Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2017 Supreme(SC) 973

SUPREME COURT OF INDIA
Adarsh Kumar Goel, Uday Umesh Lalit, JJ.
M/s. Meters and Instruments Private Limited & Anr. – Appellant
Versus
Kanchan Mehta – Respondents
Criminal Appeal No. 1731 of 2017 (Arising Out of Special Leave Petition (Crl.) No.5451 of 2017) With Criminal Appeal No. 1732 of 2017 (Arising Out of Special Leave Petition (CRL.) No.5441 of 2017) With Criminal Appeal No. 1733 of 2017 (Arising Out of Special Leave Petition (CRL.) No.5449 of 2017)
Decided On : 05-10-2017

Advocates Appeared:
For the Appellant : B. Sunita Rao, Adv.
For the Respondent No. 1:- Akshat Goel, Adv.

IMPORTANT POINT
Though compounding requires consent of both parties, even in absence of such consent, the Court, in the interests of justice, on being satisfied that the complainant has been duly compensated, can in its discretion close the proceedings and discharge the accused.

Headnote:(a) Negotiable Instruments Act, 1881 – Section 147 – Dishonour of cheque – Drawer of cheque liable to prosecution – Statute providing safeguards to honest drawers – 2002 amendment providing for service of summons by Speed Post/Courier, summary trial; and making the offence compoundable-the offence being a civil wrong – Requiring "preponderance of probabilities" to be standard of proof – Compensation – Act not intending to penalize the drawee but to make him honour the cheque – 2002 amendment laying down a special code to do away with all stages and processes in regular criminal trial – a (Para 6, 7, 8, 9)
       (2004) 2 SCC 235; (2008) 2 SCC 305; (2010) 11 SCC 441; (2012) 1 SCC 260; (2014) 13 SCC 779 – Relied upon
       (2006) 6 SCC 456; (2007) 6 SCC 555; (2014) 10 SCC 690; (2001) 1 SCC 631; (2010) 3 SCC 83; (2014) 10 SCC 494 – Referred
       (2004)13 SCC 324 – Distinguished
       (b) Negotiable Instruments Act, 1881 – Section 138 – Sentence of two years or fine or both – Compensation u/s 357(3) CrPC – In addition to sentence if awarded without fine – Quantum discretionary – Enforceable by default sentence u/s 64 IPC or recovery procedure u/s 431 CrPC. (Para 12)
       (1988) 4 SCC 551; (2002) 2 SCC 420; (2010) 6 SCC 230; (2012) 8 SCC 721; (2017) 7 SCC 471 – Relied upon
       (c) Negotiable Instruments Act, 1881 – Section 138 – Procedure – Simpler procedure for disposal of cases u/s 138 as laid down – Restated. (Para 13)
       (2014) 5 SCC 590 – Relied upon
       2005 Cri LJ 1201 (Bom); 2006 Cri LJ 208: (2005) 44 Civil CC (Bom); (2006) 4 Mah LJ 381; (2007) 3 CHN 574; ILR (2010) 6 Del 610 – Cited
       (d) Negotiable instruments Act, 1881 – Section 138 and section 205, Code of Criminal Procedure, 1973 – Dispensing with personal appearance of accused – Discretion of Magistrate without causing prejudice to prosecution proceedings. (Para 15)
       (2001) 7 SCC 401 – Relied upon
       (2011) 2 SCC 772 – Referred
       (e) Negotiable instruments Act, 1881 – Section 138 – Summary trial – Quantum of cases – 20% of total cases – High Court should review situation and issue updated directions – Use of modern technology. (Para 17)
       (2017)5 SCC 702 – Relied upon
       (f) Negotiable instruments Act, 1881 – Section 138 and 143 – Cheque amount with interest and cost as assessed by the Court, if paid by a specified date – Held, court could close the proceedings – Section 143 r/w Section 258 Cr.P.C. – Summary procedure – Complainant to give his bank account number and, if possible, e-mail ID of the accused – However, if trial is to proceed, Court may explore possibility of settlement – It may also consider provisions of plea bargaining – Subject to this, the trial can be on day to day basis so as to conclude it within six months. (Para 19, 20, 21)
       Facts of the case:
       The Respondent Kanchan Mehta filed complaint alleging that the appellants were to pay a monthly amount to her under an agreement. Cheque dated 31st March, 2016 was given for Rs.29,319/- in discharge of legal liability but the same was returned unpaid for want of sufficient funds. In spite of service of legal notice, the amount was not paid.
       The Magistrate summoned the appellants. Notice of accusation was served under Section 251 Cr.P.C.
       Appellant No.2, the Director of appellant No.1, stated that he was ready to make the payment of the cheque amount. However, the complainant declined to accept the demand draft.
       The appellants’ application for compounding was dismissed. The High Court did not interfere with the order of the Magistrate.
       Finding of the Court:
       Offence under Section 138 of the Act is primarily a civil wrong.
       Standard of proof is "preponderance of probabilities".
       Result: Appeals disposed of.

