The Controversy Gets Murkier - Can The Accused Seek Compounding Of An Offence For Cheque Dishonour Without The Consent Of The Complainant?

• Published date: 18 August 2020
• Subject Matter: Finance and Banking, Litigation, Mediation & Arbitration, Financial Services, Trials & Appeals & Compensation
• Law Firm: IndusLaw
• Author: Mr Lomesh Kiran Nidumuri

The Controversy Gets Murkier - Can The Accused Seek Compounding Of An Offence For Cheque Dishonour Without The Consent Of The Complainant?

1. INTRODUCTION

The object of introducing sections 138 to 142 to the Negotiable Instruments Act, 1881¹ (the "NI Act") was to ensure efficacy of banking operations and credibility of transacting in negotiable instruments. However with the passage of time, the number of pending cheque dishonour cases increased exponentially. The Negotiable Instruments (Amendment and Miscellaneous) Act, 2002², among others introduced Section 147 to the NI Act that made offences for dishonour of cheques compoundable. One of the reasons for this amendment was to ensure speedy disposal of these cases that were causing a huge burden on the judicial system. In 2008, the 213th Law Commission of India³ had recommended setting up fast track courts at magisterial levels with the objective of resolving more than 3.5 million cheque dishonour cases across India⁴. However, the situation did not improve, and the cases have only piled up over the years.

Traditionally, the concept of compounding a criminal offence requires the consent of the aggrieved or the injured party. Section 320 of the Code of Criminal Procedure, 1973 ("CrPC") provides for compounding of offences. The table provided in the said provision makes it clear that the compounding of the named offences can take place only with the consent of a person who is either a complainant or who has been injured or aggrieved. Section 147 of the NI Act⁵ has a non-obstante clause that makes an offence of cheque dishonour compoundable, notwithstanding the provisions of the CrPC.

When the complainant and the accused agree to settle the case amicably, the accused can avail the remedy under Section 147 of the NI Act and compound the offence. However, the difficulty arises in situations where the accused appears before the magistrate court and expresses intention to pay up the value of the cheque amount and have the offence compounded, but the complainant refuses to accept it. In such a situation, can the magistrate permit the accused to unilaterally compound the offence, despite objections of the complainant? This question has remained unresolved despite several judicial precedents. It will be interesting to analyse the law as it evolved over a period of time.

2. THE JUDGMENTS OF COURTS

A three-judge bench of the Supreme Court of India (the "Supreme Court") in Damodar S Prabhu v. Sayed Babalal H.⁶ ("Damodar") allowed the compounding of cheque dishonour offence since both parties had arrived at a settlement. However, the court considered the larger question of the huge pendency of cheque dishonour cases and the enormous strain that it was putting on the judicial system. Mr. Goolam E. Vahanvati (then Attorney General of India) was appointed as the amicus curiae. He suggested that the court frames guidelines to ensure that the parties seek compounding of the offence at an early stage instead of availing it at a belated stage after a protracted litigation - causing delays, expenditure, and strain on the judicial system. The following guidelines were framed - (a) if the accused makes an application for compounding (the "Application") in the first or second hearing of the case, compounding may be allowed without the imposition of costs (b) if the Application is filed at any other stage, accused will be required to pay 10% of the cheque amount as costs to the legal services authority or any such authority as the court deems fit (c) if the Application is filed before the sessions court or the high court, the compounding may be allowed on the...