310 Case Analysis
310 Case Analysis
310 Case Analysis
By-
AYUSH GARG
1st YEAR, B.B.A.LL.B (Hons.)
NATIONAL LAW UNIVERSITY ODISHA, CUTTACK
Email- [email protected]
www.probono-india.in
WHAT IS COMPOUNDING?
Compounding the crime in common legal jargon implies that the victim and the accused resolve
their differences mutually, cordially and peacefully, putting a halt to the subsequent proceedings.
Compounding is an act under which a complainant decides not to sue the victim for
compensation or some other remuneration. The consequence is a waiver of the sentence for the
accused. Compounding means a split of satisfaction in favor of the sufferer, although it does not
need to be financial; it suffices if it serves as an incentive for the victim to avoid suing the
perpetrators and to be assured that they want a mutual settlement of the conflict without any
coercion or compulsion from any quarter. Section 147 of the Negotiable Instrument Act deals
with the offences to be compoundable. It states that “Notwithstanding anything contained in the
Code of Criminal Procedure, 1973 (2 of 1974), every offence punishable under this Act shall be
compoundable.”
1
(2000) 1 SCC 672.
2
verdict of the court on sentencing could not be interfered with because it was accessible to the
parties to create a settlement earlier and that they did not do so. The bench had commented that
“taking into consideration the nature of the offence in question and the fact that the complainant
and the accused have already entered into a compromise, it would be appropriate to grant
permission in the peculiar facts and circumstances of the case, to compound the offence”.
Similar reliefs were granted in Sivasankaran v. State of Kerala & Anr. 2, Kishore Kumar v.
J.K. Corporation Ltd.3 and Sailesh Shyam Parsekar v. Baban4, among other cases.
2
(2002) 8 SCC 164
3
(2004) 12 SCC 494
4
(2005) 4 SCC 162.
3
offences punished under legislation other than the Indian Penal Code cannot be compounded as
well. However, since a specific law provision has been introduced in Section 147, the same is
going to circumvent the influence of Section 320(9) of the CRPC5.
In Vinay Devanna Nayak v. Ryot Sewa Sahakari Bank Ltd. 6, “it was examined whether an
offence punishable under Section 138 of the Act which is a special law can be compounded.
After taking note of a divergence of views in past decisions, the Apex Court took the position
that this provision is intended to prevent dishonesty on the part of the drawer of negotiable
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)”.7
The compounding of the offence at later stages of litigation in cheque bouncing cases has also
been held to be permissible in a decision of the Apex Court, reported as K.M. Ibrahim v. K.P.
Mohammed & Anr.8, wherein Kabir, J. has noted “that as far as the nonobstante clause included
in Section 147 of the 1881 Act is concerned, the 1881 Act being a special statute, the provisions
of Section 147 will have an overriding effect over the provisions of the Code relating to
compounding of offences. It is true that the application under Section 147 of the Negotiable
Instruments Act was made by the parties after the proceedings had been concluded before the
Appellate 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, no reason is found to reject the application under Section 147 of the aforesaid Act
even in a proceeding under Article 136 of the Constitution”.9
5
Prefatory Note, Statement of Objects and Reasons, Negotiable Instruments (Amendment and
Miscellaneous Provisions) Act, 2002.
6
(2008) 2 SCC 305.
7
ibid.
8
2009 (14) SCC 262.
9
ibid.
4
It would also be pertinent to refer to the Apex Court's decision in R. Rajeshwari v. H.N.
10
Jagadish wherein S.B. Sinha, J. while referring to Section 147 of the Act observed that
“Negotiable Instruments Act is a special Act and indisputably, the provisions of the Code of
Criminal Procedure, 1973 would be applicable to the proceedings pending before the courts for
trial of offences under the said Act. Stricto sensu, however, the table appended to Section 320 of
the Code of Criminal Procedure is not attracted as the provisions mentioned therein refer only to
provisions of the Penal Code and none other”.
Under the common law, compounding a felony was punishable as a misdemeanor. Many states
have enacted statutes that punish the offense as a felony. Compounding a misdemeanor is not a
crime. However, an agreement not to prosecute a misdemeanor is unenforceable as being
contrary to public policy. Criminal liability for compounding is pervasive in American law, at
least in theory. In forty-five states, the compounding of a crime may be prosecuted as a statutory
offense, in two others it apparently may be prosecuted as a common law offense 12. Compounding
has been abolished in the Republic of Ireland, England and Wales, New South Wales and in
Northern Ireland.
10
(2008) 4 SCC 82.
11
Boyce & Perkins, Criminal Law, 3rd ed. (1992) at 578.
12
Ayushi Tripathi, ‘compounding of offences’ (2019) Law times Journal <http://lawtimesjournal.in/compounding-
of-offences/> as accessed 20 April 2020.
