Bombay High Court
Varsha Tukaram Joshi And Another vs Sandeep Joglkishor Karwa on 13 February, 2025
2025:BHC-AUG:4946
921WP818-24 settlement of NI Act.odt
IN THE HIGH COURT OF JUDICATURE OF BOMBAY
BENCH AT AURANGABAD
921 CRIMINAL WRIT PETITION NO. 818 OF 2024
Ms. Varsha W/o Tukaram Joshi,
Age: 53 years, Occupation: Household,
R/o. Nageshwar Wadi, Ch. Sambhajinagar.
Through her Power of Attorney,
Mr. Tukaram S/o Devidasrao Joshi,
Age: 62 years, Occu: Business,
R/o. Nageshwar Wadi, Ch. Sambhajinagar ....PETITIONER
VERSUS
1. Mr. Sandeep S/o Jugalkishor Karwa,
Age: 52 years, Occu; Business,
R/o. Plot No.39, "Suraj", Ahinsanagar,
Ch. Sambhajinagar.
2. The State Of Maharashtra ....RESPONDENT
....
Mr. Shripad S. Kulkarni, Advocate for the Petitioner
Mr. Aditya N. Sikchi, Advocate for Respondent No.1
Mr. S. M. Ganachari, APP for the Respondent No.2-State
....
CORAM : Y. G. KHOBRAGADE, J.
DATE : 13.02.2025
ORAL JUDGMENT :-
1. Rule. Rule made returnable forthwith. With consent of
both the parties, heard finally at the stage of admission.
2. By the present Petition, the Petitioners have challenged
the Judgment and order dated 20.12.2022 passed by the learned
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Additional Sessions Judge, Court No.8 Aurangabad in Criminal Revision
No. 228 of 2022, thereby affirmed the order dated 21.07.2022 below
Exh.76 in SCC No. 4979 of 2015 passed by the learned JMFC Court
No.11, Aurangabad.
3. The Petitioner is the original accused and Respondent is the
original Complainant in SCC No. 4979 of 2015. For the sake of brevity, I
would like to refer parties to the present Petition in their original
capacity as "Complainant" and "Accused".
4. The Complainant filed a Criminal complaint SCC No. 4979
of 2015 for the offence punishable under Section 138 of the N.I. Act
alleging that, on 06.06.2015, the Accused issued two cheques Nos.
031165 and 031166 amount of Rs.1,00,000/- (One lakh) each in his
favour drawn on Bank of Baroda, Aurangabad for discharging legal
liabilities. Accordingly, he deposited both the cheques with his banker
HDFC Bank Padampura Station Road, Aurangabad, however, both the
cheques returned unpaid with bank memo dated 16.06.2015 on ground
of "Insufficient Fund". Thereafter, on 25.06.2015, he issued mandatory
notice under Section 138 of the N.I. Act and called upon the accused to
comply said notice within 15 days but the accused did not claim said
notice. Therefore, he prayed for awarding of punishment u/s 138 of
N.I. Act. Against the Accused.
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5. On 03.08.2015, the learned JMFC passed an order in SCC
No.4979 Of 2015 and issued process against the accused for the offence
punishable under Section 138 of the N.I. Act.
6. Needless to say that, after service of summons, the accused
appeared before the learned JMFC Court No.11, Aurangabad. On
03.01.2022, the Complainant and Accused have filed Joint Pursis and
prayed for referring the matter before the Mediator for settlement. On
the same day, the accused also filed Exh.69 an Application with prayer
for referring the matter to the Mediator. The Accused undertook that, he
shall pay amount of Rs.4,00,000/-(Four Lakh) towards final settlement
to the Complainant before 31.03.2022. The Complainant also agreed to
accept said amount towards final settlement. Therefore, the learned
JMFC passed an order below Exh. 69 observing that, considering nature
of the complaint and offence, the matter shall be referred to the
Mediator as per the willingness of both parties.
7. On 31.03.2022, the accused and the Complainant filed
Exhibit-73 Joint Pursis and stated that, as per settlement, the accused
agreed to pay Rs.4,00,000/- (Four Lakhs) to the Complainant but on
that day, the accused has only paid Rs.1,00,000/- (One Lakh) through
Phone-Pay and agreed to pay remaining amount by the next date i.e.,
20.04.2022. Again, on 20.04.2022, an amount of Rs.1,00,000/- (One
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Lakh) was paid to the Complainant through demand draft No. 000260
drawn on HDFC Bank. The accused had sought time to pay remaining
amount of Rs.2,00,000/-(Two Lakhs) till next date. Thereafter, on
05.05.2022, the accused and Complainant filed joint pursis Exhibit-75
stating that, he has handed over demand draft dated 04.05.2022 to the
amount of Rs.1,58,000/- and D.D. dated 05.05.2022 for amount of
Rs.17,000/- and remaining amount of Rs.25,000/- paid in cash, i.e.
