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TMI Blog2012 (2) TMI 269X X X X Extracts X X X X X X X X Extracts X X X X ..... se of compounding of an offence under N.I. Act in view of Section 147 of the same. However, the main principle of such compounding, namely, the consent of the person aggrieved or the person injured or the complainant cannot be wished away nor can the same be substituted by virtue of Section 147 of N.I. Act. For the reasons aforesaid - Appeal stands dismissed. - SLP (CRL.) NOS. 4446 TO 4454, 4456 & 4457 OF 2009 AND 843-862, 6643-6651 OF 2010, CRIMINAL APPEAL NOs. 263 to 303 OF 2012` - - - Dated:- 1-2-2012 - ASOK KUMAR GANGULY, JAGDISH SINGH KHEHAR, JJ. JUDGMENT Asok Kumar Ganguly, J. Leave granted. 2. This group of appeals were heard together as they involve common questions of law. There are some factual differences but the main argument by the appellant(s) in this matter was advanced by Mr. Chander Uday Singh, Senior Advocate on behalf of the Sharp Industries Limited in SLP (Crl.) No.6643-6651 of 2010 and the facts are taken mostly from the said case. 3. The learned counsel assailed the judgment of the High Court wherein by a detailed judgment High Court dismissed several criminal writ petitions which were filed challenging the processes which were issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority as required under the law. Thereafter, on 17.11.2005 another company petition with a fresh scheme (Company petition No. 460 of 2005) was filed. After the said company petition was filed all proceedings which were initiated by different companies against the appellant(s) came to be stayed by the High Court. In view of the aforesaid scheme the appellant company filed application for compounding under Section 147 of the N.I. Act read with Section 320 of the Criminal Procedure Code (hereinafter, 'the Code') and Section 391 of the Companies Act. However, the respondents opposed the said prayer of the petitioner and by an order dated 19th January, 2007, the learned Chief Judicial Magistrate, Ahmednagar rejected the application filed by the appellant for termination of the proceedings inter alia on the ground that the learned Magistrate has no power to quash or terminate the proceedings. 5. Being aggrieved by the said order of the Magistrate, the appellants filed writ petitions before the High court. 6. Similar petitions were filed on 6.7.2009 by JIK Industries Limited and another. All those petitioners were dismissed by the High court on 18.3.2010 in view of an order dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and is a dissenting creditor. 9. The learned counsel for the respondents (in Sharp Industries case) on the other hand submitted that in the petition which was filed before the Magistrate on behalf of the Sharp Industries the prayer was only for quashing of the criminal proceedings and there was no prayer for compounding of the offences. While the Magistrate refused to quash the said proceeding then while challenging the same in the High Court the prayer for compounding was made for the first time. The learned counsel for the respondents (in the case of JIK Industries) has drawn the attention of this Court to the order dated 3.10.2006 passed by the Metropolitan Magistrate, XII Court Bandra, Mumbai whereby the learned Magistrate passed an order on the application of the accused, the appellant, for compounding of offences under Section 138. By the said order the learned Magistrate rejected the prayer for compounding made by the appellant(s) under Section 147 of the N.I. Act. 10. It was also pointed out by some of the respondents that after the High Court passed the impugned order whereby the prayer for compounding by the appellant(s) was rejected and the appellant(s) were giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ratio of the aforesaid judgment, this Court cannot accept the appellant's contention that the scheme under Section 391 of the Companies Act will have the effect of automatically compounding the offence under the N.I. Act. 14. The learned counsel for the appellant(s) also relied on various other judgments to show the effect of the scheme under Section 391 of the Companies Act. Reliance was also placed on the decision of this Court in the case of S.K. Gupta and another v. K.P. Jain and another reported in 1979 (3) SCC 54. In the case of S.K. Gupta ( supra ) also the ratio in the case of M/s. J.K. (Bombay) Private Ltd. ( supra ) was relied upon and it was held that a scheme under Section 391 of the Companies Act has a statutory force and is also binding on the dissenting creditor. Various other questions were discussed in the said judgment with which we are not concerned in this case. 15. The scheme under Section 391 of the Companies Act has been very elaborately dealt with by this Court in the case of Miheer H. Mafatlal v. Mafatlal Industries Ltd. reported in AIR 1997 SC 506. From a perusal of the various principles laid down in Mafatlal ( supra ), it is clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med by the offender that the offence has been compounded. Thus, compounding of an offence cannot be achieved indirectly by the sanctioning of a scheme by the Company Court. 