138 - Negotiable Instruments Act, (urgent)

Sameer can you pls provide any citation to support your view .. the court cannot force the withdrawl of the complaint as per my knowledge .. The court can just suggest that the complaint may be withdrawn if the parties reach to a mutual compromise ... If you can please forward the copy of the case it would be very helpful

regards

 Hi Sameer

Offence u/s 138 is compoundable , with the permission of the court , AND most importantly complainant and accused both to remain present before the court and seek permission for the same. so first cancel the warrant, then compound u/s 147 NI Act. Accused will be acquitted.

Dear Expert,

Can u tell me that what should should i do when somebody issues three cheques to three different people which get dishonoured?

 Three different people will file three different cases against the person who issued three different cheques. Clear?

As per the amended act Offence under section 138 of N.I.Act is compoundable under section 147 of the Act.

But the court cannot force a party to compound the case . Even if the payment is made at ay stage after the institutiion of the case the case will proceed because, an offence once committed need to be punished in view of the ruling of the apexcourt in Rajneesh Aggerwal v Amit.J.Balla ( A.I.R.2001, SC , 518).

I do agree with my all Ld. friends.But I'm thankfull to Mr. B.N.Rajamohamed & Mr. TVD Rajkumar, who provide such valueable judgements on this lawyersclubindia.

Sir,

With my humble regards i seek your kind advice as to under which section (200) of the Cr.PC the complaint u/s. 138 of N.I.Act 1881. Can u please provide me a performa complaint to be filed under the said section 138.

with regards

 

Mohammed Maqsood Ali

(Advocate)

 

 

 pls find the attached-

1) section 138 of the Negotiable Instruments Act, 1881 is compoundable,  with the permission of the court .

2) the court cannot force the complainant to compromise the case under section 138 N.I.Act, 1881 (Criminal complaint) even if the accused agrees to pay of the amount involved by virtue of cheque/ more than cheque amount. If only complainant wishes to compound then only compromise allowed. Offence is completed and now if accused is agreeing to pay chq amount , liability proved, he can b convicted though sentence may b lineient as per the wish of the court., may b till the rising of the court.

3) no such directive is within my knowledge yet.

REPORTABLE

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO. 963 OF 2010

[Arising out of SLP (Crl.) No. 6369 of 2007]

Damodar S. Prabhu … Appellant (s)

Versus

Sayed Babalal H. … Respondent (s)

WITH

CRIMINAL APPEAL NOS. 964-966 OF 2010

[Arising out of SLP (Crl.) Nos. 6370-6372 of 2007]

O R D E R

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

1

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)

2

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

3

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.

4

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 bounce cases

usually seek the compounding of the offence at a very late

stage. The 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. This is

clearly a situation that is causing some concern, since Section

147 of the Act does not prescribe as to what stage is

appropriate for compounding the offence and whether the

same can be done at the instance of the complainant or with

the leave of the court. The learned Attorney General stressed

on the importance of using compounding as an expedient

method to hasten the disposal of cases. In this regard, the

learned Attorney General has proposed that this Court should

frame some guidelines to disincentivise litigants from seeking

5

the compounding of the offence at an unduly late stage of

litigation. In other words, judicial directions have been sought

to nudge litigants in cheque bounce cases to opt for

compounding during the early stages of litigation, thereby

bringing down the arrears.

6. Before examining the guidelines proposed by the learned

Attorney General, it would be useful to clarify the position

relating to the compounding of offences under the Negotiable

Instruments Act, 1881. Even before the insertion of Section

147 in the Act (by way of an amendment in 2002) some High

Courts had permitted the compounding of the offence

contemplated by Section 138 during the later stages of

litigation. In fact in O.P. Dholakia v. State of Haryana, (2000)

1 SCC 672, a division bench of this Court had permitted the

compounding of the offence even though the petitioner’s

conviction had been upheld by all the three designated

forums. After noting that the petitioner had already entered

into a compromise with the complainant, the bench had

rejected the State’s argument that this Court need not

6

interfere with the conviction and sentence since it was open to

the parties to enter into a compromise at an earlier stage and

that they had not done so. The bench had observed:-

"… Taking into consideration the nature of the

offence in question and the fact that the

complainant and the accused have already entered

into a compromise, we think it appropriate to grant

permission in the peculiar facts and circumstances

of the present case, to compound."

