Case Reported:

 Smt. Rani Gaur Vs. State of U.P. and 4 Others [Criminal Revision No. 2047/2023]

Court:

 The Allahabad High Court

Case Referred:

 JIK Industries Limited and Ors. Vs. Amarlal V. Jumani and Anr. [(2012) 3 SCC 255] and
Meters and Instruments Pvt. Ltd. and Anr. Vs. Kanchan Mehta [(2018) 1 SCC 560]

Ratio:

 Cases of cheque dishonour under Section 138, Negotiable Instrument Act, 1881 can be compounded by the Court, without direct consent of the Complainant, if the Accused offers a compensation to the Complainant that is just and fair in the opinion of the Court

Judgement date:

 May 24, 2023

Act/Law:

 Negotiable Instrument Act, 1881 ("NI Act") and Code of Criminal Procedure, 1973 ("Cr.P.C")


Background:

  • In 2012, a two judge bench of the Supreme Court ("SC") in the case of JIK Industries Limited and Ors. Vs. Amarlal V. Jumani and Anr. [(2012) 3 SCC 255] observed that:
"82. ......... Therefore, Section 147 of the N.I. Act must be reasonably construed to mean that as a result of the said Section the offences under N.I. 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 wished away nor can the same be substituted by virtue of Section 147 of N.I. Act."

 

  • Based on the above judgement, various Trial Courts took the view that consent of the Complainant was necessary for compounding of cases of cheque dishonour.
  • In 2017, a two judge bench of the SC in the matter of Meters and Instruments Pvt. Ltd. and Anr. Vs. Kanchan Mehta [(2018) 1 SCC 560] recognized the power of the Trial Court to dispose of/compound matters of cheque dishonour, despite objections by the Complainant, in cases where the Accused offered a just and fair compensation to the Complainant. The relevant paragraphs of the said SC judgement are reproduced below:

"18.1

 .......... Thus read, principle of Section 258 Cr.P.C. will apply and the Court can close the proceedings and discharge the accused on satisfaction that the cheque amount with assessed costs and interest is paid and if there is no reason to proceed with the punitive aspect.

18.2

 The object of the provision being primarily compensatory, punitive element being mainly with the object of enforcing the compensatory element, compounding at the initial stage has to be encouraged but is not debarred at later stage subject to appropriate compensation as may be found acceptable to the parties or the Court.

18.3

 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."

 

  • In view of the 2017 judgement of the SC, the Trial Court has the power to compound a case of cheque dishonour even if the Complainant does not give a consent, provided that in the opinion of the Court, the Complainant has been duly compensated (financially) by the Accused. This opinion/discretion of the Court to compound the cheque dishonour matter, without the consent of the Complainant, did not find any specific mention in the 2012 judgement of the SC. Accordingly, there was a perceived contradiction between the two judgements.
  • The Allahabad High Court has now harmoniously interpreted both the judgements of the SC in view of the law. Vide the order dated May 24, 2023, passed by the Allahabad High Court, the High Court observed that:

    "The Supreme Court did not say that the requirement of consent for compounding may just be done away with. Instead widening the compensatory aspect of cases filed under Section 138 of the NI Act, the Apex Court has carved out a window in the existing scheme of things saying that the case can be disposed of without obtaining direct consent of the complainant under certain circumstances. The circumstances included offering an amount fair and acceptable which in the opinion of the court is appropriate for duly compensating the complainant. That is under certain circumstances the court can proceed in absence of direct consent. The court is empowered to apply its discretion in terms of provisions of Section 258 Cr.P.C. It may be made clear that this aspect of the matter is distinct and separate from compounding of the case where both the parties agree. The revisional court has remanded the matter to decide it afresh as per law laid down in M/s Meters and Instruments Private Limited and Another vs. Kanchan Mehta (supra). By the aforesaid judgement the Apex Court has emphasized that where an appropriate amount has been offered/deposited, the trial court may consider to drop the proceeding. Definitely the objections, if any, in this regard shall be taken into consideration. The court has not lost its power of discretion in such matters. In view of the above I do not find any cause"

Conclusion:

In substance, the Allahabad High Court rightly observed that the compounding upon payment of compensation presents two possible scenarios. First, where the parties agree on the amount of compensation, and in this case the Court can direct compounding. The second scenario, where the Complainant objects to the amount of compensation or compounding, the Court can judiciously assess these objections and still decide to allow compounding if the Court determines that the compensation is adequate to cover the cheque amount, costs, interest and penalties (if any to be levied).

The judgement of the Allahabad High Court records the correct position of the law, and is set to work as a precedent in many cases of cheque dishonour pending before the Trial Courts.

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