Judgement Key Points

Certainly. Based on the provided legal document, the key points are as follows:

The offence under Section 138 of the Negotiable Instruments Act is primarily a civil wrong, with the standard of proof being "preponderance of probabilities." The proceedings are generally intended to be summary and expeditious, with the possibility of closing proceedings if the cheque amount along with interest and costs are paid by a specified date (!) .
The object of the law is mainly compensatory, aiming to enforce payment rather than punishment. The Court can, in its discretion, close proceedings and discharge the accused if it is satisfied that the complainant has been duly compensated, even without the consent of both parties (!) .
Although compounding of offences requires the consent of both parties, the Court can, in the interests of justice, close proceedings and discharge the accused if it is satisfied that the complainant has been adequately compensated, regardless of the other party’s consent (!) .
The procedure for trials under Chapter XVII of the Act is generally summary, with the discretion to hold that a case should not be tried summarily if the sentence may exceed one year. The Court can also award compensation in addition to imprisonment, and such compensation can be enforced through default sentences or recovery procedures (!) (!) .
Evidence in proceedings can be presented via affidavits, which can be read as evidence at all stages of the trial, provided the Court summons and examines the deponent. This allows for a streamlined process and reduces the need for extensive examination (!) .
If the cheque amount, including interest and costs, is paid by a specified date, the Court has the authority to close the proceedings under Section 143 of the Act, especially when the payment is accompanied by relevant details such as bank account number and email ID of the accused (!) (!) .
The Court may facilitate the process by indicating in summons that if the accused deposits the specified amount by a certain date, they may not be required to appear in person, and proceedings can be closed unless the complainant objects (!) .
The proceedings under Section 138 are designed to be speedy, with efforts encouraged to conclude cases within six months. The Court can also explore settlement options, plea bargaining, or conduct trials via modern technology such as online or video conferencing to reduce delays and hardship (!) (!) .
The Court emphasizes the importance of balancing the rights of the complainant and the accused, advocating for procedures that prioritize justice and efficiency while allowing for appropriate discretion by the Magistrate (!) (!) .
High Courts are encouraged to review and update directions for handling Section 138 cases, including the possibility of conducting proceedings online or through designated courts, to further streamline the process and enhance access to justice (!) (!) .
The Court advocates for a pragmatic approach, including the use of modern technology and simplified procedures, to ensure timely disposal of cases, reduce court congestion, and uphold the principles of justice (!) (!) .
The appeals are disposed of, and the appellants are permitted to approach the Trial Court again for any further orders in accordance with this judgment (!) (!) .

Would you like a detailed explanation of any specific point or guidance on how to proceed further?

JUDGMENT

Adarsh Kumar Goel, J.

Leave granted. These appeals have been preferred against the order dated 21st April, 2017 of the High Court of Punjab and Haryana at Chandigarh in CRLM Nos.13631, 13628 and 13630 of 2017. The High Court rejected the prayer of the appellants for compounding the offence under Section 138 of the Negotiable Instruments Act, 1881 (the Act) on payment of the cheque amount and in the alternative for exemption from personal appearance.

2. When the matters came up for hearing before this Court earlier, notice was issued to consider the question "as to how proceedings for an offence under Section 138 of the Act can be regulated where the accused is willing to deposit the cheque amount. Whether in such a case, the proceedings can be closed or exemption granted from personal appearance or any other order can be passed." The Court also appointed Mr. K.V. Viswanathan, learned senior counsel to assist the Court as amicus and Mr. Rishi Malhotra, learned counsel to assist the amicus. Accordingly, learned amicus has made his submissions and also filed written submissions duly assisted by S/Shri Rishi Malhotra, Ravi Raghunath, Dhananjay Ray and Sidhant Buxy, advocates. We place on record our appreciation for the services rendered by learned amicus and his team.

3. Few Facts: The Respondent Kanchan Mehta filed complaint dated 15th July, 2016 alleging that the appellants were to pay a monthly amount to her under an agreement. Cheque dated 31st March, 2016 was given for L 29,319/- in discharge of legal liability but the same was returned unpaid for want of sufficient funds. In spite of service of legal notice, the amount having not been paid, the appellants committed the offence under Section 138 of the Act. The Magistrate vide order dated 24th August, 2016, after considering the complaint and the preliminary evidence, summoned the appellants. The Magistrate in the order dated 9th November, 2016 observed that the case could not be tried summarily as sentence of more than one year may have to be passed and be tried as summons case. Notice of accusation dated 9th November, 2016 was served under Section 251 Cr.P.C.

4. Appellant No.2, who is the Director of appellant No.1, made a statement that he was ready to make the payment of the cheque amount. However, the complainant declined to accept the demand draft. The case was adjourned for evidence. The appellants filed an application under Section 147 of the Act on 12th January, 2017 relying upon the judgment of this Court in Damodar S. Prabhu v. Sayed Babalal H., (2010) 5 SCC 663 The application was dismissed in view of the judgment of this Court in JIK Industries Ltd. v. Amarlal V. Jumani, (2012) 3 SCC 255 which required consent of the complainant for compounding. The High Court did not find any ground to interfere with the order of the Magistrate. Facts of other two cases are identical. Hence these appeals.

5. We have heard learned counsel for the parties and learned amicus who has been duly and ably assisted by S/Shri Rishi Malhotra, Ravi Raghunath, Dhananjay Ray and Sidhant Buxy, advocates. We proceed to consider the question.

6. The object of introducing Section 138 and other provisions of Chapter XVII in the Act in the year 1988 [Vide the Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988] was to enhance the acceptability of cheques in the settlement of liabilities. The drawer of cheque is made liable to prosecution on dishonour of cheque with safeguards to prevent harassment of honest drawers. The Negotiable Instruments (Amendment and Miscellaneous Provisions) Act, 2002 to amend the Act was brought in, inter-alia, to simplify the procedure to deal with such matters. The amendment includes provision for service of summons by Speed Post/Courier, summary trial and making the offence compoundable.

7. This Court has noted that the object of the statute was to facilitate smooth functioning of business transactions. The provision is necessa

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2017 Supreme(SC) 973

IMPORTANT POINT Though compounding requires consent of both parties, even in absence of such consent, the Court, in the interests of justice, on being satisfied that the complainant has been duly compensated, can in its discretion close the proceedings and discharge the accused.

Cases Referred (22)

IMPORTANT POINT
Though compounding requires consent of both parties, even in absence of such consent, the Court, in the interests of justice, on being satisfied that the complainant has been duly compensated, can in its discretion close the proceedings and discharge the accused.