Damodar S. Prabhu v. Sayed Babalal H.
Supreme Court of India, 3 May 2010, 3 judges
The Court allowed compounding of Section 138 offences under Section 147 of the Negotiable Instruments Act and laid down guidelines imposing graded costs on accused persons who seek compounding at later stages of litigation.
Facts
The parties had commercial dealings, and five cheques issued by the appellant were dishonoured. The appellant was convicted under Section 138 of the Negotiable Instruments Act, and the matters reached the Supreme Court by special leave from judgments of the High Court of Bombay at Goa. The parties then settled and sought compounding under Section 147. The Solicitor General, appearing as amicus curiae, pointed to the case as an example of compounding sought only at a very late stage, and proposed guidelines to discourage such delay. The Court noted, citing the 213th Report of the Law Commission, that more than 38 lakh cheque bounce cases were pending as of October 2008.
Questions before the Court
- Can an offence under Section 138 of the Negotiable Instruments Act be compounded at a late stage of litigation, including before the Supreme Court?
- Should the Court frame guidelines to encourage compounding of such offences at an early stage, given that Section 147 is silent on the stage and manner of compounding?
What the Court held
- Since the parties had settled and the respondent did not oppose, the offence was compounded and the appellant's conviction in each impugned judgment was set aside.
- Because of its non obstante clause, Section 147 governs compounding of offences under the Negotiable Instruments Act; the scheme of Section 320 CrPC does not apply in the strict sense, and Section 147 overrides Section 320(9).
- Dishonour of a cheque is a regulatory offence mainly affecting private parties, and the compensatory aspect of the remedy should be given priority over the punitive aspect.
- Guidelines: the summons should tell the accused that compounding at the first or second hearing is allowed without costs. Later compounding requires deposit of 10% of the cheque amount before the Magistrate, 15% before the Sessions Court or High Court, and 20% before the Supreme Court, with the Legal Services Authority at that level.
- The competent court may reduce the costs for recorded reasons. Prospectively, the complainant must disclose on a sworn affidavit that no other complaint has been filed on the same transaction. Given the legislative vacuum in Section 147, the Court saw no hurdle to endorsing these guidelines, recalling its earlier use of Article 142 in such a vacuum.
Why it matters
The order lays down the graded scheme of costs for compounding cheque dishonour offences under Section 147 of the Negotiable Instruments Act according to the stage at which compounding is sought, to reduce arrears in Magistrates' courts. It also requires a sworn disclosure against multiple complaints on the same transaction, and gives priority to the compensatory aspect of the remedy for the Section 138 offence.
In the Court's words
Copied from the official judgment; each passage links to its page.
“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.”
“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.”
“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.”
Provisions interpreted
Case and bench
- Parties
- Damodar S. Prabhu v. Sayed Babalal H.
- Case
- Criminal Appeal No. 963 of 2010 (arising out of SLP (Crl.) No. 6369 of 2007) with Criminal Appeal Nos. 964-966 of 2010
- Decided
- 3 May 2010
- Bench
- K.G. Balakrishnan (CJI), P. Sathasivam, J.M. Panchal
- Opinions
- Unanimous. Order of the Court signed by all three Judges; no individual author is named.
Questions on this case
2 questions in live Law Maker papers mention this case. Practise them with the landmark judgments questions.