Total amount of Rs.4,00,000/- (Four Lakhs) paid by the accused to the
Complainant. The Complainant put her endorsement about receipt of
cash of Rs.25,000/- at pursis Exhibit-75. Thereafter, the accused filed
Exhibit-76 an Application for disposal of the Complaint and acquittal on
account of making payment of settlement of Rs.4,00,000/- (Four Lakhs)
to the complainant towards full and final. The Complainant filed say
and resisted said application on ground that, there is delay while making
payment as per terms of compromise and he has suffered lot and spent
huge time to attend the Court proceeding.
8. On 21.07.2022, the learned JMFC passed an order
considering the law laid down in case of Damodar S. Prabhu Vs. Sayed
Babalal, 2010 (4) AIR Bom R 58 and held that, the accused failed to
obey the guidelines laid down in cited case and has not deposited
compounding charges. So also, in pursis nowhere mentioned that, the
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Complainant would withdraw the matter after receiving the amount.
9. Being aggrieved by the said order, the accused filed a
Criminal Revision Application No.228 of 2022. On 20.12.2022, the
learned Revisional Court passed the impugned order and dismissed the
Revision on the ground that, although the Accused and Complainant
settled the dispute, the accused did not adhere to the terms of
settlement within time frame.
10. The learned counsel for the Respondent/Complainant
canvassed in vehemence that, even after receipt of compensation with
cheque amount, unless the Complainant agreed to compound the
offence and to withdraw the Complaint, the Court cannot compel the
respondent/accused to compound the offence and to withdraw the
complaint.
11. In support of these submissions, the learned counsel for the
Respondent/Complainant relied on Raj Reddy Kallem Vs. The State of
Haryana and Others MANU/SC/0409/2024 = (2024) 8 SCC 588,
wherein the Hon'ble Supreme Court considered the case of Damodar S.
Prabhu cited (supra) as well as the case of K. M. Ibrahim Vs. K. P.
Mohammed and Another, (2010) 1 SCC 798 and O.P. Dholakia Vs. State
of Haryana and Another, (2000)1 SCC 762. and held thus:
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"Though compounding requires consent of both parties, even in absence of
such consent, the court, in the interests of justice, on being satisfied that the
complainant has been duly compensated, can in its discretion close the proceedings
and discharge the Accused.
In our opinion, Kanchan Mehta (supra) nowhere contemplates that
'compounding' can be done without the 'consent of the parties and even the above
observation of Kanchan Mehta (supra) giving discretion to the trial court to 'close the
proceedings and discharge the Accused', by reading Section 258¹ of Code of Criminal
Procedure, has been held to be 'not a good law' by this Court in the subsequent 5
judges bench judgment in Expeditious Trial of Cases Under Section 138 of NI Act,
1881, In re, MANU/SC/0284/2021: (2021) 16 SCC 1162.
All the same, in this particular given case even though the complainant has
been duly compensated by the Accused yet the complainant does not agree for the
compounding of the offence, the courts cannot compel the complainant to give
'consent' for compounding of the matter. It is also true that mere repayment of the
amount cannot mean that the Appellant is absolved from the criminal liabilities Under
Section 138 of the NI Act. But this case has some peculiar facts as well. In the present
case, the Appellant has already been in jail for more than 1 year before being released
on bail and has also compensated the complainant. Further, in compliance of the
order dated 08.08.2023, the Appellant has deposited an additional amount of Rs. 10
lacs. There is no purpose now to keep the proceedings pending in appeal before the
lower appellate court. Here, we would like to point out that quashing of a case is
different from compounding. This Court in JIK Industries Ltd? (Supra) distinguished
the quashing of case from compounding in the following words:
Quashing of a case is different from compounding. In quashing the court
applies it but in compounding it is primarily based on consent of the injured party.
Therefore, the two cannot be equated.
