Brief Facts
- In 2012, Respondent No.2-complainant paid Rs. 1.55 crores advance to Appellant’s company for supply of a fiber laser cutting machine, which was never delivered. The Appellant issued 5 cheques for refund, which were dishonoured, leading to proceedings u/s 138 NI Act and FIR u/s 406, 420, 120B IPC.
- The Appellant was convicted by the Trial Court u/s 138, NI Act. During pendency of appeal before the Additional Sessions Judge, the Parties reached a settlement before the Lok Adalat, whereafter the Additional Sessions Judge passed the settlement order dated 05.12.2015, whereunder the Appellant agreed to pay back the entire amount of Rs. 1.55 Crore and compound or quash offences, failing which the appeal would be decided on merits. Upon default, the Trial Court declared the settlement frustrated.
- Eventually, under directions of the Supreme Court, the appellant deposited remaining `20 lakhs and an additional `10 lakhs towards interest, thereby making full restitution.
- However, the complainant later refused to compounding, resulting in continuation of criminal proceedings despite full repayment and over a year of incarceration. Hence, appeal is filed before the Supreme Court.
Issues
- Whether the proceedings under Section 138 NI Act and IPC sections should be quashed despite the complainant’s refusal to compound the case?
- Whether the Supreme Court can invoke Article 142 to quash criminal proceedings?
Held
- The Supreme Court allowed the appeal and quashed all criminal proceeding in exercise of powers under Article 142 of the Constitution of India. The findings of the Court are as under:
- Distinguished between compounding (requires consent) and quashing (court’s discretion), relied on JIK Industries Limited & Ors. vs Amarlal V. Jamuni & Anr. – 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.
- This Court has time and again reiterated that in cases of section 138 of NI Act, the accused must try for compounding at the initial stages instead of the later stage, however, there is no bar to seek the compounding of the offence at later stages of criminal proceedings including after conviction, like the present case (See: K.M Ibrahim v. K.P Mohammed & Anr. (2010) 1 SCC 798 and O.P Dholakia v. State of Haryana & Anr. (2000) 1 SCC 762). In the case at hand, initially, both sides agreed to compound the offence at the appellate stage but the appellant could not pay the amount within the time stipulated in the agreement and the complainant now has shown her unwillingness towards compounding of the offence, despite receiving the entire amount. The appellant has paid the entire Rs.1.55 crore and further Rs.10 lacs as interest.
- As far the requirement of ‘consent’ in compounding of offence under section 138 of NI Act is concerned, this Court in JIK Industries Limited & Ors. v. Amarlal V. Jamuni & Anr. (2012) 3 SCC 255 denied the suggestion of the appellant therein that ‘consent’ is not mandatory in compounding of offences under Section 138 of NI Act.
- 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. 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.
- As far as FIR case under Sections 406, 420, 120B of IPC against the appellant is concerned, in any case we do not find any merit in the allegations that the appellant from the very beginning had the intention of cheating the complainant. It is a fact that the appellant failed to procure and supply the ‘machine’ even after taking the advance money from the complainant but there is nothing on record to show that the appellant had any ill intention of cheating or defrauding the complainant from the very inception. The transaction between the parties was purely civil in nature which does not attract criminal law in any way.
- Even though complainant is unwilling to compound the case but, considering the totality of facts and circumstances of the present case which we have referred above, we are of the considered view that these proceedings must come to an end. We, therefore, allow this appeal and set aside the impugned order of High Court dated 29.11.2022. We also quash all the criminal proceedings qua appellant arising out of FIR No.35 of 2014 at P.S Mahesh Nagar, Ambala pending before Chief Judicial Magistrate, Ambala. Since, criminal appeals filed by present appellant against his conviction under Section 138 of the NI Act are also pending, we deem it appropriate that the said proceedings should also be quashed. Hence, in order to do complete justice, we exercise our powers under Article 142 of the Constitution of India, and hereby quash all the pending criminal appeals on the file of Additional Sessions Judge, Ambala Cantt., against the appellant in the present matter, and set aside the conviction and sentence awarded to the appellant by the trial court.
- We also direct the trial court to hand over the Demand Drafts totalling the amount of Rs.30 lacs to the complainant which were deposited in the trial court in pursuance of this Court’s orders, if not handed-over till now.
Relevant Para No.
12,13,14 and15