Nayak Vs. Ryot Seva Sahakari Bank Ltd  Insc 1238 (7 December 2007)
Thakker & Markandey Katju
APPEAL NO. 1679 OF 2007 ARISING OUT OF SPECIAL LEAVE PETITION (CRL.) NO. 6908
OF 2007 C.K. THAKKER, J.
Delay Condoned. Leave granted.
present appeal is filed against an order passed by the Court of Civil Judge
(Jr. Dvn.) and Judicial Magistrate First Class, Ankola on April 12, 2004 in
Criminal Case No.73 of 2001, confirmed by the Sessions Judge, Fast Track
Court-I, Karwar on March 24, 2005 in Criminal Appeal No.50 of 2004 as also
confirmed by the High Court of Karnataka, Bangalore on December 20, 2005 in
Criminal Revision Petition No.1003 of 2005.
Brief facts of the case are that the appellant herein was a member of Ryot Sewa
Sahakari Bank Ltd., Basgod, Taluka Ankola ('Complainant Bank' for short). He
had obtained a loan of Rs.20,000/- from the Complainant-Bank on April 3, 1998 for business. The amount was not
paid by the appellant. The appellant issued a cheque of Rs.24,000/- on October 13, 2000 in favour of the Complainant-Bank
and assured the Bank that it would be honoured. But when the cheque was
submitted for clearance, it was dishonored and returned to the drawer on December 22, 2000 with endorsement; "Loan account
due date is over and account is not in operation". The complainant,
therefore, issued a registered legal notice on December 26, 2000 which was duly served upon the accused-loanee on December 30, 2000. In spite of the notice, no payment
was made by the accused and hence a criminal case was filed by the Bank against
him under the Negotiable Instruments Act, 1881 (hereinafter referred to as 'the
Act'). A summons was issued to the accused for an offence punishable under
Section 138 of the Act. He pleaded not guilty to the charge and claimed to be
Trial Court on the basis of evidence adduced by the complainant Bank, held that
the accused had issued a cheque of Rs.24,000/- which was dishonored and even
after receipt of legal notice, he failed to pay the amount and thereby he had
committed an offence punishable under 138 of Act. The Court, hence, convicted
the accused and ordered him to undergo imprisonment for a period of six months.
The accused was also ordered to pay a sum of Rs.48,000/- as compensation within
one month from the date of the order. The Court ordered that out of the said
amount of compensation, Rs.43,000/- should be paid to the complainant towards
the compensation and Rs.5,000/- to be appropriated to the State. In default of
payment of compensation, the accused was ordered to undergo imprisonment for a
period of six months.
Being aggrieved by the order of conviction and sentence, the appellant
preferred an appeal. The Appellate Court confirmed the order of conviction and
sentence recorded by the Trial Court. It, however, reduced the amount of
compensation from Rs.43,000/- to Rs.30,000/- and fine from Rs.5,000/- to
Rs.3,000/-. Order of default- sentence was maintained.
aggrieved accused invoked Revisional Jurisdiction of the High Court under
Section 401 read with Section 397 of the Code of Criminal Procedure, 1973. The
High Court on July 13,
2005, passed an
interim order directing the accused to deposit the compensation-amount in the
Court. But the accused failed to comply with the said order.
the matter came up for hearing, the High Court, by the impugned order dated December 20, 2005 dismissed the Revision Petition
observing that there was no ground to interfere with the order passed by the
Trial Court and confirmed by the First Appellate Court. It also observed that
the petitioner-accused had not complied with the interim order passed on July 13, 2005.
there was no reason to admit the revision petition and accordingly it was
dismissed. The accused has challenged that order in this Court.
7. On November 12, 2007, the matter was placed for
admission-hearing. It was stated by the Learned Counsel for the appellant that
the appellant intended to pay the amount.
notice was issued to the other side. Pursuant to the notice, the respondent-
Bank appeared and affidavit is filed by General Manager, Ryot Sewa Sahakari
Bank Limited, Basgod, wherein it was stated that the appellant had paid an
amount of Rs.45,000/- towards final settlement of the claim of the respondent
Bank on July 25, 2007 and the Bank had no other claim against the appellant and
the matter has been settled amicably.
have heard the Learned Counsel for the parties. The Learned Counsel for the
appellant submitted that since the matter has been amicably settled between
parties and the amount of Rs.45,000/- has been paid to the Bank towards 'full
and final settlement' and no further claim has remained, the compromise may be
recorded, the appeal may be allowed and appellant-accused may be ordered to be
acquitted of the charge levelled and conviction recorded against him by setting
aside conviction as well as sentence.