In our opinion, if we allow the continuance of criminal appeals pending
before Additional Sessions Judge against the Appellant's conviction then it would
defeat all the efforts of this Court in the last year where this Court had monitored this
matter and ensured that the complainant gets her money back."
12. The learned counsel for the Respondent further relied on
case of A. S. Pharma Pvt. Ltd. Vs. Nayati Medical Pvt. Ltd. And Others
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MANU/SC/0957/2024 = 2024 (3) Crimes 335(SC), wherein the
Hon'ble Apex Court observed in Paragraph No.18 as under:
"18. In the context of the issues involved another aspect of the matter also requires
consideration. The decision in Raj Reddy Kallem's case (supra), also stands on a
similar footing inasmuch as the complainant therein was duly compensated by the
Accused but the complainant did not agree for compounding the offence. After
observing that, Courts could not compel the complainant to give consent for
compounding the offence Under Section 138, N.I. Act, this Court in Raj Reddy
Kallem's case (supra) took note of the peculiar factual situation obtained and invoked
the power Under Section 142 of the Constitution of India to quash the proceeding
pending against the Appellant-Accused Under Section 138, N.I. Act. True that in Raj
Reddy Kallem's case it was despite the non- consent of the complainant-Respondent
that the proceedings were quashed against the Appellant therein, interalia, taking
note of the fact that the Accused therein had compensated the complainant and
furthermore deposited the additional amount, as has been ordered by this Court. We
have no doubt in holding that merely because taking into account such aspects and
circumstances this Court 'quashed' the proceedings by invocation of the power Under
Article 142 of the Constitution of India, cannot be a reason for 'compounding' an
offence Under Section 138, N.I. Act, invoking the power Under Section 482, Code of
Criminal Procedure and the power Under Section 147, Ν.Ι. Act, in the absence of
consent of the complainant concerned in view of the decision referred hereinbefore.
In this context, this is to be noted that the fact that this Court quashed the
proceedings Under Section 138, N.I. Act, Invoking the power Under Article 142 of the
Constitution of India can be no reason at all for High Courts to pass an order quashing
proceeding Under Section 138, N.I. Act, on the similar lines as the power Under
Article 142 of the Constitution of India is available only to the Supreme Court of
India."
13. He further relied on case of Rajneesh Aggarwal Vs. Amit J.
Bhalla MANU/SC/1462/2001 = AIR 2001 SC 518, wherein the Hon'ble
Supreme Court considered the questions and held that:
7. Having regard to the contentions raised by the counsel for the parties, two
questions really arise for our consideration:
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(1) Was the High Court justified in coming to the conclusion that the drawer has
not been duly served with notice for payment?
(2) Whether deposit of the entire amount covered by three cheques, while the
matter is pending in this Court, would make any difference?
8. So far as the first question is concerned, it is no doubt true that all the three
requirements under clauses (a), (b) and (c) must be complied with before the offence
under Section 138 of the Negotiable Instruments Act, can be said to have been
committed and Section 141 indicates as to who would be the persons, liable in the
event the offence is committed by a company. The High Court itself on facts, has
recorded the findings that conditions (a) and (b) under Section 138 having been duly
complied with and, therefore, the only question is whether the conclusion of the High
Court that condition (c) has not been complied with, can be said to be in accordance
with law. Mere dishonour of a cheque would not raise to a cause of action unless the
payee makes a demand in writing to the drawer of the cheque for the payment and
the drawer fails to make the payment of the said amount of money to the payee. The
cheques had been issued by M/s Bhalla Techtran Industries Limited, through its
Director Shri Amit Bhalla. The appellant had issued notice to said Shri Amit J. Bhalla,
Director of M/s Bhalla Techtran Industries Limited. Notwithstanding the service of the
notice, the amount in question was not paid. The object of issuing notice indicating
the factum of dishonour of the cheques is to give an opportunity to the drawer to
make payment within 15 days, so that it will not be necessary for the payee to
proceed against in any criminal action, even though the bank dishonoured the
cheques. It is Amit Bhalla, who had signed the cheques as the Director of M/s Bhalla
Techtran Industries Ltd. When the notice was issued to said Shri Amit Bhalla, Director
of M/s Bhalla Techtran Industries Ltd., It was incumbent upon Shri Bhalla to see that
the payments are made within the stipulated period of 15 days. It is not disputed that
Shri Bhalla has not signed the cheques, nor is it disputed that Shri Bhalla was not the
Director of the company. Bearing in mind the object of issuance of such notice, it must
be held that the notices cannot be construed in a narrow technical way without
examining the substance of the matter. We really fail to understand as to why the
judgment of this court in Bilakchand Gyanchand Co., MANU/SC/0201/1999:
1999CriLJ3498: will have no application. In that case also criminal proceedings had
been initiated against A Chinnaswami, who was the Managing Director of the
company and the cheques in question had been signed by him. In the aforesaid
premises, we have no hesitation to come to the conclusion that the High Court
committed error in recording a finding that there was no notice to the drawer of the
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cheque, as required under Section 138 of the Negotiable Instruments Act. In our
opinion, after the cheques were dishonoured by the bank the payee had served due
notice and yet there was failure on the part of the accused to pay the money, who had
signed the cheques, as the Director of the company. The impugned order of the High
Court, therefore, is liable to be quashed.
