relevant to have a recap of the statutory provisions i.e. Sections 138 and 147 of the Negotiable Instruments Act, which read as under:- "138. Dishonour of cheque for insufficiency, etc., of funds in the account. - Where any cheque drawn by a person on an account....
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....rt or otherwise to secure the ends of justice." 12(i). In the background of the aforesaid statutory provisions, it is relevant to take note of the mandate of the Hon'ble Supreme Court, in Meters and Instruments Private Limited and another Versus Kanchan Mehta, (2018) 1 SCC 560 has also held as under:- "6. The object of introducing Section 138 and other provisions of Chapter XVII in the Act in the year 1988 [Vide the Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988] 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. The Negotiable Instruments (Amendment and Miscellaneous Provisions) Act, 2002 to amend the Act was brought in, inter alia, to simplify the procedure to deal with such matters. The amendment includes provision for service of summons by speed post/courier, summary trial and making the offence compoundable. 7. This Court has noted that the object of the statute was to facilitate smooth functioning of business transactions. The provision is necessary as in many transact....
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....the Act. Thus read, principle of Section 258 CrPC 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. 18.2. The object of the provision being primarily compensatory, punitive element being mainly with the object of 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. 18.3. 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 duly compensated, can in its discretion close the proceedings and discharge the accused. 18.4. Procedure for trial of cases under Chapter XVII of the Act has normally to be summary. The discretion of the Magistrate under second proviso to Section 143, to hold that it was undesirable to try the case summarily as sentence of more than one year may have to be passed, is to be exercised after considering the fu....
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.... cheque amount and interest/cost, by a specified date, the accused need not appear unless required and proceedings may be closed subject to any valid objection of the complainant . If the accused complies with such summons and informs the Court and the complainant by e-mail, the Court can ascertain the objection, if any, of the complainant and close the proceedings unless it becomes necessary to proceed with the case. In such a situation, the accused's presence can be required, unless the presence is otherwise exempted subject to such conditions as may be considered appropriate. The accused, who wants to contest the case, must be required to disclose specific defence for such contest. It is open to the Court to ask specific questions to the accused at that stage. In case the trial is to proceed, it will be open to the Court to explore the possibility of settlement. It will also be open to the Court to consider the provisions of plea bargaining. Subject to this, the trial can be on day to day basis and endeavour must be to conclude it within six months. The guilty must be punished at the earliest as per law and the one who obeys the law need not be held up in proceedings for long un....
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....d arrived at a settlement under the provisions of the Negotiable Instruments Act. The relevant Paras of the aforesaid judgment read as under:- "7. Now, the applicant-appellant has filed an application being Criminal Misc. Petition No. 176956 of 2019 seeking modification of the Order dated 27.09.2019 stating therein that the matter has been compromised between the parties. The appellant as per Settlement Agreement dated 05.09.2019 made payment of entire sum of Rs.3,16,000/- to respondent No. 1-complainant. It has further been stated in the said application that respondent No. 1- complainant on his own after having been received a sum of Rs. 3,16,000/- along with Rs. 50,000/-, as interest, from the appellant, filed an application under Section 147 of the Negotiable Instruments Act, 1881, for compounding of offence before the Chief Judicial Magistrate, 1st Class, Durg, Chhattisgarh. 8. It has been averred in the above-mentioned application that when the Order dated 27.09.2019 was passed by this Court, the appellant had already paid Rs.3,16,000/- to respondent No. 1-complainant, vide Settlement Agreement dated 05.09.2019, along with interest amounting to Rs.50,000/- and respondent....
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....e is concerned. Given these tests, it is clear that a Section 138 proceeding can be said to be a "civil sheep" in a "criminal wolf's" clothing, as it is the interest of the victim that is sought to be protected, the larger interest of the State being subsumed in the victim alone moving a court in cheque bouncing cases, as has been seen by us in the analysis made hereinabove of Chapter XVII of the Negotiable Instruments Act. 54. In Goaplast (P) Ltd. v. Chico Ursula D'Souza, the object sought to be achieved by Section 138 is succinctly set out in paragraph 3 thereof: "3. The learned counsel for the appellant has submitted that mere writing of letter to the bank stopping payment of the post-dated cheques does not take the case out of the purview of the Act. He has invited our attention to the object behind the provision contained in Chapter XVII of the Act. For appreciating the issue involved in the present case, it is necessary to refer to the object behind introduction of Chapter XVII containing Sections 138 to 142. This chapter was introduced in the Act by the Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988 (Act 66 of 1988) with th....
