2023 (3) TMI 531 - HC - Indian Laws

Dishonour of Cheque - compounding of offences - instant complaint has been filed at a time when no cause of action was available to the opposite party - HELD THAT - The petitioner no. 1 company is ready to pay to the opposite party the amount of the cheque dishonoured, (in respect whereof the present proceeding has been initiated) by the said demand draft. The impugned proceeding is a gross abuse of the process of court which if allowed to continue for a single day more beyond the stage it has already reached, will degenerate itself into a weapon of harassment and persecution and as such the same is liable to be quashed for the ends of justice - That it is expedient in the interest of justice, to uphold the dignity of law that the impugned proceeding is quashed. Vide order dated 07.12.2018 the Learned Magistrate was pleased to take cognizance and issue process against the /accused petitioners. Considering all the materials on record, it is before this court that a deed of settlement between the parties, regarding all their dues has been filed before the NCLT - the matter therein has been withdrawn in accordance with the three settlement agreements with liberty to file appropriate applications for revival of the company petition at stage at which it was left of in case there is default. In the present case, the opposite party/complainant has not appeared in spite of due service. The order dated 18.06.2019 passed by the Learned Additional Chief Judicial Magistrate, Bidhannagar, North 24 Parganas, in Case No. C 5223 of 2018 is set aside, not being in accordance with law and the matter is remitted to the Learned Magistrate to dispose of the case in view of the settlement between the parties, by ensuring the presence of both sides, in the interest of Justice within one month from the date of communication of this order - Application disposed off.

Issues Involved:
1. Quashing of the proceeding under Section 138 of the Negotiable Instruments Act.
2. Rejection of the application for payment of the dishonoured cheque amount.
3. Vicarious liability under Section 141 of the Negotiable Instruments Act.
4. Compounding of the offence under Section 138 of the Negotiable Instruments Act.
5. Settlement between parties and its impact on the proceedings.

Detailed Analysis:

1. Quashing of the proceeding under Section 138 of the Negotiable Instruments Act:
The petitioners sought to quash the proceeding of Case No. C-5223 of 2018 under Section 138 of the Negotiable Instruments Act, pending before the Additional Chief Judicial Magistrate, Bidhannagar. The petitioners argued that the complaint was filed before the expiration of the statutory period of 15 days from the date of service of the demand notice, rendering the complaint premature and not maintainable in law.

2. Rejection of the application for payment of the dishonoured cheque amount:
The petitioners filed an application on 25.02.2019, expressing their readiness to pay the amount of the dishonoured cheque and prayed for the closure of the proceedings. The opposite party, however, refused to accept the payment, arguing that accepting the amount would affect the proceedings under the Insolvency and Bankruptcy Code, 2016, pending before the National Company Law Tribunal (NCLT), Kolkata Bench. The Magistrate found the opposite party's reasoning convincing and rejected the petitioners' application on 18.06.2019.

3. Vicarious liability under Section 141 of the Negotiable Instruments Act:
The petitioners contended that the complaint did not aver that the directors (petitioners nos. 2, 3, 4, and 5) were in charge of and responsible for the conduct of the company's business. They argued that mere designation as directors does not satisfy the requirement of Section 141, which must be strictly construed as it creates vicarious liability. The complainant failed to specify the roles of the directors in the dishonour of the cheque.

4. Compounding of the offence under Section 138 of the Negotiable Instruments Act:
The petitioners cited the Supreme Court's judgment in Meters and Instruments Private Limited v. Kanchan Mehta, which allows for the compounding of offences even without the complainant's consent if the cheque amount is paid. The petitioners argued that the Magistrate erred by not considering this precedent and failing to quash the proceedings despite their willingness to pay the cheque amount.

5. Settlement between parties and its impact on the proceedings:
The petitioners presented a supplementary affidavit showing a Deed of Settlement executed on 27.01.2022, indicating that the parties had settled their disputes. The NCLT, in its order dated 28.02.2022, recorded the settlement agreements and dismissed the insolvency petition with liberty to revive in case of default. The High Court noted that the opposite party did not appear despite due service and set aside the Magistrate's order dated 18.06.2019. The case was remitted to the Magistrate to dispose of in light of the settlement, ensuring the presence of both parties within one month.

Conclusion:
The High Court quashed the order dated 18.06.2019, directing the Magistrate to dispose of the case considering the settlement between the parties. The proceedings under Section 138 of the Negotiable Instruments Act were to be revisited, ensuring justice and compliance with the settlement terms. The revision petition was disposed of without any order as to costs, and all connected applications were also disposed of.

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