9. So far as the question of deposit of the money during the pendency of these
appeals is concerned, we may state that in course of hearing the parties wanted to
settle the matter in Court and it is in that connection, to prove the bona fide, the
respondent deposited the amount covered under all the three cheques in the Court,
but the complainant's counsel insisted that if there is going to be a settlement, then all
the pending cases between the parties should be settled, which was, however not
agreed to by the respondent and, therefore, the matter could not be settled. So far as
the criminal complaint is concerned, once the offence is committed, any payment
made subsequent thereto will not absolve the accused of the liability of criminal
offence, though in the matter of awarding of sentence, it may have some effect on the
Court trying the offence. But by no stretch of imagination, a criminal proceeding
could be quashed on account of deposit of money in the Court or that an order of
quashing of criminal proceeding, which is otherwise unsustainable in law, could be
sustained because of the deposit of money in this Court. In this view of the matter, the
so-called deposit of money by the respondent in this Court is of no consequence."
14. Needless to say that, in case of Damodar S. Prabhu cited
(supra), the Hon'ble Supreme Court held that, the offence punishable
under Section 138 of N.I Act is compoundable at any stage of the matter
even before the Supreme Court, however, while compounding or
compromise of the offence under Section 138 following guidelines have
been laid down which reads as follows:
THE GUIDELINES
(I) the circumstances, it is proposed as follows
(a) That directions can be given that the Writ of Summons be suitably modified
making it clear to (a) Thaised that he could make an application for compounding of
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the offences at the first of second hearing of the case and that if such an application is
made, compounding may be allowed by the court without imposing any costs on the
accused.
(b) If the accused does not make an application for compounding as aforesaid, then if
an application for compounding is made before the Magistrate at a subsequent stage,
compounding can be allowed subject to the condition that the accused will be
required to pay 10% of the cheque amount to be deposited as a condition for
compounding with the Legal Services Authority, or such authority as the Court deems
fit
(c) Similarly, if the application for compounding is made before the Sessions Court or
a High Court in revision or appeal, such compounding may be allowed on the
condition that the accused pays 15% of the cheque amount by way of costs
(d) Finally, if the application for compounding is made before the Supreme Court, the
figure would increase to 20% of the cheque amount
Let it also be clarified that any costs imposed in accordance with these
guidelines should be deposited with the Legal Services Authority operating at the level
of the Court before which compounding takes place For instance, in case of
compounding during the pendency of proceedings before a Magistrate's Court or a
Court of Sessions, such costs should be deposited with the District Legal Services
Authority. Likewise, costs imposed in connection with composition before the High
Court should be deposited with the State Legal Services Authority and those imposed
in connection with composition before the Supreme Court should be deposited with
the National Legal Services Authority.
In paragraph No.17, the Hon'ble Supreme Court held that, even
though the imposition of costs by the Competent Court is a matter of
discretion, the scale of costs has been suggested in the interest of
uniformity. The Competent Court may, of course, reduce the costs in
light of the specific facts and circumstances of a case, while recording
reasons in writing for such variance. Bona-fide litigants should of course
contest the proceedings to their logical end.
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15. In M/s New Win Export & Anr. -Vs- A. Subramaniam,
[2024] 7 S.C.R. 1225 : 2024 INSC 535, the Hon'ble Supreme Court
considered the issue, whether the conviction under Section 138 of the
Negotiable Instruments Act, 1881 can be quashed because of the parties
have settled the dispute among themselves by entering into a settlement
agreement. In this circumstance it is held that, the Appellants and
Respondent-Complainant have entered into a settlement agreement
dated 27.01.2024, therefore it is clear that, the parties have settled the
dispute among themselves as per the agreement and the appellants have
paid Rs.5,25,000 to the Respondent-Complainant, who had agreed to
settle the dispute and paid the said amount. The complainant does not
have any objection if the conviction of the appellants is set aside. The
settlement agreement can be treated to be compounding of the offence,
when the accused and complainant have reached a settlement
permissible by law.