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....necessary that the drawer of the cheque should not be allowed to abuse the accommodation given to him by a creditor by way of acceptance of a postdated cheque. If stoppage of payment of a postdated cheque is permitted to take the case out of the purview of Section 138 of the Act, it will amount to allowing the party to take advantage of his own wrong." 55. In Vinay Devanna Nayak v. Ryot Sewa Sahakari Bank Ltd., a Division Bench of this Court referred to the object of Section 138 thus: "16. Section 138 of the Act was inserted by the Banking, Public Financial Institutions and Negotiable Instruments Law (Amendment) Act, 1988 (Act 66 of 1988) to regulate financial promises in growing business, trade, commerce and industrial activities of the country and the strict liability to promote greater vigilance in financial matters. The incorporation of the provision is designed to safeguard the faith of the creditor in the drawer of the cheque, which is essential to the economic life of a developing country like India. The provision has been introduced with a view to curb cases of issuing cheques indiscriminately by making stringent provisions and safeguarding interest of creditors. 1....
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....ly with the leave of the court. Sub-section (1) of Section 320 enumerates the offences which are compoundable without the leave of the court, while sub-section (2) of the said Section specifies the offences which are compoundable with the leave of the court. 12. Section 147 of the Negotiable Instruments Act, 1881 is in the nature of an enabling provision which provides for the compounding of offences prescribed under the same Act, thereby serving as an exception to the general rule incorporated in sub-section (9) of Section 320 Cr.PC which states that "No offence shall be compounded except as provided by this Section". A bare reading of this provision would lead us to the inference that offences punishable under laws other than the 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) CrPC, especially keeping in mind that Section 147 carries a non obstante clause." xxx xxx xxx 15. The compounding of the offence at later stages of litigation in cheque bouncing cases has also been held to be permissible in a recent decision of this Court, reported as K.M. Ibrahim....
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....ly 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." 18. 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. 21. With regard to the progression of litigation in cheque bouncing cases, the learned Attorney General has urged this Court to frame guidelines for a graded scheme of imposing costs on parties who unduly delay compounding of the offence. It was submitted that the requirement of deposit of the costs will act as a deterrent for delayed composition, since at present, free and easy compounding of offences at any stage, however belated, gives an incentive to the drawer of the cheque to delay settling the cases for years. An application for compounding made after severa....
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.... "78. Compounding as codified in Section 320 of the Code has a historical background. In common law compounding was considered a misdemeanour. In Kenny's Outlines of Criminal Law (19th Edn., 1966) the concept of compounding has been traced as follows : "422. Mercy should be shown, not sold.-It is a misdemeanour at common law to 'compound' a felony (and perhaps also to compound a misdemeanour); i.e. to bargain, for value, to abstain from prosecuting the offender who has committed a crime. You commit this offence if you promise a thief not to prosecute him if only he will return the goods he stole from you; but you may lawfully take them back if you make no such promise. You may show mercy, but must not sell mercy. This offence of compounding is committed by the bare act of agreement; even though the compounder afterwards breaks his agreement and prosecutes the criminal. And inasmuch as the law permits not merely the person injured by a crime, but also all other members of the community, to prosecute, it is criminal for anyone to make such a composition; even though he suffered no injury and indeed has no concern with the crime." 79. Russell on Crime (12th Edn.) also describes....
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....me be substituted by virtue of Section 147 of the NI Act." 59. In Kaushalya Devi Massand v. Roopkishore Khore, (2011) 4 SCC 593, a Division Bench of this Court succinctly stated: "11. Having considered the submissions made on behalf of the parties, we are of the view that the gravity of a complaint under the Negotiable Instruments Act cannot be equated with an offence under the provisions of the Penal Code, 1860 or other criminal offences. An offence under Section 138 of the Negotiable Instruments Act, 1881, is almost in the nature of a civil wrong which has been given criminal overtones." 60. In R. Vijayan v. Baby, (2012) 1 SCC 260, this Court referred to the provisions of Chapter XVII of the Negotiable Instruments Act, observing that Chapter XVII is a unique exercise which blurs the dividing line between civil and criminal jurisdictions. The Court held: "16. We propose to address an aspect of the cases under Section 138 of the Act, which is not dealt with in Damodar S. Prabhu. It is sometimes said that cases arising under Section 138 of the Act are really civil cases masquerading as criminal cases. The avowed object of Chapter XVII of the Act is to "encourage the cult....
