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2010 (3) Supreme 547
SUPREME COURT OF INDIA
CJI K.G. Balakrishnan, P. Sathasivam and J.M. Panchal, JJ.
Damodar S. Prabhu — Appellant
versus
Sayed Babalal H. — Respondent
Criminal Appeal No. 963 of 2010
[Arising out of SLP (Crl.) No. 6369 of 2007]
Decided on : 3-05-2010
Negotiable Instruments Act, 1881- Sections 138 ,147 - Dishonour of cheque-Compounding of offences-In view of non-obstante clause, compounding of offences under N I Act, 1881 is controlled by Section 147 and the scheme contemplated by Section 320 of ‘CrPC’ will not be applicable in the strict sense since the latter is meant for specified offences under the Indian Penal Code-So far as the CrPC is concerned, Section 320 deals with offences which are compoundable, either by the parties without the leave of court or by the parties but only with the leave of the Court-Sub-section (1) of Section 320 enumerates the offences which are compoundable without the leave of the Court, while sub-section (2) of the said section specifies the offences which are compoundable with the leave of the Court- Section 147 of N I Act, 1881 is in the nature of an enabling provision which provides for the compounding of offences prescribed under the same Act, thereby serving as an exception to the general rule incorporated in sub-section (9) of Section 320 of the CrPC which states that ‘No offence shall be compounded except as provided by this Section’- A bare reading of this provision leads to the inference that offences punishable under laws other than Indian Penal Code also cannot be compounded- However, since Section 147 was inserted by way of an amendment to a special law, same will override the effect of Section 320(9) of the CrPC, especially keeping in mind that Section 147 carries a non-obstante clause. (Para 8)
Facts of the Case :
Appeals were filed in respect of litigation involving offence enumerated by Section 138 of N I Act, 1881. Solicitor General appeared as amicus curiae in Instant matter and referred to the facts herein as an illustration of how parties involved in cheque bounce cases usually seek the compounding of the offence at a very late stage. Contention of Solicitor General that interests of justice would indeed be better served if parties resorted to compounding as a method to resolve their disputes at an early stage instead of engaging in protracted litigation before several forums, thereby causing undue delay,expenditure and strain on part of the judicial system. The learned Attorney General stressed on the importance of using compounding as an expedient method to hasten the disposal of cases. In this regard, learned Attorney General proposed that Apex Court should frame some guidelines to disincentivise litigants from seeking compounding of the offence at an unduly late stage of litigation.
Findings of the Court :
Held An application for compounding made after several years not only results in system being burdened but the complainant is also deprived of effective justice.Section 147 of the Act does not carry any guidance on how to proceed with the compounding of offences under the Act. Again scheme contemplated under Section 320 of the CrPC cannot be followed in the strict sense.In view of the legislative vacuum, no hurdle was seen to endorsement of some suggestions which have been designed to discourage litigants from unduly delaying the composition of offence in cases involving Section 138 of the Act. In view of this submission, Direction was given that following guidelines be followed.Held 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 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 accused. 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. 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. Finally, if the application for compounding is made before the Supreme Court, figure would increase to 20% of cheque amount.
ORDER
1.Leave granted.
2.The present appeals are in respect of litigation involving the offence enumerated by Section 138 of the Negotiable Instruments Act, 1881 [Hereinafter ‘Act’]. It is not necessary for us to delve into the facts leading up to the institution of proceedings before this Court since the appellant and the respondent have arrived at a settlement and prayed for the compounding of the offence as contemplated by Section 147 of the Act. It would suffice to say that the parties were involved in commercial transactions and that disputes had arisen on account of the dishonour of five cheques issued by the appellant. Thereafter, the parties went through the several stages of litigation before their dispute reached this Court by way of special leave petitions. With regard to the impugned judgments delivered by the High Court of Bombay at Goa, the appellant has prayed for the setting aside of his conviction in these matters by relying on the consent terms that have been arrived at between the parties. The respondent has not opposed this plea and, therefore, we allow the compounding of the offence and set aside the appellant’s conviction in each of the impugned judgments.
3.However, there are some larger issues which can be appropriately addressed in the context of the present case. It may be recalled that Chapter XVII comprising sections 138 to 142 was inserted into the Act by the Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988 (66 of 1988). The object of bringing Section 138 into the statute was to inculcate faith in the efficacy of banking operations and credibility in transacting business on negotiable instruments. It was to enhance the acceptability of cheques in settlement of liabilities by making the drawer liable for penalties in case of bouncing of cheques due to insufficient arrangements made by the drawer, with adequate safeguards to prevent harassment of honest drawers. If the cheque is dishonoured for insufficiency of funds in the drawer’s account or if it exceeds the amount arranged to be paid from that account, the drawer is to be punished with imprisonment for a term which may extend to two years, or with fine which may extend to twice the amount of the cheque, or with both. It may be noted that when the offence was inserted in the statute in 1988, it carried the provision for imprisonment up to one year, which was revised to two years following the amendment to the Act in 2002. It is quite evident that the legislative intent was to provide a strong criminal remedy in order to deter the worryingly high incidence of dishonour of cheques. While the possibility of imprisonment up to two years provides a remedy of a punitive nature, the provision for imposing a ‘fine which may extent to twice the amount of the cheque’ serves a compensatory purpose. What must be remembered is that the dishonour of a cheque can be best described as a regulatory offence that has been created to serve the public interest in ensuring the reliability of these instruments. The impact of this offence is usually confined to the private parties involved in commercial transactions.
4.Invariably, the provision of a strong criminal remedy has encouraged the institution of a large number of cases that are relatable to the offence contemplated by Section 138 of the Act. So much so, that at present a disproportionately large number of cases involving the dishonour of cheques is choking our criminal justice system, especially at the level of Magistrates’ Courts. As per the 213th Report of the Law Commission of India, more than 38 lakh cheque bouncing cases were pending before various courts in the country as of October 2008. This is putting an unprecedented strain on our judicial system.
5.Mr. Goolam E. Vahanvati, Solicitor General (now Attorney- General for India) had appeared as amicus curiae in the present matter and referred to the facts herein as an illustration of how parties involved in cheque b
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