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TMI Blog2024 (6) TMI 700X X X X Extracts X X X X X X X X Extracts X X X X ..... h, the transactionproceedings have a tinge of criminal liability, then, on settling the entire liability in view of Section 147 of the Negotiable Instruments Act, the compounding of offences, on discharge of liability, appears to be genuine, is certainly is a step towards securing the ends of justice. It is relevant to observe that once the Respondent- Complainant who had initiated the proceedings under Section 138 of the Negotiable Instruments Act, 1881, has received his cake then, no useful purpose will be achieved in continuing the criminal proceedings against the accused-petitioner despite having discharged/ liquidated his liability. This Court on the basis of the material placed on record is satisfied that the petitioner-accused [Budhi Singh] and Respondent No.2-Complainant have settled the dispute and Respondent No.2-Complainant has no grudges against the petitioner-accused, who has liquidated/ discharged/remitted his liability in favour of the complainant in the proceedings under Section 138 of the Act. Petition disposed off. - Hon ble Mr. Justice Ranjan Sharma , Judge For the Petitioner: Mr. Nand Lal Thakur , Advocate For the Respondents: Mr. Ajit Sharma , Deputy Advocate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for 4 [a term which may be extended to two years ], or with fine which may extend to twice the amount of the cheque, or with both: Provided that nothing contained in this section shall apply unless (a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier; (b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice; in writing, to the drawer of the cheque, 5 [within thirty days] of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and (c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce under Section 138 primarily related to a civil wrong and the 2002 Amendment specifically made it compoundable. [Vinay Devanna Nayak v. Ryot Sewa Sahakari Bank Ltd., (2008) 2 SCC 305 : (2008) 1 SCC (Civ) 542 : (2008) 1 SCC (Cri) 351] The offence was also described as regulatory offence . The burden of proof was on the accused in view of presumption under Section 139 and the standard of proof was of preponderance of probabilities . [Rangappa v. Sri Mohan, (2010) 11 SCC 441 : (2010) 4 SCC (Civ) 477 : (2011) 1 SCC (Cri) 184]. The object of the provision was described as both punitive as well as compensatory. The intention of the provision was to ensure that the complainant received the amount of cheque by way of compensation. Though proceedings under Section 138 could not be treated as civil suits for recovery, the scheme of the provision, providing for punishment with imprisonment or with fine which could extend to twice the amount of the cheque or to both, made the intention of law clear. The complainant could be given not only the cheque amount but double the amount so as to cover interest and costs. Section 357(1)(b) CrPC provides for payment of compensation for the loss caused ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e given on affidavit, subject to the court summoning the person giving affidavit and examining him and the bank's slip being prima facie evidence of the dishonour of cheque, it is unnecessary for the Magistrate to record any further preliminary evidence. Such affidavit evidence can be read as evidence at all stages of trial or other proceedings. The manner of examination of the person giving affidavit can be as per Section 264 Cr.PC. The scheme is to follow summary procedure except where exercise of power under second proviso to Section 143 becomes necessary, where sentence of one year may have to be awarded and compensation under Section 357(3) is considered inadequate, having regard to the amount of the cheque, the financial capacity and the conduct of the accused or any other circumstances. 19. In view of the above, we hold that where the cheque amount with interest and cost as assessed by the Court is paid by a specified date, the Court is entitled to close the proceedings in exercise of its powers under Section 143 of the Act read with Section 258 Cr.P.C. As already observed, normal rule for trial of cases under Chapter XVII of the Act is to follow the summary procedure an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther criminal cases, cannot apply to these cases. 66. Likewise, in H.N. Jagadeesh v. R. Rajeshwari, (2019) 16 SCC 730, this Court again alluded to the quasi-criminal nature of the offence as follows: 7. The learned counsel for the respondent has submitted that in order to advance the cause of justice, such an approach is permissible and for this purpose he has relied upon the judgment of this Court in Zahira Habibulla H. Sheikh v. State of Gujarat. We are afraid that the ratio of the aforesaid judgment cannot be extended to the facts of this case, particularly when we find that the present case is a complaint case filed by the respondent under Section 138 of the Act and where the proceedings are also quasi-criminal nature . 