5
REASONS FOR ISSUING GUIDELINES RELATED TO COMPOUNDING
Chapter XVII comprising Sections 138 to 142 was inserted into the Negotiable instrument Act
by the Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment)
Act, 1988 (66 of 1988). The primary aim for the entry into force of Section 138 was to create
confidence in the efficiency of banking systems and integrity of business processes by means of
negotiable instruments, eliminating the need for paper currency. It was planned to render the
drawer responsible for fines if cheques were to be rebound due to inadequate procedures by the
drawers with adequate protections to avoid abuse of honest drawers. If the cheque is dishonored
for insufficiency of funds in the drawer's account or if it exceeds the amount arranged to be paid
from that account, the drawer will be punished by a sentence of two years imprisonment or a
penalty that can correspond to two times the value of the cheque or both. It should be
remembered that the penal clause above was inserted into the Legislation in 1988 which brought
the detention period up to one year, which was extended up to two years after the act was
updated in 2002. It is therefore clear that the statutory purpose was to include an effective
criminal solution to prevent the alarmingly high rate of cheque dishonor. The threat of detention
for a term of up to two years, on the one side, offers a deterrent remedy; it is a more fundamental
compensation intention to levy a penalty that may surpass twice the value of a cheque. The
dishonor of a cheque is to be better characterized as a statutory violation that has been inserted in
the Law to protect the public interest and guarantee that such instruments are accurate.
The reality that the existence of a robust statutory redress has contributed to a substantial number
of cases related to the felony envisaged under Section 138 of the Act. Too much, that our
criminal justice institutions are being stunned by a shockingly high amount of instances
concerning the dishonor of cheques, particularly at magistrate level. Mr. Goolam E. Vahanvati,
Solicitor General Attorney- General for India while appearing as amicus curiae in this case
referred to the facts herein to show how participants involved in cheque bounce cases typically
try to compound the crime at a late point. It is easier to support the interests of justice if parties
are able to compound themselves as an early stage route to settle their disagreements rather than
to continue to several courts, thus creating unnecessary delays, expense, and pressure on behalf
of the judiciary. This is obviously a question of interest as Section 147 of the Act does not
indicate when the stage is suitable for the crime to be compounded and if the same should be
6
achieved either at the complainant's request or with the Court's permission 13. The educated
lawyer stressed the value of utilizing compounding as an effective way of increasing the
disposition of crimes. The learned attorney General recommended in this regard that the Court
could create such rules to prevent litigants from pursuing an unnecessarily late compounding of
the offence. In other words, judicial guidelines were required to enable litigants to opt out of
compounding in cheque bounce cases in the early stages of prosecutions and thereby reduce the
arrears.14
13
Damodar S. Prabhu versus Sayed Babalal H., (2010) 5 SCC 663.
14
(2010) 5 SCC 663.
15
ibid.
7
In Patri Mahesh v. State of Andhra Pradesh 16 the aspect of consent of the complainant again
cropped up for consideration. “It was argued that under Section 147 of the Act, every offence
punishable under the Act shall be compoundable and therefore, once the petitioner/accused
expressed his willingness to deposit the cheque amount, the case against him shall be withdrawn
irrespective of the fact whether the complainant consented for it or not. In a way, his contention
was that consent of the complainant is irrelevant for compounding the offence as soon as the
petitioner/accused is prepared to deposit the cheque amount. It was also contended that the
procedure contemplated under Section 320 of Criminal Procedure Code for compounding
offences cannot be adapted to the offences punishable under Section 138 of the Act. In support
of above contentions, reliance was placed on the judgment of Supreme Court in Damodar
S.Prabhu v. Sayed Babalal H17 Per contra; learned counsel appearing for the respondent-
complainant submitted that the consent of the complainant is essential for compounding the
offence under Section 147 of the Act and therefore, the trial Court is justified in dismissing the
application filed by the petitioner/ accused to the extent of withdrawing the complaint against
him. It was also contended by him that Section 147 does not contemplate the procedure for
compounding offences and therefore, the procedure contemplated under Section 320 CRPC is
required to be adopted”. In support of his submissions, reliance was placed on the judgment of
Supreme Court in JIK Industries Ltd. v. Amarlal V.Jumani 18 wherein it had been held that ,
“Section 147 of the Negotiable Instruments Act must be reasonably construed to mean that as a
result of the said Section the offences under Negotiable Instruments Act are made
compoundable, but the main principle of such compounding, namely, the consent of the person
aggrieved or the person injured or the complainant cannot be whisked away nor can the same be
substituted by virtue of Section 147 of Negotiable Instruments Act”.
