2014 (7) TMI 1252 - HC - Indian Laws

Offences under Section 138 of the Negotiable Instruments Act - meditation - Held that - In order to promote mediation as a process for an Alternative Disputes Resolution in monitory transactions as in the cases under Section 138 of the Act as it was really a civil dispute which was converted into a criminal prosecution with a view to make the drawer of the cheque to honour the cheque than to send them to prison as mentioned in the decision reported in Damodar S. Prabhu s case (2010 (5) TMI 380 - SUPREME COURT OF INDIA), Court can allow reasonable time to parties to fulfill the terms of the agreement so as to avoid prolonged litigation for realisation of the amount So, under the said circumstances, in order to promote the settlement arrived at in the mediation if a reasonable time is provided in the mediation agreement namely, up to 6 months and if the parties are willing to abide by the condition, then it is always better that court can wait for that much time to allow the parties to honour the settlement that has been arrived in the mediation and the purpose of the mediation is to restore the relationship between the parties and that can be achieved by that and that will give a boost for a process of mediation to be used by the parties to resolve their disputes amicably. So, under the circumstances, this court feels that since six months period is provided will be over by 17.08.2014, the learned Magistrate is directed to keep the case till that date without insisting for evidence so as to allow the parties to honour the settlement which has been arrived in the mediation process and if the amount is not paid and the application for compounding is not filed within that time, then the learned Magistrate is directed to proceed with the case, considering the principles laid down in this decision regarding the mediation agreement which has not been honoured by the accused and dispose of the case in accordance with law. If a compounding application is filed on the basis of the same agreement later, then that can be taken only as a delaying process by the accused and it can be accepted only in terms of the guidelines provided in Damodar S. Prabhu s case (supra).

Summary

Issues Involved:
1. Legality of mediation agreement in criminal cases under Section 138 of the Negotiable Instruments Act.
2. Effect of mediation agreement on the ongoing criminal proceedings.
3. Whether the mediation agreement can be treated as evidence in a criminal matter.
4. Appropriate action for the Criminal Court when mediation agreement terms are not fulfilled.

Issue-wise Detailed Analysis:

1. Legality of Mediation Agreement in Criminal Cases under Section 138 of the Negotiable Instruments Act:
The judgment clarifies that while Section 89 of the Code of Civil Procedure provides mediation as an Alternative Dispute Resolution (ADR) process, criminal cases are generally not suitable for ADR processes. However, under the Legal Services Authorities Act, compoundable criminal cases can be referred to Lok Adalath, which can pass orders as a Criminal Court. Specifically, cases under Section 138 of the Negotiable Instruments Act, being compoundable, can be referred for mediation to settle the amount in dispute. The mediation is only for facilitating settlement and not for passing any award or decree.

2. Effect of Mediation Agreement on the Ongoing Criminal Proceedings:
The court emphasized that a mediation agreement in a criminal matter does not have the same legal effect as an award or decree unless it is accepted by the court and a decree is passed under Section 89 of the Code of Civil Procedure read with Order 23 Rule 3. The criminal court cannot rely on the mediation agreement to pass a civil decree. The court must proceed based on evidence to either convict or acquit the accused unless the case is compounded.

3. Whether the Mediation Agreement Can Be Treated as Evidence in a Criminal Matter:
The judgment states that mediation agreements cannot be used as evidence in criminal proceedings. The confidentiality of mediation proceedings is protected under rules 20, 21, and 22 of the Civil Procedure (Alternative Disputes Resolution) Rules, Kerala 2008. The court cannot disclose or rely on the mediation agreement unless it is accepted by the court and converted into a conciliation agreement or decree.

4. Appropriate Action for the Criminal Court When Mediation Agreement Terms Are Not Fulfilled:
The court directed that if a reasonable period, such as six months, is provided in the mediation agreement, the criminal court should wait for that period to allow the parties to fulfill the terms. If the terms are not honored, the court should proceed with the case based on evidence. The court also referenced the Supreme Court's guidelines in Indian Bank Association v. Union of India and Damodar S. Prabhu v. Sayed Babalal H, emphasizing the need for expeditious disposal of cases under Section 138 and imposing costs for delayed compounding.

Conclusion:
The petition was disposed of with the direction to the Magistrate to wait until the expiry of the six-month period provided in the mediation agreement. If the amount is not paid and no compounding application is filed within that time, the Magistrate should proceed with the case based on evidence and in accordance with the law. If a compounding application is filed later, it should be considered as a delaying tactic and accepted only under the guidelines provided by the Supreme Court in Damodar S. Prabhu's case.