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DELHI HIGH COURT
Gita Mittal, A.C.J. and Anu Malhotra, J.
Dayawati —Petitioner
versus
Yogesh Kumar Gosain —Respondent
Crl.Ref.No.1 of 2016
Decided on 17.10.2017
(B) Negotiable Instruments Act, 1881 – Section 138 – Criminal Procedure Code, 1973 – Section 395 read with Sections 29 and 320 – Mediation and Conciliation Rules, 2004 – Legal Services Authorities Act, 1987 – Sections 19 and 20 – Section 89 and Rule 3 of Order XXIII of CPC – Dishonour of cheque – Procedure for amicable settlement through mediation – Whether criminal court can in any manner refer parties before it to dispute resolution by mediation – Mediation provides an efficient, effective, speedy, convenient and inexpensive process to resolve disputes with dignity, mutuality, respect and civility where parties participate in arriving at a negotiated settlement rather than being confronted with a third party adjudication of their disputes – Genesis of mediation may rest on a court referral whereby court refers parties in a pending case, with their consent, to mediation – However, availability of mediation as a platform to negotiate a settlement does not rest on a court referral – Even though an express statutory provision enabling criminal court to refer complainant and accused persons to alternate dispute redressal mechanisms has not been specifically provided by Legislature, however, Cr.P.C. does permit and recognize settlement without stipulating or restricting process by which it may be reached – There is no bar to utilizing alternate dispute mechanisms including arbitration, mediation, conciliation (recognized under Section 89 of CPC) for the purposes of settling disputes which are subject matter of offences covered under Section 320 of Cr.P.C. (Paras 53, 54, 56 and 57)
(C) Negotiable Instruments Act, 1881 – Sections 138 and 147 – Criminal Procedure Code, 1973 – Section 395 read with Sections 29 and 320 – Mediation and Conciliation Rules, 2004 – Legal Services Authorities Act, 1987 – Sections 19 and 20 – Section 89 and Rule 3 of Order XXIII of CPC – Dishonour of cheque – Procedure for amicable settlement through mediation – Legal Services Authorities Act did not make out any distinction between reference made by a civil court and a criminal court – Upon settlement before Lok Adalat even in a criminal case, award of Lok Adalat has to be treated as a decree capable of execution by a civil court – Proceedings under Section 138 of NI Act have a special character – They arise from a civil dispute relating to dishonouring to a cheque but may result in a criminal consequence – Even though statute is punitive in nature, however, its spirit, intendment and object is to provide compensation and ensure restitution as well which aspects must receive priority over punishment – Proceedings under Section 138 of NI Act are distinct from other criminal cases – They are really in nature of a civil wrong which has been given criminal overtones – Irrespective of and apart from offences stipulated under Section 320 of Cr.P.C., Section 147 of NI Act makes offence under Section 138 of NI Act specifically compoundable – There is no legal prohibition upon a court, seized of a complaint under NI Act, to encourage dispute resolution by recourse to alternate dispute resolution methods including mediation – Delhi Mediation and Conciliation Rules, 2004 apply to all mediations and conciliations connected with any suit or other proceedings pending in High Court of Delhi or in any other court subordinate to High Court of Delhi. (Paras 67, 68, 73, 75 and 80)
(D) Negotiable Instruments Act, 1881 – Sections 138 and 147 – Criminal Procedure Code, 1973 – Section 395 read with Sections 29 and 320 – Mediation and Conciliation Rules, 2004 – Legal Services Authorities Act, 1987 – Sections 19 and 20 – Section 89 and Rule 3 of Order XXIII of CPC – Dishonour of cheque – Procedure for amicable settlement through mediation – Code of Criminal Procedure as well as NI Act have provided only for compounding of offences – No procedure regarding manner in which a settlement agreement required to be placed or considered by court has been provided – Order XXIII Rule 3 of CPC permits consideration of agreement, whether or not subject matter of agreement or compromise is the same as subject matter of suit – While Code of Civil Procedure would have no application to proceedings which are guided by Criminal Procedure Code, given legislative vacuum, there appears to be no reason as to why principles which apply to consideration of a settlement under Order XXIII Rule 3 of CPC cannot be applied for consideration of a settlement which is subject matter of consideration by a court under Section 320 of the Cr.P.C. or Section 147 of NI Act – Binding parties to a settlement agreement entered into through a formal mediation process and being held accountable for honouring the same is really enforcing legislative mandate in enacting Sections 138 and 147 of NI Act – Breach of a lawful entered agreement would not only frustrate parties to mediation, but would be opposed to spirit, intendment and purpose of Section 138 of NI Act and would defeat ends of justice. (Paras 100, 101 and 104)