The court after appraisal of the rival views expressed above held that “it is a settled proposition
of law that consent of the complainant is essential for compounding the offence under Section
138 of Negotiable Instruments Act and as the complainant is not consenting for withdrawal, the
trial Court is justified in dismissing the application. There is no flaw in the order passed by the
trial Court warranting interference of the Apex Court in exercise of power under Section 482
CRPC”
16
Criminal Petition No.5315 of 2010 decided on 27.08.2012.
17
(2010) 5 SCC 663.
18
(2012) 3 SCC 255.
8
JUDGMENT
GUIDELINES ON COMPOUNDING
(a) The Honorable Supreme Court made it clear 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.19”
(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.”20
(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.”21
(d) Finally, “if the application for compounding is made before the Supreme Court, the figure
would increase to 20% of the cheque amount.”
ON DEPOSITION OF FINE
The Supreme Court clarified “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
19
Damodar S.Prabhu v. Sayed Babalal H. (2010) 5 SCC 663.
20
Ibid.
21
ibid.
9
and those imposed in connection with composition before the Supreme Court should be
deposited with the National Legal Services Authority”22.
ON MULTIPLE COMPLAINTS
The Supreme Court said “we are also in agreement with the Learned Attorney General's
suggestions for controlling the filing of multiple complaints that are relatable to the same
transaction. It was submitted that complaints are being increasingly filed in multiple jurisdictions
in a vexatious manner which causes tremendous harassment and prejudice to the drawers of the
cheque. For instance, in the same transaction pertaining to a loan taken on an installment basis to
be repaid in equated monthly installments, several cheques are taken which are dated for each
monthly installment and upon the dishonor of each of such cheques, different complaints are
being filed in different courts which may also have jurisdiction in relation to the complaint. In
light of this submission, we direct that it should be mandatory for the complainant to disclose
that no other complaint has been filed in any other court in respect of the same transaction. Such
a disclosure should be made on a sworn affidavit which should accompany the complaint filed
under Section 200 of the CRPC. If it is found that such multiple complaints have been filed,
orders for transfer of the complaint to the first court should be given, generally speaking, by the
High Court after imposing heavy costs on the complainant for resorting to such a practice. These
directions should be given effect prospectively”.
CONCLUDING REMARKS
The Apex Court while laying down the above guidelines also stated that “the judicial
endorsement of the above quoted guidelines could be seen as an act of judicial law-making and
therefore an intrusion into the legislative domain. It must be kept in mind that Section 147 of the
Act does not carry any guidance on how to precede with the compounding of offences under the
Act. The scheme contemplated under Section 320 of the CRPC cannot be followed in the strict
sense. In view of the legislative vacuum, there is no hurdle to the endorsement of some
suggestions which have been designed to discourage litigants from unduly delaying the
composition of the offence in cases involving Section 138 of the Act. The graded scheme for
imposing costs is a means to encourage compounding at an early stage of litigation. In the status
22
ibid.
10
quo, valuable time of the Court is spent on the trial of these cases and the parties are not liable to
pay any Court fee since the proceedings are governed by the Code of Criminal Procedure, even
though the impact of the offence is largely confined to the private parties. Even though the
imposition of costs by the competent court is a matter of discretion, the scale of costs has been
suggested in the interest of uniformity. The competent Court can of course reduce the costs with
regard to the specific facts and circumstances of a case, while recording reasons in writing for
such variance. Bona fide litigants should of course contest the proceedings to their logical end.
Even in the past, the Court has used its power to do complete justice under Article 142 of the
Constitution to frame guidelines in relation to subject-matter where there was a legislative
vacuum”.
It has been clarified by the Hon’ble Supreme court in the above case that the above scale is
indicative and discretion is vested in the court dealing with the matter. In other words the court
dealing with the matter has to take into account facts of each case before it, for imposing costs
which will be deposited with appropriate Legal services authority.
The judgment indicates that dishonest drawers must be made to pay for not only the cheque
amount, but also compensation for the extended litigation. The judgment of Supreme Court
ensures less litigation in 138 cases and also expeditious disposal of 138 cases.
REFERENCES
11
O.P. Dholakia v. State of Haryana, (2000) 1 SCC 672.
Sivasankaran v. State of Kerala & Anr.,(2002) 8 SCC 164.
Kishore Kumar v. J.K. Corporation Ltd. (2004) 12 SCC 494.
Sailesh Shyam Parsekar v. Baban, (2005) 4 SCC 162.
Vinay Devanna Nayak v. Ryot Sewa Sahakari Bank Ltd., (2008) 2 SCC 305.
K.M. Ibrahim v. K.P. Mohammed & Anr. 2009 (14) SCC 262.
R. Rajeshwari v. H.N. Jagadish, (2008) 4 SCC 82.
JIK Industries Ltd. v. Amarlal V.Jumani, (2012) 3 SCC 255.
Compounding offences under negotiable Instrument Act 1881, Tax Guru.
12