Recently, the Himachal Pradesh High Court dealt with a Criminal Miscellaneous Petition filed by a person accused in a cheque bounce case. The applicant sought exemption from depositing a 15% compounding fee because of his financial hardship, stating that he has to look after a large family, including his ageing parents.
The bench presided by Justice Rakesh Kainthla took note of the Supreme Court judgement in the case titled M.P. State Legal Services Authority v. Prateek Jain, 2014 Latest Caselaw 571 SC, wherein it was observed that the parties should compound the offence at the earliest to save time of the court and not after they are driven to the wall. Lamenting how the cases under Section 138 of the NI Act proceed in India, the apex court had observed,
“It was noticed that there was a tendency on the part of the accused persons to drag on these proceedings and resort to the settlement process only at a stage when the accused persons were driven to the wall. It is for this reason that most of the complaints filed result in compromise or settlement before the final judgment, on the one hand, and even in those cases where judgment is pronounced and conviction is recorded, such cases are settled at the appellate stage.
…For this reason, the Court framed the guidelines (in Damodar S. Prabhu v. Sayed Babalal H., 2010 Latest Caselaw 332 SC) permitting compounding with the imposition of varying costs depending upon the stage at which the settlement took place in a particular case.”
The Guidelines provide a graded scheme for imposing costs as a means to encourage compounding at an early stage of litigation but they also give discretion to the court concerned to reduce or waive off the costs with regard to specific facts and circumstances of the case while recording reasons in writing about such variance.
Hence, the Himachal Pradesh HC deduced that if the matter is to be settled, the same should be done in the Court of first instance at the first opportunity.
In the present case, the accused had borrowed an amount of ₹1,00,000, 15% of which would be ₹15,000 only, which “cannot be said to be an exorbitant amount by any stretch of imagination.”
The HC noted that the applicant had compromised the matter with the complainant showing that he was in a position to pay ₹1,00,000. The Court further noted,
“If he could afford the luxury of litigation before the learned Trial Court, Appellate Court and before this Court, there is no reason why he should not pay 15% of the cheque amount ordered to be deposited. This amount of composition fee was provided as a deterrent to dissuade persons like the applicant from indulging in the luxury of litigation and dragging the complainant to the different Courts, and settling the matter when no other option is left with him. Any relaxation in the imposition of the amount would encourage people like the applicant to defeat the purpose of imposing the composition fee.”
Thus, the High Court found no reason to exempt the accused from the payment of 15% of the cheque amount as ordered to be paid by the Supreme Court in Damodar S. Prabhu. Hence, the application was dismissed with the direction to deposit the 15% amount with the State Legal Services Authorities.
Case Title: Yashwant v. Amar Singh
Coram: Justice Rakesh Kainthla
Date of Pronouncement: 9th May 2025
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