7. Similar reliefs were granted in orders reported as

Sivasankaran v. State of Kerala & Anr., (2002) 8 SCC 164,

Kishore Kumar v. J.K. Corporation Ltd., (2004) 12 SCC 494

and Sailesh Shyam Parsekar v. Baban, (2005) 4 SCC 162,

among other cases. As mentioned above, the Negotiable

Instruments Act, 1881 was amended by the Negotiable

Instruments (Amendment and Miscellaneous Provisions) Act,

2002 which inserted a specific provision, i.e. Section 147 ‘to

make the offences under the Act compoundable’. We can refer

to the following extract from the Statement of Objects and

7

Reasons attached to the 2002 amendment which is selfexplanatory:-

"Prefatory Note – Statement of Objects and

Reasons. – The Negotiable Instruments Act, 1881

was amended by the Banking, Public Financial

Institutions and Negotiable Instruments Laws

(Amendment) Act, 1988 wherein a new Chapter XVII

was incorporated for penalties in case of dishonour

of cheques due to insufficiency of funds in the

account of the drawer of the cheque. These

provisions were incorporated with a view to

encourage the culture of use of cheques and

enhancing the credibility of the instrument. The

existing provisions in the Negotiable Instruments

Act, 1881, namely, Sections 138 to 142 in Chapter

XVII have been found deficient in dealing with

dishonour of cheques. Not only the punishment

provided in the Act has proved to be inadequate, the

procedure prescribed for the courts to deal with

such matters has been found to be cumbersome.

The courts are unable to dispose of such cases

expeditiously in a time bound manner in view of the

procedure contained in the Act. …"

(emphasis supplied)

In order to address the deficiencies referred to above, Section

10 of the 2002 amendment inserted Sections 143, 144, 145,

146 and 147 into the Act, which deal with aspects such as the

power of the Court to try cases summarily (Section 143), Mode

of service of summons (Section 144), Evidence on affidavit

8

(Section 145), Bank’s slip to be considered as prima facie

evidence of certain facts (Section 146) and Offences under the

Act to be compoundable (Section 147). At present, we are of

course concerned with Section 147 of the Act, which reads as

follows:-

"147. Offences to be compoundable. –

Notwithstanding anything contained in the Code of

Criminal Procedure, 1973 (2 of 1974), every offence

punishable under this Act shall be compoundable."

8. At this point, it would be apt to clarify that in view of the

non-obstante clause, the compounding of offences under the

Negotiable Instruments Act, 1881 is controlled by Section 147

and the scheme contemplated by Section 320 of the Code of

Criminal Procedure [Hereinafter ‘CrPC’] will not be applicable

in the strict sense since the latter is meant for the 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 the

court or by the parties but only with the leave of the Court.

Sub-section (1) of Section 320 enumerates the offences which

9

are compoundable without the leave of the Court, while subsection

(2) of the said section specifies the offences which are

compoundable with the leave of the Court. Section 147 of the

Negotiable Instruments 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 would lead us to the inference that

offences punishable under laws other than the Indian Penal

Code also cannot be compounded. However, since Section 147

was inserted by way of an amendment to a special law, the

same will override the effect of Section 320(9) of the CrPC,

especially keeping in mind that Section 147 carries a nonobstante

clause

9. In Vinay Devanna Nayak v. Ryot Sewa Sahakari Bank

Ltd., (2008) 2 SCC 305, this Court had examined ‘whether an

offence punishable under Section 138 of the Act which is a

10

special law can be compounded’. After taking note of a

divergence of views in past decisions, this Court took the

following position (C.K. Thakker, J. at Para. 17):-

" … This provision is intended to prevent dishonesty

on the part of the drawer of negotiable instruments

in issuing cheques without sufficient funds or with

a view to inducing the payee or holder in due course

to act upon it. It thus seeks to promote the efficacy

of bank operations and ensures credibility in

transacting business through cheques. In such

matters, therefore, normally compounding of

offences should not be denied. Presumably,

Parliament also realised this aspect and inserted

Section 147 by the Negotiable Instruments

(Amendment and Miscellaneous Provisions) Act,

2002 (Act 55 of 2002). …"

