2024 (5) TMI 322 - SC - Indian Laws

Dishonour of Cheque - Cheating - wrongful retention of hard-earned money of the complainant - Compoundable offences - frustration of settlement - appellant could not pay the complainant on the deadlines stipulated in the said settlement - HELD THAT - As per section 147 of the NI Act, all offences punishable under the Negotiable Instruments Act are compoundable. However, unlike Section 320 of CrPC, the NI Act does not elaborate upon the manner in which offences should be compounded. To fill up this legislative gap, three Judges Bench of this Court in DAMODAR S. PRABHU VERSUS SAYED BABALAL H. 2010 (5) TMI 380 - SUPREME COURT , passed some guidelines under Article 142 of the Constitution of India regarding compounding of offence under Section 138 of NI Act. But most importantly, in that case, this Court discussed the importance of compounding offence under Section 138 of the NI Act and also the legislative intent behind making the dishonour of cheque a crime by enacting a special law. This Court has time and again reiterated that in cases of section 138 of NI Act, the accused must try for compounding at the initial stages instead of the later stage, however, there is no bar to seek the compounding of the offence at later stages of criminal proceedings including after conviction, like the present case - In the case at hand, initially, both sides agreed to compound the offence at the appellate stage but the appellant could not pay the amount within the time stipulated in the agreement and the complainant now has shown her unwillingness towards compounding of the offence, despite receiving the entire amount. The appellant has paid the entire Rs.1.55 crore and further Rs.10 lacs as interest. In the present case, the appellant has already been in jail for more than 1 year before being released on bail and has also compensated the complainant. Further, in compliance of the order dated 08.08.2023, the appellant has deposited an additional amount of Rs.10 lacs. There is no purpose now to keep the proceedings pending in appeal before the lower appellate court. Here, we would like to point out that quashing of a case is different from compounding - if the continuance of criminal appeals pending before Additional Sessions Judge against the appellant s conviction, is allowed then it would defeat all the efforts of this Court in the last year where this Court had monitored this matter and ensured that the complainant gets her money back. It is a fact that the appellant failed to procure and supply the machine even after taking the advance money from the complainant but there is nothing on record to show that the appellant had any ill intention of cheating or defrauding the complainant from the very inception. The transaction between the parties was purely civil in nature which does not attract criminal law in any way - Even though complainant is unwilling to compound the case but, considering the totality of facts and circumstances of the present case which we have referred above, we are of the considered view that these proceedings must come to an end. The impugned order is set aside - appeal allowed.

Summary

Issues Involved:
1. Conviction under Section 138 of the Negotiable Instruments Act (NI Act).
2. Criminal proceedings under Sections 406, 420, and 120B of the Indian Penal Code (IPC).
3. Settlement and compounding of offences.
4. Quashing of criminal proceedings and appeals.

Summary:

Issue 1: Conviction under Section 138 of the NI Act
- The appellant was convicted by the trial court u/s 138 of the NI Act and sentenced to 2 years of rigorous imprisonment along with a direction to pay the cheque amount.
- An appeal led to a settlement in Lok Adalat, where the appellant agreed to repay Rs.1.55 crore within 16 months, failing which the settlement would be frustrated.
- The appellant failed to comply with the settlement terms, and the Additional Sessions Judge declared the settlement frustrated.
- Despite subsequent payments, the trial court refused to accept a Demand Draft for the remaining Rs.20 lacs due to non-compliance with the Supreme Court's order.

Issue 2: Criminal Proceedings under Sections 406, 420, and 120B of IPC
- The appellant faced charges u/s 406, 420, and 120B of IPC for allegedly cheating the complainant by not supplying a machine after taking an advance payment.
- The Supreme Court found no merit in the allegations, stating the transaction was civil in nature and did not attract criminal law.

Issue 3: Settlement and Compounding of Offences
- The appellant paid the entire amount of Rs.1.55 crore and an additional Rs.10 lacs towards interest.
- The complainant refused to consent to the compounding of the offence despite receiving the entire amount.
- The Supreme Court noted that u/s 147 of the NI Act, offences are compoundable but require the complainant's consent, which was not given in this case.
- The Court cited Damodar S. Prabhu v. Sayed Babalal H. and Kanchan Mehta cases, emphasizing the compensatory aspect over the punitive aspect in cheque dishonour cases.

Issue 4: Quashing of Criminal Proceedings and Appeals
- The Supreme Court exercised its powers u/s Article 142 of the Constitution to quash all pending criminal appeals and proceedings against the appellant.
- The Court highlighted that continuing the appeals would defeat the purpose of ensuring the complainant gets her money back.
- The Court directed the trial court to hand over the Demand Drafts totaling Rs.30 lacs to the complainant.

Conclusion:
- The Supreme Court allowed the appeal, set aside the High Court's impugned order, quashed all criminal proceedings arising out of FIR No.35 of 2014, and quashed the pending criminal appeals against the appellant's conviction u/s 138 of the NI Act.
- The Court directed the trial court to hand over the Demand Drafts to the complainant. Pending applications were disposed of.