Case Note & Summary
The applicants, who were accused in a criminal complaint filed by the respondent-company under Section 138 of the Negotiable Instruments Act, 1881, challenged the order of the 2nd Additional Chief Judicial Magistrate, Nagpur, dated 03.11.2022, rejecting their application for compounding of the offence. The complaint alleged dishonour of a cheque of Rs. 15 lakhs issued by Castex Technologies Limited, of which the applicants were directors. The applicants had paid the entire cheque amount along with interest and costs to the complainant, but the Magistrate rejected the compounding application on the ground that the complainant did not consent. The High Court, after hearing both sides, observed that Section 147 of the NI Act makes the offence compoundable and that the consent of the complainant is not a prerequisite for compounding. The court relied on the Supreme Court judgments in Damodar S. Prabhu vs. Sayed Babalal and Meters and Instruments Private Limited vs. Kanchan Mehta, which held that once the accused pays the cheque amount with interest and costs, the offence can be compounded and the proceedings quashed. The court allowed the application, set aside the Magistrate's order, and quashed the criminal proceedings against the applicants.
Headnote
A) Criminal Law - Negotiable Instruments Act - Compounding of Offence - Section 138, 147 Negotiable Instruments Act, 1881 - The applicants, accused in a complaint under Section 138 NI Act, sought compounding after paying the full cheque amount of Rs. 15 lakhs with interest and costs. The Magistrate rejected the application citing lack of consent from the complainant. The High Court held that under Section 147 NI Act, the offence is compoundable, and the consent of the complainant is not mandatory. The court allowed the application and quashed the proceedings, relying on the guidelines in Damodar S. Prabhu vs. Sayed Babalal and Meters and Instruments Private Limited vs. Kanchan Mehta. (Paras 2-8)
Issue of Consideration
Whether the Magistrate can reject an application for compounding of an offence under Section 138 of the Negotiable Instruments Act, 1881, on the ground that the complainant does not consent, when the accused has paid the entire cheque amount along with interest and costs as per the guidelines laid down by the Supreme Court.
Final Decision
The High Court allowed the application, set aside the order dated 03.11.2022 passed by the 2nd Additional Chief Judicial Magistrate, Nagpur, and quashed the criminal proceedings against the applicants in the complaint under Section 138 of the Negotiable Instruments Act, 1881.
Law Points
- Compounding of offence under Section 138 NI Act
- Section 147 NI Act
- Consent of complainant not mandatory
- Payment of cheque amount with interest and costs
- Guidelines in Damodar S. Prabhu and Meters and Instruments Private Limited
Case Details
2023 LawText (BOM) (11) 86
Criminal Application (APL) No.566/2023
Mr. D.P. Singh, Mr. Avi Singh, Mr. K.N. Shukul (for applicants), Ms. Shamsi Haider (APP for State), Mr. Anand Jaiswal (Senior Advocate) with 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 the rejection of compounding application in a complaint under Section 138 of the Negotiable Instruments Act, 1881.
Remedy Sought
The applicants sought quashing of the criminal proceedings and compounding of the offence upon payment of the cheque amount.
Filing Reason
The applicants were aggrieved by the Magistrate's order rejecting their application for compounding of the offence under Section 138 NI Act.
Previous Decisions
The Magistrate rejected the compounding application on 03.11.2022 on the ground that the complainant did not consent.
Issues
Whether the Magistrate can reject a compounding application under Section 138 NI Act solely on the ground of lack of consent from the complainant when the accused has paid the entire cheque amount with interest and costs.
Submissions/Arguments
The applicants argued that the Magistrate failed to consider the law laid down by the Supreme Court in Damodar S. Prabhu vs. Sayed Babalal and Meters and Instruments Private Limited vs. Kanchan Mehta, which permit compounding upon payment of the cheque amount with interest and costs, irrespective of the complainant's consent.
The respondent-complainant opposed the compounding, contending that the consent of the complainant is necessary.
Ratio Decidendi
Under Section 147 of the Negotiable Instruments Act, 1881, an offence under Section 138 is compoundable. The consent of the complainant is not mandatory for compounding. Once the accused pays the entire cheque amount along with interest and costs as per the guidelines of the Supreme Court, the offence can be compounded and the proceedings quashed.
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 respondent-complainant filed a complaint under Section 138 of the Negotiable Instruments Act, 1881 against 12 accused, including the applicants. The applicants filed an application for compounding of the offence 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 order.
Acts & Sections
- Negotiable Instruments Act, 1881: 138, 147