In the same decision, the court had also noted (Para. 11):-

"… Certain offences are very serious in which

compromise or settlement is not permissible. Some

other offences, on the other hand, are not so serious

and the law may allow the parties to settle them by

entering into a compromise. The compounding of an

offence signifies that the person against whom an

offence has been committed has received some

gratification to an act as an inducement for his

abstaining from proceeding further with the case."

11

10. It would also be pertinent to refer to this Court’s decision

in R. Rajeshwari v. H.N. Jagadish, (2008) 4 SCC 82, wherein

the following observations were made (S.B. Sinha, J. at

Para. 12):-

"Negotiable Instruments Act is a special Act. Section

147 provides for a non obstante clause, stating:

147. Offences to be compoundable. –

Notwithstanding anything contained in the

Code of Criminal Procedure, 1973 (2 of 1974),

every offence punishable under this Act shall

be compoundable.

Indisputably, the provisions of the Code of Criminal

Procedure, 1973 would be applicable to the

proceedings pending before the courts for trial of

offences under the said Act. Stricto sensu, however,

the table appended to Section 320 of the Code of

Criminal Procedure is not attracted as the

provisions mentioned therein refer only to

provisions of the Penal Code and none other."

11. The compounding of the offence at later stages of litigation

in cheque bouncing cases has also been held to be permissible

in a recent decision of this Court, reported as K.M. Ibrahim v.

K.P. Mohammed & Anr., 2009 (14) SCALE 262, wherein

Kabir, J. has noted (at Paras. 11, 12):-

12

"11. As far as the non-obstante clause included in

Section 147 of the 1881 Act is concerned, the 1881

Act being a special statute, the provisions of Section

147 will have an overriding effect over the provisions

of the Code relating to compounding of offences. …

12. It is true that the application under Section 147

of the Negotiable Instruments Act was made by the

parties after the proceedings had been concluded

before the Appellate Forum. However, Section 147 of

the aforesaid Act does not bar the parties from

compounding an offence under Section 138 even at

the appellate stage of the proceedings. Accordingly,

we find no reason to reject the application under

Section 147 of the aforesaid Act even in a

proceeding under Article 136 of the Constitution."

12. It is evident that the permissibility of the compounding of

an offence is linked to the perceived seriousness of the offence

and the nature of the remedy provided. On this point we can

refer to the following extracts from an academic commentary

[Cited from: K.N.C. Pillai, R.V. Kelkar’s Criminal Procedure, 5th

edn. (Lucknow: Eastern Book Company, 2008) at p. 444]:-

"A crime is essentially a wrong against the society

and the State. Therefore, any compromise between

the accused person and the individual victim of the

crime should not absolve the accused from criminal

responsibility. However, where the offences are

essentially of a private nature and relatively not

quite serious, the Code considers it expedient to

13

recognize some of them as compoundable offences

and some others as compoundable only with the

permission of the court. …"

In a recently published commentary, the following

observations have been made with regard to the offence

punishable under Section 138 of the Act [Cited from: Arun

Mohan, Some thoughts towards law reforms on the topic of

Section 138, Negotiable Instruments Act – Tackling an

avalanche of cases (New Delhi: Universal Law Publishing Co.

Pvt. Ltd., 2009) at p. 5]

"… Unlike that for other forms of crime, the

punishment here (in so far as the complainant is

concerned) is not a means of seeking retribution,

but is more a means to ensure payment of money.

