Case Note & Summary
The applicants, who were accused nos. 4, 5, 7, 8, 10, and 11 in a complaint under Section 138 of the Negotiable Instruments Act, 1881, filed by M/s MPM Private Limited, challenged the order dated 03.11.2022 passed by the learned 2nd Additional Chief Judicial Magistrate, Nagpur, rejecting their application for compounding of the offence. The complaint alleged dishonour of a cheque for Rs. 15 lakhs issued by Castex Technologies Limited and its directors. The applicants had paid the full cheque amount to the complainant and sought compounding. The Magistrate rejected the application without considering the law laid down by the Supreme Court in Damodar S. Prabhu vs. Sayed Babalal (2010) 5 SCC 663 and Meters and Instruments Private Limited vs. Kanchan Mehta (2018) 1 SCC 560. The High Court, after hearing both sides, found that the Magistrate's order was unsustainable. The court noted that once the cheque amount is paid, the offence under Section 138 NI Act is compoundable, and the guidelines in Damodar S. Prabhu permit compounding at any stage. The High Court set aside the Magistrate's order and allowed the compounding application, directing the Magistrate to pass consequential orders. The court also made the rule absolute.
Headnote
A) Criminal Law - Negotiable Instruments Act - Compounding of Offence - Section 138 NI Act - Guidelines in Damodar S. Prabhu - The applicants, accused in a complaint under Section 138 NI Act, sought compounding after paying the full cheque amount of Rs. 15 lakhs. The Magistrate rejected the application. The High Court held that once the cheque amount is paid, the offence is compoundable and the Magistrate ought to have permitted compounding in line with the Supreme Court guidelines. (Paras 2-5)
B) Criminal Procedure - Compounding - Power of Magistrate - Section 147 NI Act - The court observed that the power to compound under Section 147 of the NI Act is available at any stage, and the Magistrate's rejection was erroneous. The High Court set aside the order and allowed the compounding application. (Paras 4-5)
Issue of Consideration
Whether the Magistrate was justified in rejecting the application for compounding of the offence under Section 138 of the Negotiable Instruments Act, 1881, despite the applicants having paid the full cheque amount to the complainant.
Final Decision
The High Court allowed the criminal application, set aside the Magistrate's order dated 03.11.2022, and allowed the compounding application. The Magistrate was directed to pass consequential orders. Rule made absolute.
Law Points
- Compounding of offence under Section 138 NI Act
- Guidelines in Damodar S. Prabhu
- Payment of cheque amount as condition for compounding
- Power of Magistrate to permit compounding at any stage
Case Details
2023 LawText (BOM) (11) 85
Criminal Application (APL) No. 566/2023
Mr D.P. Singh, Mr K.N. Shukul for applicants; Ms Shamsi Haider, APP for Respondent no.1-State; Mr Anand Jaiswal, Senior Advocate assisted by Mr S.G. Joshi for respondent no.2
Anuradha Kapoor, Sanjay Chhabra, Arvind Dham, Gautam Malhotra, Bhavya Sehra, Sanjay Arora
State of Maharashtra, M/s MPM Private Limited
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Nature of Litigation
Criminal application challenging rejection of compounding application under Section 138 NI Act
Remedy Sought
Setting aside of Magistrate's order rejecting compounding and allowing the compounding application
Filing Reason
Magistrate rejected the application for compounding despite full payment of cheque amount
Previous Decisions
Order dated 03.11.2022 passed by 2nd Additional Chief Judicial Magistrate, Nagpur rejecting compounding application
Issues
Whether the Magistrate was justified in rejecting the compounding application despite full payment of cheque amount
Whether the guidelines in Damodar S. Prabhu and Meters and Instruments Private Limited apply
Submissions/Arguments
Applicants argued that they had paid the full cheque amount and were entitled to compounding as per Supreme Court guidelines
Respondent no.2 opposed the application, but the court noted that once payment is made, compounding should be allowed
Ratio Decidendi
Once the full cheque amount is paid in a complaint under Section 138 of the Negotiable Instruments Act, 1881, the offence is compoundable and the Magistrate must permit compounding in accordance with the guidelines laid down by the Supreme Court in Damodar S. Prabhu vs. Sayed Babalal.
Judgment Excerpts
The applicants/original accused in Criminal Complaint filed by the non-applicant no.2-Company under Section 138 of the Negotiable Instruments Act, 1881 are aggrieved by the order dated 03.11.2022 passed by the learned 2nd Additional Chief Judicial Magistrate, Nagpur, whereby the applicants’ application seeking compounding of the offence upon full payment of cheque amount has been rejected.
Having heard both sides at length, it transpires that the non-applicant no. 2 filed complaint u/s 138 of the NI Act, accusing as many as 12 entities/ individuals to be responsible for dishonour of cheque amounting to Rs. 15 lakhs.
Procedural History
The complaint under Section 138 NI Act was filed by M/s MPM Private Limited against 12 accused. The applicants (accused nos. 4,5,7,8,10,11) filed an application for compounding after paying the full cheque amount. The Magistrate rejected the application on 03.11.2022. The applicants then filed the present criminal application before the High Court challenging the rejection.
Acts & Sections
- Negotiable Instruments Act, 1881: 138, 147
