2010 (5) TMI 380 - SC - Indian Laws

Graded scheme of imposing costs on parties who unduly delay compounding of the offence Held that - Any costs imposed in accordance with these guidelines should be deposited with the Legal Services Authority operating at the level of the Court before which compounding takes place. For instance, in case of compounding during the pendency of proceedings before a Magistrate s Court or a Court of Sessions, such costs should be deposited with the District Legal Services Authority. Likewise, costs imposed in connection with composition before the High Court should be deposited with the State Legal Services Authority and those imposed in connection with composition before the Supreme Court should be deposited with the National Legal Services Authority.

Issues Involved:
1. Compounding of offence under Section 138 of the Negotiable Instruments Act, 1881.
2. Legislative intent and judicial interpretation of Section 147 of the Act.
3. Guidelines for the compounding of offences at various stages of litigation.
4. Control of multiple complaints related to the same transaction.
5. Judicial law-making and legislative vacuum.

Issue-wise Detailed Analysis:

1. Compounding of offence under Section 138 of the Negotiable Instruments Act, 1881:
The appeals pertain to litigation involving the offence under Section 138 of the Negotiable Instruments Act, 1881, concerning the dishonour of cheques. The parties involved have reached a settlement and prayed for the compounding of the offence as contemplated by Section 147 of the Act. Consequently, the Court allowed the compounding of the offence and set aside the appellant's conviction in each of the impugned judgments.

2. Legislative intent and judicial interpretation of Section 147 of the Act:
Chapter XVII, comprising Sections 138 to 142, was inserted into the Act by the 1988 Amendment to enhance the acceptability of cheques in settlement of liabilities and to deter the high incidence of cheque dishonour. Section 147, inserted by the 2002 Amendment, makes offences under the Act compoundable. The Court noted that the legislative intent was to provide a strong criminal remedy to ensure the reliability of negotiable instruments and that the provision for imposing a fine serves a compensatory purpose.

3. Guidelines for the compounding of offences at various stages of litigation:
The Court recognized the need for guidelines to disincentivize delayed compounding of offences. The guidelines proposed by the learned Attorney General were accepted, which include:
- No costs for compounding at the first or second hearing.
- 10% of the cheque amount as costs if compounded at a subsequent stage before the Magistrate.
- 15% of the cheque amount as costs if compounded before the Sessions Court or High Court.
- 20% of the cheque amount as costs if compounded before the Supreme Court.
These costs are to be deposited with the Legal Services Authority operating at the level of the Court where compounding takes place.

4. Control of multiple complaints related to the same transaction:
To prevent harassment and prejudice due to multiple complaints in different jurisdictions, the Court directed that complainants must disclose on a sworn affidavit that no other complaint has been filed in any other Court in respect of the same transaction. If multiple complaints are found, orders for transfer to the first Court should be given, generally by the High Court, with heavy costs imposed on the complainant.

5. Judicial law-making and legislative vacuum:
The Court acknowledged the potential view of judicial endorsement of guidelines as judicial law-making. However, given the legislative vacuum in Section 147 regarding the compounding process, the Court saw no hurdle in endorsing guidelines to discourage delayed compounding. The graded scheme for imposing costs aims to encourage early-stage compounding, thus reducing the burden on the judicial system. The Court emphasized that bona fide litigants should contest proceedings to their logical end and that the competent Court could adjust costs based on specific case circumstances, recording reasons for any variance.

Conclusion:
The appeals were disposed of with the compounding of the offence under Section 138, setting aside the appellant's conviction. The Court provided guidelines for the compounding process to deter delayed settlements and directed measures to control multiple complaints related to the same transaction. The decision addressed the legislative vacuum in Section 147, balancing the need for judicial intervention with the principles of justice and efficiency.

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