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.... dishonour of cheque, under Section 357(1)(b) of the Code and the provision for compounding the offences under Section 138 of the Act. Most of the cases (except those where liability is denied) get compounded at one stage or the other by payment of the cheque amount with or without interest. Even where the offence is not compounded, the courts tend to direct payment of compensation equal to the cheque amount (or even something more towards interest) by levying a fine commensurate with the cheque amount. A stage has reached when most of the complainants, in particular the financing institutions (particularly private financiers) view the proceedings under Section 138 of the Act, as a proceeding for the recovery of the cheque amount, the punishment of the drawer of the cheque for the offence of dishonour, becoming secondary." (emphasis supplied) 61. In Dashrath Rupsingh Rathod v. State of Maharashtra, (2014) 9 SCC 129, a three-Judge Bench of this Court answered the question as to whether the territorial jurisdiction for filing of cheque dishonour complaints is restricted to the court within whose territorial jurisdiction the offence is committed, which is the location where the ....
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....ce dehors mens rea not only under Section 138 but also by virtue of the succeeding two sections. Section 139 carves out the presumption that the holder of a cheque has received it for the discharge of any liability. Section 140 clarifies that it will not be available as a defence to the drawer that he had no reason to believe, when he issued the cheque, that it would be dishonoured. Section 138 unequivocally states that the offence is committed no sooner the drawee bank returns the cheque unpaid." The focus in this case was on the court within whose jurisdiction the offence under Section 138 can be said to have taken place. This case, therefore, has no direct relevance to the point that has been urged before us. 62. In Lafarge Aggregates & Concrete India (P) Ltd. v. Sukarsh Azad, (2014) 13 SCC 779, this Court, continuing the trend of the earlier judgments in describing the hybrid nature of these provisions, held: "6. The respondents have agreed to pay the said amount but the appellant has refused to accept the payment and insisted that the appeal against rejection of the recall application should be allowed by this Court. The counsel for the appellant submitted that merely....
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....payment to the appellant by issuing a demand draft in their favour for a sum of Rs 5 lakhs, which would be treated as an overall amount including interest and compensation towards the cheque for which stop-payment instructions had been issued. If the same is not acceptable to the appellant, it is their choice but that would not allow them to prosecute the respondents herein in pursuance to the complaint which they have lodged implicating these two respondents." 13. In the background, of the facts of the instant case and the statutory provisions and the mandate of the Hon'ble Supreme Court, in cases of Kanchan Mehta, Madan Tiwari and P. Mohanraj [supra], once the proceedings under Section 138 have been held to be proceedings in the form of a civil sheep in a criminal wolf's clothing, therefore, once the petitioner-accused has amicably decided to settle/liquidate/discharge his liability, though, the transaction-proceedings have a tinge of criminal liability, then, on settling the entire liability in view of Section 147 of the Negotiable Instruments Act, the compounding of offences, on discharge of liability, appears to be genuine, which is certainly is a step towards securing the e....
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....s/discharges or liquidates his liability then such a person can be absolved of the criminal action-prosecution by permitting compounding of offence in proceedings under Section 138 of the Act. Moreover, once the petitioner-accused has discharged/liquidated his liability towards Respondent- Complainant, therefore, the continuance of criminal proceedings will not serve any purpose. The compounding of an offence would enable both the parties to lead life of respect and dignity in the society. Once, no dispute remains between the parties to the lis, then obviously the law cannot be so harsh so as to stand as a wall between the parties notwithstanding the amicable settlement inter se the parties. Continuation of criminal proceedings in such circumstances, would only cause an irreparable harassment and hardship and may even tarnish and spoil the reputation of the petitioner-accused. The Court proceedings cannot be permitted to de-generate into a weapon of harassment and persecution. The power to do complete justice is the very essence of every judicial justice dispensation system. It cannot be diluted by distorted perceptions and is not a slave to anything, except to the caution and circ....