Learned Counsel for the respondent- bank admitted that there was a compromise
between the parties and an amount of Rs.45,000/- had been accepted by the bank
towards final settlement of the dues against the appellant and no further claim
has been put forward by the respondent bank.
view of the fact that the matter has been settled and the amount of Rs.45,000/-
has been paid by the appellant and accepted by the bank as 'full and final
settlement' and there are no further dues by the bank, prima facie, there
should be no objection to grant the prayer of the accused and acquit him of the
offence with which he was charged and convicted by the Courts below.
is no doubt true that every crime is considered to be an offence against the
society as a whole and not only against an individual even though an individual
might have suffered thereby. It is, therefore, the duty of the State to take
appropriate action against the offender. It is equally the duty of a Court of
law administrating criminal justice to punish a criminal. But there are
offences and offences. Certain offences are very serious in which compromise or
settlement is not permissible. Some other offences, on the other hand, are not
so serious and the law may allow the parties to settle them by entering into a
compromise. The compounding of an offence signifies that the person against
whom an offence has been committed has received some gratification to an act as
an inducement for his abstaining from proceeding further with the case.
far as the Code of Criminal Procedure is concerned Section 320 deals with
offences which are compoundable, either by the parties without the leave of the
Court or by the parties but only with the leave of the Court. Sub-section (1)
of Section 320 enumerates the offences which are compoundable without the leave
of the Court, while sub- section (2) of the said section specifies the offences
which are compoundable with the leave of the Court. Sub-section (9) of Section
320 declares; "No offence shall be compounded except as provided by this
section". It is thus clear that offences not referred to in sub- sections
(1) and (2) of Section 320 and not included in the Table are not compoundable.
offences punishable under laws other than the Indian Penal Code also cannot be
the circumstances, a question may arise whether an offence punishable under
Section 138 of the Act which is a special law can be compounded. Whereas some
High Courts held that if the matter is settled between the parties, the offence
can be compounded, other High Courts took a contrary view.
Cranex Ltd. & Anr. v. Nagarjuna Finance Ltd. & Anr., (2000) 7 SCC 388,
a settlement had been entered between the parties during the pendency of appeal
in Sessions Court against an order of conviction and sentence recorded by the
Magistrate under section 138 of the Act. This Court directed the Appellate
Court to consider the settlement and to take appropriate action in accordance
O.P. Dholkia vs. State of Haryana & Anr., (2000) 1 SCC 762, an order of
conviction recorded by the Trial Court was upheld by the Appellate as well as Revisional Court.
however, a compromise had been arrived at between the parties and the entire
amount was paid to the complainant. It was, therefore, submitted before this
Court that the accused may be acquitted. The Learned Counsel appearing for the
State urged that when the conviction and sentence had been maintained by all
Courts, this Court need not show any indulgence. Though the Court observed that
there was 'some force' in the said contention, taking into account the nature
of offence and the fact that the complainant had compromised the matter,
permission was granted 'in the peculiar facts and circumstances' of the case
[see also Nambiram Veetil Pocker v. Stte of Kerala & Anr., (2003) 9 SCC
214]. It is thus clear that even though technically the provisions of Section
320 of the Code of Criminal Procedure did not apply to offences not covered by
the Indian Penal Code, the fact as to compromise between the parties and
payment of dues under Section 138 of the Act was considered a relevant fact and
compounding was allowed by the Court [vide Kishore Kumar v. J.K. Corporation
Ltd., (2004) 13 SCC 494;
Shyam Parsekar v. Baban @ Vishwanath, (2005) 4 SCC 162; K.J.B.L. Rama Reddy v. Annapurna Seeds & Anr., (2005) 10 SCC
Section 138 of the Act was inserted by the Banking, Public Financial
Institutions and Negotiable Instrument Law (Amendment) Act, 1988 (ACT 66 of
1988) to regulate financial promises in growing business, trade, commerce and
industrial activities of the country and the strict liability to promote
greater vigilance in financial matters. The incorporation of the provision is
designed to safeguard the faith of the creditor in the drawer of the cheque,
which is essential to the economic life of a developing country like India. The provision has been introduced
with a view to curb cases of issuing cheques indiscriminately by making
stringent provisions and safeguarding interest of creditors.
observed by this Court in Electronic Trade & Technology Development Corporation
Ltd. V. Indian Technologists & Engineers, (1996) 2 SCC 739, the object of
bringing Section 138 in the statute book is to inculcate faith in the efficacy
of banking operations and credibility in transacting business on negotiable
instruments. The provision is intended to prevent dishonesty on the part of the
drawer of negotiable instruments in issuing cheques without sufficient funds or
with a view to inducing the payee or holder in due course to act upon it.
thus seeks to promote the efficacy of bank operations and ensures credibility
in transacting business through cheques. In such matters, therefore, normally
compounding of offences should not be denied. Presumably, Parliament also
realized this aspect and inserted Section 147 by the Negotiable Instruments
(Amendment and Miscellaneous Provisions) Act,2002. (ACT 55 of 2002). The said
section reads thus: S.147. Offences to be compoundable. Notwithstanding
anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), every
offence punishable under this Act shall be compoundable.
Taking into consideration even the said provision (Section 147) and the primary
object underlying Section 138, in our judgment, there is no reason to refuse
compromise between the parties. We, therefore, dispose of the appeal on the
basis of the settlement arrived at between the appellant and the respondent.
For the foregoing reasons the appeal deserves to be allowed and is accordingly
allowed by holding that since the matter has been compromised between the
parties and the amount of Rs.45,000/- has been paid by the appellant towards
full and final settlement to the respondent-bank towards its dues, the
appellant is entitled to acquittal. The order of conviction and sentence
recorded by all courts is set aside and he is acquitted of the charge levelled