16. In case-in-hand, it prima facie appears that, the
Complainant filed a Criminal complaint SCC No. 4979 of 2015 under
Section 138 of the N.I. Act on ground of dishonoured of two cheques
Nos. 031165 and 031166 amount of Rs.1,00,000/- (One lakh) each
dated 06.06.2015. After service of summons, the Petitioner/Accused
appeared before the learned Judicial Magistrate. It is not in dispute
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that, on 31.03.2022, the accused and Complainant filed Exhibit-73 Joint
Pursis and agreed to settle the dispute. It is a matter of record that, as
per the settlement, the Petitioner / accused agreed to pay Rs.4,00,000/-
(Four Lakhs) to the Complainant and paid Rs.1,00,000/- (One Lakh)
through Phone-Pay and agreed to pay remaining amount by the next
date i.e., 20.04.2022. Accordingly, on 20.04.2022, the Petitioner
/accused paid Rs.1,00,000/- (One Lakh) to the Respondent /
Complainant through demand draft No. 000260 drawn on HDFC Bank.
No doubt, the petitioner/accused had sought time to pay remaining
amount of Rs.2,00,000/-(Two Lakhs) till next date and the Respondent/
complainant had consented for extension of further period. Thereafter,
on 05.05.2022, the accused and Complainant filed joint pursis Exhibit-
75 stating therein about handed over demand draft dated 04.05.2022
for Rs.1,58,000/- and D.D. dated 05.05.2022 for Rs.17,000/- and
remaining amount of Rs.25,000/- paid in cash, i.e. Total amount of
Rs.4,00,000/- (Four Lakhs). The Complainant put her endorsement at
Pursis Exhibit-75 and acknowledged receipt of cash of Rs.25,000/-.
Thereafter, the accused filed Exhibit-76 an Application for disposal of the
Complaint and acquittal on account of making payment of settlement of
Rs.4,00,000/- (Four Lakhs) to the complainant towards full and final.
The Respondent/complainant has not disputed about settlement amount
of Rs.4,00,000/- (Four lakhs) in lieu of dishonoured of two cheques of
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Rs. 1 lac each as per Joint Pursis Exhibit-73.
17. No doubt, as per Pursis Exhibit-73, the accused failed to pay
Rs.4,00,000/- on or before 31.03.2022 but said period was extended
time to time with consent of the Respondent/Complainant. Ultimately,
on 05.05.2022, the petitioner/accused paid entire amount to the
Respondent/Complainant. Needless to say that, the petitioner has not
filed specific application for compounding of offence u/s 138 of NI Act
as provided under Sec. 320 of Cr.P.C. read with Section 147 of N.I. Act
but as per the law laid down in M/s New Win Export & Anr., cited
(supra), the settlement agreement can be treated to be compounding of
the offence, when the accused and complainant have reached a
settlement permissible by law. Since, the Petitioner/accused already
paid amount of Rs. 4,00,000/- (Four Lakhs) i.e., double to the cheque
amount, therefore, continuation of the Criminal Proceeding as against
the Petitioner/accused would certainly amounts to abuse of process of
law and no cause of action survives. Since, the Petitioner Accused
compounded the offence prior to framing of the charge, therefore, as
guidelines laid down in case of Damodar S. Prabhu, cited supra, the
Petitioner accused is permitted to deposit 10% of both the cheques
amount i.e., Rs.20,000/- towards compounding charges with the District
Legal Services Authority, Aurangabad on or before 07.03.2025.
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18. In view of the above discussion I am of the view that, the
impugned order dated 20.12.2022 passed by the learned Revisional
Court arising out of order dated 21.07.2022 passed by the learned JMFC
Below Exhibit-76 in S.C.C. No.4979 of 2015 is hereby quashed and set
aside. Resultantly, the complaint bearing S.C.C. No.4979 of 2015
pending on the file of learned JMFC, Aurangabad is hereby quashed and
set aside. Accordingly, Rule is made absolute in above terms. No order as
to costs.
[ Y. G. KHOBRAGADE, J. ]
HRJadhav
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