The complainant’s interest lies primarily in

recovering the money rather than seeing the drawer

of the cheque in jail. The threat of jail is only a

mode to ensure recovery. As against the accused

who is willing to undergo a jail term, there is little

available as remedy for the holder of the cheque.

If we were to examine the number of complaints

filed which were ‘compromised’ or ‘settled’ before the

final judgment on one side and the cases which

proceeded to judgment and conviction on the other,

we will find that the bulk was settled and only a

miniscule number continued."

14

13. It is quite obvious that with respect to the offence of

dishonour of cheques, it is the compensatory aspect of the

remedy which should be given priority over the punitive

aspect. There is also some support for the apprehensions

raised by the learned Attorney General that a majority of

cheque bounce cases are indeed being compromised or settled

by way of compounding, albeit during the later stages of

litigation thereby contributing to undue delay in justicedelivery.

The problem herein is with the tendency of litigants

to belatedly choose compounding as a means to resolve their

dispute. Furthermore, the written submissions filed on behalf

of the learned Attorney General have stressed on the fact that

unlike Section 320 of the CrPC, Section 147 of the Negotiable

Instruments Act provides no explicit guidance as to what stage

compounding can or cannot be done and whether

compounding can be done at the instance of the complainant

or with the leave of the court. As mentioned earlier, the

learned Attorney General’s submission is that in the absence

of statutory guidance, parties are choosing compounding as a

method of last resort instead of opting for it as soon as the

15

Magistrates take cognizance of the complaints. One

explanation for such behaviour could be that the accused

persons are willing to take the chance of progressing through

the various stages of litigation and then choose the route of

settlement only when no other route remains. While such

behaviour may be viewed as rational from the viewpoint of

litigants, the hard facts are that the undue delay in opting for

compounding contributes to the arrears pending before the

courts at various levels. If the accused is willing to settle or

compromise by way of compounding of the offence at a later

stage of litigation, it is generally indicative of some merit in the

complainant’s case. In such cases it would be desirable if

parties choose compounding during the earlier stages of

litigation. If however, the accused has a valid defence such as

a mistake, forgery or coercion among other grounds, then the

matter can be litigated through the specified forums.

14. It may be noted here that Section 143 of the Act makes an

offence under Section 138 triable by a Judicial Magistrate

First Class (JMFC). After trial, the progression of further legal

16

proceedings would depend on whether there has been a

conviction or an acquittal.

· In the case of conviction, an appeal would lie to the Court

of Sessions under Section 374(3)(a) of the CrPC;

thereafter a Revision to the High Court under Section

397/401 of the CrPC and finally a petition before the

Supreme Court, seeking special leave to appeal under

136 of the Constitution of India. Thus, in case of

conviction there will be four levels of litigation.

· In the case of acquittal by the JMFC, the complainant

could appeal to the High Court under Section 378(4) of

the CrPC, and thereafter for special leave to appeal to the

Supreme Court under Article 136. In such an instance,

therefore, there will be three levels of proceedings.

15. With regard to the progression of litigation in cheque

bouncing cases, the learned Attorney General has urged this

Court to frame guidelines for a graded scheme of imposing

costs on parties who unduly delay compounding of the offence.

It was submitted that the requirement of deposit of the costs

17

will act as a deterrent for delayed composition, since at

present, free and easy compounding of offences at any stage,

however belated, gives an incentive to the drawer of the

cheque to delay settling the cases for years. An application for

compounding made after several years not only results in the

system being burdened but the complainant is also deprived of

effective justice. In view of this submission, we direct that the

following guidelines be followed:-

THE GUIDELINES

(i) In the circumstances, it is proposed as follows:

(a) 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 the

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 the

accused.

18

(b) 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.

(c) 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.

(d) Finally, if the application for compounding is made

before the Supreme Court, the figure would increase to

20% of the cheque amount.