19. The learned counsel also relied on a few other judgments in order to contend the scheme of compromise operates a statutory consent and the same will have the effect of restructuring legally enforceable debts or liabilities of the company. In support of the said contention reliance was placed on the judgment of this Court in the case of Balmer Lawrie Workers' Union, Bombay and another v. Balmer Lawrie Co. Ltd. and others reported in 1984 (Supp.) SCC 663. That decision related to a settlement reached in a proceeding under Industrial Disputes Act in which a representative union was a party. The Court held that such a settlement is binding on all the workmen of the undertaking. This Court fails to understand the application of this ratio to the facts of the present case. 20. Reliance was also placed by the learned counsel for the appellant(s) on the decision of this Court in the case of Shivanand Gaurishankar Baswanti v. Laxmi Vishnu Textile Mills and others reported in [2008] 13 SCC 323. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cooperative Bank Limited v. Nimesh B. Thakore reported in [2010] 3 SCC 83. This Court in Mandvi (supra) discussed the scope of N.I. Act including the first amendment to the Act inserted under Chapter XVII in the Act. This Court looked into the Statement of Objects and Reasons introducing the amendment and noted the rationale for introduction of Section 147 of N.I. Act. Section 147 of N.I. Act made the offences under the said Act compoundable. The Court noted that from the Statement and Objects and Reasons it is clear that the Parliament became aware of the fact that the courts are not able to dispose of, in a time bound manner, large number of cases coming under the said Act in view of the procedure in the Act. In order to deal with such situation, several amendments were introduced and one of them is making offences under the said Act compoundable. Section 147 of the N.I. Act is as follows: "147. Offences to be compoundable. - Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), every offence punishable under this Act shall be compoundable." 24. This Court fails to understand the applicability of the principle laid down in Mandvi (s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "THE GUIDELINES ( i ) In the circumstances, it is proposed as follows: ( a ) That directions can be given that the writ of summons be suitably modified making it clear to the accused that he could make an application for compounding of the offences at the first or second hearing of the case and that if such an application is made, compounding may be allowed by the court without imposing any costs on the accused. ( b ) If the accused does not make an application for compounding as aforesaid, then if an application for compounding is made before the Magistrate at a subsequent stage, compounding can be allowed subject to the condition that the accused will be required to pay 10% of the cheque amount to be deposited as a condition for compounding with the Legal Services Authority, or such authority as the court deems fit. ( c ) Similarly, if the application for compounding is made before the Sessions Court or a High Court in revision or appeal, such compounding may be allowed on the condition that the accused pays 15% of the cheque amount by way of costs. ( d ) Finally, if the application for compounding is made before the Supreme Court, the figure would increase t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Civil Court have been compromised. The FIRs were filed in 1987-1988 and the investigation had not been completed till 1991. On those facts the Court, rendering the judgment in July, 1996, felt that having regard to the lapse of time and also having regard to the fact that there is a compromise decree satisfying the Banks' dues, there is no purpose in allowing the criminal prosecution to proceed. On those consideration, this Court, in the 'special facts of the case', did not interfere with the order of the High Court dated 23.12.1992 whereby the criminal prosecution was quashed. 31. It is, therefore, clear that no legal proposition has been laid down on the compounding of offence in Duncans Agro (supra). This Court proceeded on the peculiar facts of the case discussed above. Therefore, the said decision cannot be an authority to contend that by mere sanctioning of a scheme, the offences committed by the appellant company, prior to the scheme, stand automatically compounded. 32. Reliance was also placed on the decision of this Court in the case of Hira Lal Hari Lal Bhagwati v. CBI, New Delhi reported in [2003] 5 SCC 257. In that case reliance was placed on the decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise could be a futile exercise. Therefore, the said decision in Nikhil Merchant (supra) was rendered in the peculiar facts of the case and it was done in exercise of quashing power by the Court. It was not a case of automatic compounding of an offence on the sanctioning of a scheme under Section 391 of the Companies Act. 36. Mr. K. Parameshwar, learned counsel appearing for the respondent in special leave petition Nos.4445-4454/2009 argued that the impugned judgment of the High Court is based on correct principles inasmuch as the effect of a Scheme under Section 391 of the Companies Act can only be made applicable to a civil proceeding and it cannot affect criminal liability. Learned counsel further submitted that under the criminal law there is nothing known as deemed compounding. It was further urged that under the very concept of compounding, it cannot take place without the explicit consent of the complainant or the person aggrieved. It was also urged that in the instant case the offence has been completed prior to the scheme under Section 391 of the Companies Act was sanctioned by the Court. 