Guidelines for compounding of offence under NI Act when accused is already convicted and serving sentence

In KHOKHAR ILIYAS BISMILLAKHAN vs STATE OF GUJARAT, the learned trial court had convicted the applicant for cheque dishonour imposing one year Simple Imprisonment and also directed the applicant to pay compensation to the original complainant to the tune of Rs.13,50,000/-, in default to which, further imprisonment of six months was directed. The original complainant thereafter instituted Criminal Appeal for enhancement of sentence along with Criminal Misc. Application (stamp) No.8069 of 2020, for Leave to appeal under Section 378 of the Code. Subsequent thereto, with the intervention of prestigious people of society and friends and relatives, the applicant and the respondent no.2-original complainant arrived at a settlement/compromise and the same has also been reduced in writing in form of affidavit filed by original complainant dated 21.12.2020. The applicant submitted that the dispute and grievances have been amicably resolved between the parties and in connection whereof, settlement affidavit dated 09.03.2020 has also been executed and the same has also been produced before the High Court. Thus, he submitted that the impugned judgment and order and further proceedings in that regard, may be quashed and set aside.

The Gujarat High Court observed that as per Section 147 of the Negotiable Instrument Act, notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), every offence punishable under this Act shall be compoundable.

Allowing the compounding, the court referred to the judgment of the Supreme Court in Damodar S. Prabhu V/s Sayed Babalal H., [(2010) 5 SCC 663], where it has been observed 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 will not be applicable in the strict sense since the latter is meant for the specified offences under the Penal Code, 1860.

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 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 Jaws other than the Penal Code also cannot be compounded, However, since Section 147 was inserted by way of an amendment to a special Jaw, the same will override the effect of Section 320(9) CrPC, especially keeping in mind that Section 147 carries a non obstante clause.

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 justice delivery. 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 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.

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.

(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.

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.

We are also conscious of the view that the judicial endorsement of the above quoted guidelines could be seen as 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 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.