Court’s Decision: The Himachal Pradesh High Court, in its judgment, allowed the compounding of the offence under Section 147 of the Negotiable Instruments Act, 1881. The Court quashed the conviction and sentence imposed by the trial court and upheld by the appellate court. The petitioner was acquitted of the charge under Section 138 of the Negotiable Instruments Act after the settlement between the parties.
Facts: The case stems from a business transaction that occurred in 2017, where the complainant sold apple boxes to the petitioner for a sum of Rs. 4,10,990. To settle the financial transaction, the petitioner issued a cheque for the same amount, dated 30th October 2017, from his account. However, when the cheque was presented for encashment, it was dishonored due to insufficient funds in the petitioner’s account. In response, the complainant issued a notice to the petitioner, but despite receiving the notice, the petitioner failed to make payment within the prescribed time frame.
As a result, the complainant filed a criminal complaint under Section 138 of the Negotiable Instruments Act, which deals with the dishonor of cheques. The trial court convicted the petitioner and sentenced him to one year of simple imprisonment and a fine of Rs. 8,20,000 as compensation. The petitioner appealed the decision to the appellate court, but his appeal was dismissed, and the lower court’s judgment was upheld. This led the petitioner to file a criminal revision petition in the High Court.
Issues: The primary issue in the case was whether the petitioner, after having been convicted and sentenced by the lower courts, could have the conviction quashed and the sentence set aside based on a settlement with the complainant, under Section 147 of the Negotiable Instruments Act.
Petitioner’s Arguments: The petitioner argued that he had reached a settlement with the complainant. The entire amount of compensation had been paid to the complainant, and therefore, there was no need to pursue the case any further. The petitioner requested the High Court to quash the conviction and acquit him of the charge under Section 138 of the Negotiable Instruments Act, based on the settlement.
Respondent’s Arguments: The complainant, on the other hand, supported the petitioner’s request for compounding the offence. He confirmed that the petitioner had paid the entire amount of compensation due under the judgment, and he no longer wished to pursue the case. The complainant stated that he had no objection to the quashing of the conviction and sentence, and he expressed his willingness to have the offence compounded.
Analysis of the Law: The court examined the provisions of the Negotiable Instruments Act, 1881, particularly Section 147, which allows offences under the Act to be compounded. Section 147 of the Act specifically provides that any offence under the Act is compoundable, meaning it can be settled between the parties without the need for further legal proceedings. This provision takes precedence over the general provisions of the Code of Criminal Procedure (Cr.P.C.), allowing compounding of such offences even after a conviction has been made.
The court also referred to several important precedents, particularly the Supreme Court’s judgment in Damodar S. Prabhu v. Sayed Babalal H. (2010), which clarified the application of Section 147, emphasizing that the offence under Section 138 could be compounded if both parties agreed to the settlement. Moreover, the Supreme Court’s ruling in K. Subramanian v. R. Rajathi (2010) was cited, which allowed the compounding of the offence even after conviction had been recorded, as long as the parties reached an agreement.
Precedent Analysis: The court relied on the Damodar S. Prabhu v. Sayed Babalal H. (2010) judgment, which established that under Section 147, the compounding of offences could take place at any stage of the proceedings, including after conviction. The court emphasized that once the parties arrived at a settlement and both parties expressed no objection to the compounding, the court had the discretion to accept the compounding and set aside the judgment of conviction.
In the case of K. Subramanian v. R. Rajathi (2010), the Supreme Court had elaborated on the process and guidelines for compounding offences under Section 138 of the Negotiable Instruments Act. The Court had ruled that even after the conviction, a compromise between the parties could be accepted, further reinforcing the principle that the compounding of offences under the Act was a flexible and amicable approach to resolving such disputes.
Court’s Reasoning: The court’s reasoning was grounded in the legal principle that offences under the Negotiable Instruments Act, particularly under Section 138, can be compounded at any stage, including after conviction, provided both parties agree to the settlement. The petitioner had complied with the compensation payment, and the complainant had no objection to the quashing of the conviction. Based on these facts, the High Court found no reason to prevent the compounding of the offence.
The court also took into account the financial situation of the petitioner and considered a reduced compounding fee in light of his circumstances, in accordance with the guidelines provided by the Supreme Court. The Court noted that the payment of a compounding fee, based on a graded scheme, was designed to encourage the resolution of such matters at an early stage to save judicial time.
Conclusion: The High Court quashed the conviction and set aside the sentence imposed by the trial court. The petitioner was acquitted of the charge under Section 138 of the Negotiable Instruments Act. The judgment of conviction, dated 01.06.2023, and the order of sentence, dated 17.07.2023, passed by the trial court, as well as the appellate court’s affirmation, were all quashed, leading to the petitioner’s acquittal.
The High Court also allowed the compounding of the offence, taking into account the settlement reached between the petitioner and the complainant and the fact that the complainant had no objection to the compounding. The petitioner was directed to pay a reduced compounding fee of Rs. 20,545 (5% of the cheque amount) to the H.P. State Legal Services Authority within four weeks.
Implications: This judgment underscores the flexibility of the law under Section 147 of the Negotiable Instruments Act, which allows for the compounding of offences even after a conviction. It reinforces the idea that judicial time and resources can be saved by allowing parties to resolve matters amicably. Moreover, it highlights the Supreme Court’s guidelines on imposing compounding fees and the court’s discretion to reduce fees based on the financial condition of the petitioner.
The ruling also clarifies that the negotiation of settlements in cheque dishonour cases is encouraged, and compounding such offences after conviction is a viable remedy, provided that both parties are in agreement.
