Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2023 Supreme(Bom) 1541

IN THE HIGH COURT OF JUDICATURE AT BOMBAY, BENCH AT NAGPUR
ANIL L. PANSARE, J.
Anuradha Kapoor, D/o. Manmohan Kapoor & Ors. - Applicants
Versus
State of Maharashtra, Through Police Station Officer, MIDC Police Station, Nagpur & Ors. - Respondents
Criminal Application (APL) No. 566 of 2023
Decided On : 29-11-2023

Advocates Appeared:
For the Applicants :Mr. D.P. Singh, Advocate with Mr. K.N. Shukul.
For the Respondents:Ms. Shamsi Haider, APP, Mr. Anand Jaiswal, Senior Advocate assisted by Mr. S.G. Joshi.

The main legal point established in the judgment is that in cases of dishonour of cheques, the compensatory aspect of the remedy should be given priority over the punitive aspect. The court also emphasized the importance of early settlement through compounding and addressed the issue of piecemeal compromise and compounding in appropriate cases.

Headnote:
Compounding of Offence - Negotiable Instruments Act - 138 - 138, 142, 420 - The judgment discusses the compounding of the offence under Section 138 of the Negotiable Instruments Act, 1881. It highlights the guidelines issued by the Supreme Court in Damodar S. Prabhu vs. Sayed Babalal and Meters and Instruments Private Limited vs. Kanchan Mehta, and their interpretation in the context of compounding the offence. The court emphasizes the importance of compensatory aspect over the punitive aspect in cases of dishonour of cheques and encourages early settlement through compounding. It also addresses the issue of piecemeal compromise and compounding in appropriate cases.
Fact of the Case:

The non-applicant no. 2 filed a complaint under Section 138 of the NI Act, accusing 12 individuals of dishonouring a cheque amounting to Rs. 15 lakhs. The accused, who were directors of a company, sought compounding of the offence upon full payment of the cheque amount, which was rejected by the Magistrate. The accused contended that the non-applicant no. 2 was aware of the company's insolvency and concealed facts from the court, making the legal process mala fide.
Finding of the Court:

The court found that the accused's application for compounding the offence should be allowed, as it was made at an initial stage and the complainant was duly compensated. The court also addressed the issue of piecemeal compromise and compounding, allowing it in appropriate cases.
Issues: The main issues were whether the accused's application for compounding the offence should be allowed, and whether piecemeal compromise and compounding were permissible in the case.
Ratio Decidendi: The court held that the accused's application for compounding the offence should be allowed, as it was made at an initial stage and the complainant was duly compensated. The court also established that piecemeal compromise and compounding were permissible in appropriate cases.
Final Decision: The court allowed the accused's application for compounding the offence, subject to the accused depositing the cheque amount with interest and litigation costs. The accused were discharged upon depositing the specified amount. The effect and operation of the judgment and order were stayed for a period of six weeks.

JUDGMENT :

Rule. Rule made returnable forthwith. Heard finally, with the consent of the learned counsel for the respective parties.

2. The applicants/original accused in Criminal Complaint filed by the non-applicant no.2-Company under Section 138 of the Negotiable Instruments Act, 1881 (in short, “NI Act”) are aggrieved by the order dated 03.11.2022 passed by the learned 2nd Additional Chief Judicial Magistrate, Nagpur (in short, ‘Magistrate’), whereby the applicants’ application seeking compounding of the offence upon full payment of cheque amount has been rejected. According to the applicants, the order suffers from non-consideration of the law laid down by the Hon’ble Supreme Court, in the case of Damodar S. Prabhu vs. Sayed Babalal, (2010) Vol.5 SCC 663 and Meters and Instruments Private Limited vs. Kanchan Mehta, (2018) Vol.1 SCC 560.

3. Having heard both sides at length, it transpires that the non-applicant no. 2 filed complaint u/s 138 of the NI Act, accusing as many as 12 entities/ individuals to be responsible for dishonour of cheque amounting to Rs. 15 lakhs. The accused nos. 1 and 2 are a Company, named and styled as Castex Technologies Limited having offices at Haryana and Rajasthan. The accused no.3-John Earnest Flintham is said to be the Managing Director of the Company; accused nos. 4 to 12 are/were the Directors of the accused nos.1 and 2 companies. The applicant No.1 herein is the accused no.8; applicant no.2 is the accused no.7; applicant no.3 is the accused no.4, applicant no.4 is the accused no.5; applicant no.5 is the accused no.10 and applicant no.6 is the accused no.11 respectively. These applicants have been arrayed as accused in the capacity as Directors of the Company with an allegation that they all are involved in the day-to-day affairs of the Company.

4. The allegations against the accused are that they have placed different purchase orders with the non-applicant no. 2-Company/ complainant for supply of Lustron, Inoculant and Nodulant, which are foundry consumables. The non-applicant no.2 has supplied the material for an amount of Rs.3.16 crores approximately and in order to discharge the part liability, the aforesaid cheque was issued by the accused-Company. The cheque was for Rs.15 lakhs bearing No.805627 dated 23.12.2017 drawn on State Bank of India, Finance branch, New Delhi. The cheque was presented for encashment, but returned back unpaid with the remarks “insufficient funds”. After complying with other necessary formalities like issuance of notices etc., the complaint in question has been filed, u/s.138 read with Section 142 of the NI Act as well as Section 420 of the Indian Penal Code.

5. Mr. D.P. Singh, the learned counsel for the applicants submits that on 20.12.2017, Castex Technologies Limited/accused-Company was admitted to insolvency upon an application by SBI, being petition No.CP(IB)No.116/Chd/Hry/2017. The Interim Resolution Professional was appointed vide order dated 22.12.2017 for all suits and proceedings against the Company. The learned counsel further submits that the non-applicant no.2 has filed its claim before IBC on 30.01.2018. The statutory notice u/s. 138 was sent to all the Directors on 08.02.2018, on the address of the Company, when pursuant to Sec.17 of the IBC Code, all Directors stood divested of all their powers. He contends that the issue of notice, therefore, was an abuse of process in itself because the non-applicant no.2 was in the knowledge of the fact that the Company was admitted to IBC process. He submits that the entire liability of the non-applicant no.2 has been satisfied by the CIRP process and the Resolution Plan has been accepted on 15.12.2020. These facts have been allegedly concealed by the non-applicant no.2 from trial Court, as also from this Court and, thus, the process of law is mala fide.

6. Despite the above, the applicants on 11.12.2018 have filed an application accompanied by a demand draft issued in the name of the non-applicant no.2-Company for