37. Learned counsel distinguished between a Scheme under Section 391 and an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt, compound such offence. 44. Therefore, representation of the person compounding has been statutorily provided in all situations. 45. Sub-section (9) of Section 320 which is relevant in this connection is set out below: "No offence shall be compounded except as provided by this section." 46. Section 147 of the Negotiable Instrument Act reads as follows: " 147. Offences to be compoundable. Notwithstanding anything contained in the code of Criminal Procedure, 1973 (2 of 1974), every offence punishable under this Act shall be compoundable." 47. Relying on the aforesaid non-obstante clause in Section 147 of the N.I. Act, learned counsel for the appellant argued that a three-Judge Bench decision of this Court in Damodar (supra), held that in view of non-obstante clause in Section 147 of N.I. Act, which is a special statute, the requirement of consent of the person compounding in Section 320 of the Code is not required in the case of compounding of an offence under N.I. Act. This Court is unable to accept the aforesaid contention for various reasons which are discussed below. 48. The insertion of a non-obstante clause is a well known legislative device and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntral Bank (supra) held as follows:- " When the section containing the said clause does not refer to any particular provisions which it intends to override but refers to the provisions of the statute generally, it is not permissible to hold that it excludes the whole Act and stands all alone by itself. 'A search has, therefore, to be made with a view to determining which provision answers the description and which does not'." (Para 105, page 132 of the report) 55. Section 147 in N.I. Act came by way of amendment. From the Statement of Objects and Reasons of Negotiable Instrument (Amendment) Bill 2001, which ultimately became Act 55 of 2002, these amendments were introduced to deal with large number of cases which were pending under the N.I. Act in various Courts in the country. Considering the said pendency, a Working Group was constituted to review Section 138 of the N.I. Act and make recommendations about changes to deal with such pendency. 56. Pursuant to the recommendations of the Working Group, the aforesaid Bill was introduced in Parliament and one of the amendments introduced was "to make offences under the Act compoundable". 57. Pursuant thereto Section 147 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laid down in Section 320 of the Code will apply to compounding of an offence under N.I. Act. 65. In Vinay Devanna Nayak v. Ryot Sewa Sahakari Bank Limited reported in [2008] 2 SCC 305, this Court also considered the object behind the insertion of Section 138 of the N. I. Act by Banking Financial Institutions and Negotiable Instruments (Amendment) Act 1988. This Court held:- " The incorporation of the provision is designed to safeguard the faith of the creditor in the drawer of the cheque, which is essential to the economic life of a developing country like India. The provision has been introduced with a view to curb cases of issuing cheques indiscriminately by making stringent provisions and safeguarding interest of creditors." (para 16, page 309 of the report) 66. The Court also looked into the scope of Section 147 of the N.I. Act, and held after considering the two sections, that there is no reason to refuse compromise between the parties. But the Court did not hold that in view of Section 147, the procedure relating to compounding under Section 320 of the Code has to be given a go bye. 67. Subsequently in the case of R. Rajeshwari v. H. N. Jagadish report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jured by a crime, but also all other members of the community, to prosecute, it is criminal for anyone to make such a composition; even though he suffered no injury and indeed has no concern with the crime." 71. Russell on Crime (Twelfth Edition) also describes:- "Agreements not to prosecute or to stifle a prosecution for a criminal offence are in certain cases criminal". (Chapter 22 Compounding Offences, page 339) 72. Later on compounding was permitted in certain categories of cases where the rights of the public in general are not affected but in all cases such compounding is permissible with the consent of the injured party. 73. In our country also when the Criminal Procedure Code, 1861 was enacted it was silent about the compounding of offence. Subsequently, when the next Code of 1872 was introduced it mentioned about compounding in Section 188 by providing the mode of compounding. However, it did not contain any provision declaring what offences were compoundable. The decision as to what offences were compoundable was governed by reference to the exception to Section 214 of the Indian Penal Code. The subsequent Code of 1898 provided Section 345 indicating the ..... 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