19

Let it also be clarified that any costs imposed in accordance

with these guidelines should be deposited with the Legal

Services Authority operating at the level of the Court before

which compounding takes place. For instance, in case of

compounding during the pendency of proceedings before a

Magistrate’s Court or a Court of Sessions, such costs should

be deposited with the District Legal Services Authority.

Likewise, costs imposed in connection with composition before

the High Court should be deposited with the State Legal

Services Authority and those imposed in connection with

composition before the Supreme Court should be deposited

with the National Legal Services Authority.

16. We are also in agreement with the Learned Attorney

General’s suggestions for controlling the filing of multiple

complaints that are relatable to the same transaction. It was

submitted that complaints are being increasingly filed in

multiple jurisdictions in a vexatious manner which causes

tremendous harassment and prejudice to the drawers of the

20

cheque. For instance, in the same transaction pertaining to a

loan taken on an installment basis to be repaid in equated

monthly installments, several cheques are taken which are

dated for each monthly installment and upon the dishonor of

each of such cheques, different complaints are being filed in

different courts which may also have jurisdiction in relation to

the complaint. In light of this submission, we direct that it

should be mandatory for the complainant to disclose that no

other complaint has been filed in any other court in respect of

the same transaction. Such a disclosure should be made on a

sworn affidavit which should accompany the complaint filed

under Section 200 of the CrPC. If it is found that such

multiple complaints have been filed, orders for transfer of the

complaint to the first court should be given, generally

speaking, by the High Court after imposing heavy costs on the

complainant for resorting to such a practice. These directions

should be given effect prospectively.

17. We are also conscious of the view that the judicial

endorsement of the above quoted guidelines could be seen as

21

an act of judicial law-making and therefore an intrusion into

the legislative domain. It must be kept in mind that Section

147 of the Act does not carry any guidance on how to proceed

with the compounding of offences under the Act. We have

already explained that the scheme contemplated under

Section 320 of the CrPC cannot be followed in the strict sense.

In view of the legislative vacuum, we see no hurdle to the

endorsement of some suggestions which have been designed to

discourage litigants from unduly delaying the composition of

the offence in cases involving Section 138 of the Act. The

graded scheme for imposing costs is a means to encourage

compounding at an early stage of litigation. In the status quo,

valuable time of the Court is spent on the trial of these cases

and the parties are not liable to pay any Court fee since the

proceedings are governed by the Code of Criminal Procedure,

even though the impact of the offence is largely confined to the

private parties. Even though the imposition of costs by the

competent court is a matter of discretion, the scale of costs

has been suggested in the interest of uniformity. The

competent Court can of course reduce the costs with regard to

22

the specific facts and circumstances of a case, while recording

reasons in writing for such variance. Bona fide litigants should

of course contest the proceedings to their logical end. Even in

the past, this Court has used its power to do complete justice

under Article 142 of the Constitution to frame guidelines in

relation to subject-matter where there was a legislative

vacuum.

18. The present set of appeals are disposed of accordingly.

………………………… CJI

(K.G. BALAKRISHNAN)

…………………………. J.

(P. SATHASIVAM)

…………………………. J.

(J.M. PANCHAL)

New Delhi

May 03, 2010

23

Yes the above citation is directive and accused can take its help

 High courts can give direction to lower courts in their area only.

court can suggest but not compel the parties to compromise the matters..  If the accused willing to pay the amount due under the cheque after issuing of the summons by the court, it is nothing but admitting the offence.Then  the magfistrate had got discretion to punish the accused for a period of one year or impose fine to the value of the  double amount of the cheque. It is noted point that the fine is not a compulsory punishment and only maximum amount was prescribed. But with regard to punishment of sentence the magistrate had given discretionary power depending the value of the cheque.It is important to note that the Magistrate had judisial discretion either imposing of punishment of sentence or fine (maximum twice the value of cheque amount)  or both.                            cherukula vijayakumar advocate tirupati

What was the need to revive the dead thread?

 

 

 

Regards,

 

Shonee Kapoor

harassed.by.498a@gmail.com