67. A conspectus of these judgments would show that the gravamen of a proceeding under Section 138, though couched in language making the act complained of an offence, is really in order to get back through a summary proceeding, the amount contained in the dishonoured cheque together with interest and costs, expeditiously and cheaply. We have already seen how it is the victim alone who can file the complaint which ordinarily culminates in the payment of fine as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It has further been stated in the affidavit that he has received an amount of Rs.3,16,000/- along with interest of Rs.50,000/- from the appellant and he has no further claim against the appellant. It has also been stated in the said affidavit that respondent No. 1 has entered into the agreement with the appellant out of his own free will and without any coercion or undue pressure from the appellant. 10. Having perused the averments made in Criminal Misc. Petition No. 176956 of 2019 filed by the applicant-appellant, as also the statement made by respondent No. 1-complainant in the affidavit dated 08.11.2019, more particularly keeping in view the settlement arrived at between the parties, we hereby allow the application(s) and set aside the conviction and sentence of two years' rigorous imprisonment with fine of Rs.5,000/- awarded to the appellant under Section 138 of the Negotiable Instruments Act, 1881 by the trial court as affirmed by the appellate court and the High Court. 5(iii). The Hon ble Apex Court while dealing with the object of the scope of Section 138 and the provision of compounding in Section 147 of the Negotiable Instruments Act, has held as under in (2021) 6 Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transactions. The amendment was intended to create an atmosphere of faith and reliance on banking system. Therefore, while considering the question of applicability of Section 138 of the Act to a situation presented by the facts of the present case, it is necessary to keep the objects of the legislation in mind. If a party is allowed to use a cheque as a mode of deferred payment and the payee of the cheque on the faith that he will get his payment on the due date accepts such deferred payment by way of cheque, he should not normally suffer on account of non-payment. The faith, which the legislature has desired that such instruments should inspire in commercial transactions would be completely lost if parties are as a matter of routine allowed to interdict payment by issuing instruction to banks to stop payment of cheques. In today's world where use of cash in day-to-day life is almost getting extinct and people are using negotiable instruments in commercial transactions and plastic money for their daily needs as consumers, it is all the more necessary that people's faith in such instruments should be strengthened rather than weakened. Provisions contained in Sections 138 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able instruments in issuing cheques without sufficient funds or with a view to inducing the payee or holder in due course to act upon it. It thus seeks to promote the efficacy of bank operations and ensures credibility in transacting business through cheques. In such matters, therefore, normally compounding of offences should not be denied. Presumably, Parliament also realised this aspect and inserted Section 147 by the Negotiable Instruments (Amendment and Miscellaneous Provisions) Act, 2002 (Act 55 of 2002). The said Section reads thus: 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. 56. Damodar S. Prabhu v. Sayed Babalal H., (2010) 5 SCC 663 is an important judgment of three Hon ble Judges of this Court. This judgment dealt, in particular, with the compounding provision contained in Section 147 of the Negotiable Instruments Act. Setting out the provision, the Court held: (SCC pp.668-70, paras 10-12, 15-18 and 21) 10. At present, we are of course concerned with Section 147 of the Act, which reads as follows: 147. Offences to be compoundable. Not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... late forum. However, Section 147 of the aforesaid Act does not bar the parties from compounding an offence under Section 138 even at the appellate stage of the proceedings. Accordingly, we find no reason to reject the application under Section 147 of the aforesaid Act even in a proceeding under Article 136 of the Constitution. 16. It is evident that the permissibility of the compounding of an offence is linked to the perceived seriousness of the offence and the nature of the remedy provided. On this point we can refer to the following extracts from an academic commentary [cited from: K.N.C. Pillai, R.V. Kelkar's Criminal Procedure, Fifth Edn. (Lucknow: Eastern Book Company, 2008): 17.2. Compounding of offences. A crime is essentially a wrong against the society and the State. Therefore any compromise between the accused person and the individual victim of the crime should not absolve the accused from criminal responsibility. However, where the offences are essentially of a private nature and relatively not quite serious, the Code considers it expedient to recognise some of them as compoundable offences and some others as compoundable only with the permission of the court. 17. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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 to 20% of the cheque amount. 