2018 (10) TMI 664 - HC - Indian Laws

Dishonor of Cheque - settlement of liability - offence under Section 138 of the Negotiable Instruments Act - validity of criminal proceedings - Held that - In the present case, it is only a money transaction and the complainant has also received the amount from the petitioner/ fifth accused and in this regard a memo of compromise has also been jointly filed by the petitioner and complainant. Therefore, the complainant s interest lies primarily in recovering the money rather than seeking the drawer of the cheque in jail - Further Section 147 of the Negotiable Instruments Act also empowers this Court to compound the offence under section 138 of the Negotiable Instruments Act. The conviction and sentence imposed on the revision petitioner/fifth accused Salem are set aside and this criminal revision is disposed of - revision disposed off.

Summary

Issues:
1. Conviction under Section 138 of the Negotiable Instruments Act.
2. Compounding of the offence under Section 147 of the Negotiable Instruments Act.
3. Vicarious liability of the accused.
4. Settlement through a Memo of Compromise.
5. Applicability of the compounding principle as per legal precedents.

Analysis:

1. Conviction under Section 138 of the Negotiable Instruments Act:
The case involved the accused, who were engaged in textile import business and issued cheques that were later returned due to insufficient funds. The trial court convicted the petitioner, the fifth accused, under Section 138 of the Negotiable Instruments Act. The petitioner appealed the decision, but the III Additional Sessions Judge confirmed the conviction and sentence. The petitioner then filed a criminal revision seeking to set aside the judgment.

2. Compounding of the offence under Section 147 of the Negotiable Instruments Act:
A significant development in the case was the compounding of the offence under Section 147 of the Negotiable Instruments Act. The petitioner paid a substantial sum of money towards full and final settlement of his liability. A Memo of Compromise was filed, signed by both parties and their counsels, stating that the complainant accepted the payment and consented to compound the offence under Section 138 only against the petitioner.

3. Vicarious liability of the accused:
The petitioner argued that he paid a substantial amount to settle his liability and that the complainant accepted the payment, indicating a willingness to compound the offence against the petitioner alone. The petitioner emphasized that the lower court had punished the accused as directors of a company, imposing vicarious liability on them.

4. Settlement through a Memo of Compromise:
The Memo of Compromise detailed the payment made by the petitioner, the acceptance of the amount by the complainant, and the consent to compound the offence against the petitioner alone. Both parties agreed to set aside the conviction imposed on the petitioner by the trial court and confirmed by the appellate court.

5. Applicability of the compounding principle as per legal precedents:
The judgment referred to legal precedents, including the case of Damodar S. Prabhu Vs. Syed Babalal H., which discussed the permissibility of compounding offences based on the seriousness of the offence. The court considered the nature of the offence under Section 138 of the Negotiable Instruments Act, emphasizing the primary interest of the complainant in recovering the money rather than seeking imprisonment for the accused.

In conclusion, the High Court set aside the conviction and sentence imposed on the petitioner alone, acquitting him from all charges. The court noted that the benefit of the order applied only to the petitioner due to the settlement reached through the Memo of Compromise and the consent of the complainant to compound the offence against the petitioner alone.