(E) Negotiable Instruments Act, 1881 – Sections 138 and 147 – Criminal Procedure Code, 1973 – Section 477 – Mediation and Conciliation Rules, 2004 – Legal Services Authorities Act, 1987 – Sections 19 and 20 – Section 89 and Rule 3 of Order XXIII of CPC – Dishonour of cheque – Breach of amicable settlement through mediation – Courts cannot permit use of mediation as a tool to abuse judicial process – Once settlement is reported to court and made basis of seeking court’s indulgence parties ought not to be able to resile from such a position – In the event of either party resiling from agreed upon settlement which has received imprimatur of court, party attempting to breach settlement and undertaking cannot be permitted to avoid making payment – Such party also should not be allowed to violate such undertaking given to opposite side as well as court – In the event that a criminal court passes order accepting mediated settlement between parties and directs accused to make payment in terms thereof, settlement amount becomes payable under order of court – Such order having been passed in proceedings under Section 138 of NI Act, would be an order under Section 147 of NI Act and Section 320 of Cr.P.C. – Settlement reached in mediation arising out of a criminal case does not tantamount to a decree by a civil court and cannot be executed in a civil court – However, settlement in mediation arising out of referral in a civil case by a civil court, can result in a decree upon compliance with procedure under Order XXIII of C.P.C. – This can never be so in a mediation settlement arising out of a criminal case. (Paras 108, 111, 114 and 118)
Result: Reference answered.
As a result of the pronouncement in Afcons, Section 89 of the C.P.C. thus stands modified to the extent noted above.
39. So far as the procedure to be adopted by a court upon reference of the disputes in a civil case to an ADR mechanism is concerned, the same stands further considered in Afcons. The relevant portion of the judgment is reproduced as under:
“43. We may summarise the procedure to be adopted by a court under Section 89 of the Code as under:
(a) When the pleadings are complete, before framing issues, the court shall fix a preliminary hearing for appearance of parties. The court should acquaint itself with the facts of the case and the nature of the dispute between the parties.
(b) The court should first consider whether the case falls under any of the category of the cases which are required to be tried by courts and not fit to be referred to any ADR processes. If it finds that the case falls under any excluded category, it should record a brief order referring to the nature of the case and why it is not fit for reference to ADR processes. It will then proceed with the framing of issues and trial.
(c) In other cases (that is, in cases which can be referred to ADR processes) the court should explain the choice of five ADR processes to the parties to enable them to exercise their option.
(d) The court should first ascertain whether the parties are willing for arbitration. The court should inform the parties that arbitration is an adjudicatory process by a chosen private forum and reference to arbitration will permanently take the suit outside the ambit of the court. The parties should also be informed that the cost of arbitration will have to be borne by them. Only if both parties agree for arbitration, and also agree upon the arbitrator, the matter should be referred to arbitration.
(e) If the parties are not agreeable for arbitration, the court should ascertain whether the parties are agreeable for reference to conciliation which will be governed by the provisions of the AC Act. If all the parties agree for reference to conciliation and agree upon the conciliator(s), the court can refer the matter to conciliation in accordance with Section 64 of the AC Act.
(f) If the parties are not agreeable for arbitration and conciliation, which is likely to happen in most of the cases for want of consensus, the court should, keeping in view the preferences/options of parties, refer the matter to any one of the other three ADR processes: (a) Lok Adalat; (b) mediation by a neutral third-party facilitator or mediator; and (c) a judicial settlement, where a Judge assists the parties to arrive at a settlement.
(g) If the case is simple which may be completed in a single sitting, or cases relating to a matter where the legal principles are clearly settled and there is no personal animosity between the parties (as in the case of motor accident claims), the court may refer the matter to Lok Adalat. In case where the questions are complicated or cases which may require several rounds of negotiations, the court may refer the matter to mediation. Where the facility of mediation is not available or where the parties opt for the guidance of a Judge to arrive at a settlement, the court may refer the matter to another Judge for attempting settlement.
(h) If the reference to the ADR process fails, on receipt of the report of the ADR forum, the cour
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