57. This judgment was followed by a Division Bench of this Court in JIK Industries Ltd. v. Amarlal V. Jumani, (2012) 3 SCC 255, stating: 68. It is clear from a perusal of the aforesaid Statement of Objects and Reasons that offence under the NI Act, which was previously non-compoundable in view of Section 320 sub- section (9) of the Code ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the cheque amount and may extend to twice the amount of the cheque (Section 138) thereby rendering Section 357(3) virtually infructuous insofar as cheque dishonour cases are concerned. (ii) The provision enabling a First Class Magistrate to levy fine exceeding Rs 5000 (Section 143) notwithstanding the ceiling to the fine, as Rs 5000 imposed by Section 29(2) of the Code. (iii) The provision relating to mode of service of summons (Section 144) as contrasted from the mode prescribed for criminal cases in Section 62 of the Code. (iv) The provision for taking evidence of the complainant by affidavit (Section 145) which is more prevalent in civil proceedings, as contrasted from the procedure for recording evidence in the Code. (v) The provision making all offences punishable under Section 138 of the Act compoundable. 17. The apparent intention is to ensure that not only the offender is punished, but also ensure that the complainant invariably receives the amount of the cheque by way of compensation under Section 357(1)(b) of the Code. Though a complaint under Section 138 of the Act is in regard to criminal liability for the offence of dishonouring the cheque and not for the recovery of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... veral remedies, Section 138 of the Act is intended to prevent dishonesty on the part of the drawer of negotiable instrument to draw a cheque without sufficient funds in his account maintained by him in a bank and induces the payee or holder in due course to act upon it. Therefore, once a cheque is drawn by a person of an account maintained by him for payment of any amount or discharge of liability or debt or is returned by a bank with endorsement like (i) refer to drawer, (ii) exceeds arrangements, and (iii) instruction for stop payment and like other usual endorsement, it amounts to dishonour within the meaning of Section 138 of the Act. Therefore, even after issuance of notice if the payee or holder does not make the payment within the stipulated period, the statutory presumption would be of dishonest intention exposing to criminal liability. xxx xxx xxx 10. However, in the interest of equity, justice and fair play, we deem it appropriate to direct the respondents to make the payment to the appellant by issuing a demand draft in their favour for a sum of Rs 5 lakhs, which would be treated as an overall amount including interest and compensation towards the cheque for which stop-p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 07.12.2023 [Annexure P-2], the petitioner-accused [Budhi Singh], is suffering custody in Central Jail Mandi [District Mandi] [H.P.], till day. 10. Perusal of the Compromise Deed dated 26.04.2023 [Annexure P-4], reveals that the petitioner - accused through his father-Nokhu Ram have compromised the matter after remitting the entire compensation of Rs.2,00,000/- [Rupees Two Lakh], in favour of the Respondent No.2-Complainant [Netar Singh]. In order to test the veracity of the compromise deed [Annexure P-4], supra, the Respondent- Complainant [Netar Singh], has deposed before this Court on 08.05.2024, that he has received the entire compensation from the petitioner-accused [Budhi Singh], and in relation to the cheque(s), in issue in the instant case and nothing is to be claimed thereto. 11. Notably, the object of Section 147 of the Negotiable Instruments Act, 1881, is that in case the accused under the aforesaid enactment remits/ discharges or liquidates his liability then such a person can be absolved of the criminal actionprosecution by permitting compounding of offence in proceedings under Section 138 of the Act. In these circumstances, once the petitioner - accused has discharged/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise, in a modern society, is the sine qua non of harmony and orderly behavior. It is the soul of justice and if the power under Section 482 of the Cr.P.C or power under other statutes, including Section 147 of the Negotiable Instruments Act, 1881, is used to enhance such a compromise which, in turn, enhances the social amity and reduces friction, then it truly is finest hour of justice . 13. As observed by the Hon'ble Supreme Court in Mrs. Shakuntala Sawhney vs. Mrs. Kaushalya Sawhney and others, 1980 (1) SCC 63, while summing up the essence of compromise, it observed as under:- .The finest hour of justice arrives propitiously when parties, despite falling apart, bury the hatchet and weave a sense of fellowship of reunion. 14. In the entirety of the facts and circumstances and the mandate of law, referred to above, this Court on the basis of the material placed on record is satisfied that the petitioner-accused [Budhi Singh] and Respondent No.2-Complainant have settled the dispute and Respondent No.2-Complainant has no grudges against the petitioner-accused, who has liquidated/ discharged/remitted his liability in favour of the complainant in the proceedings under Section 138 o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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