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CASE NO.: Appeal (crl.)  1679 of 2007

PETITIONER: VINAY DEVANNA NAYAK

RESPONDENT: RYOT SEVA SAHAKARI BANK LTD

DATE OF JUDGMENT: 07/12/2007

BENCH: C.K. THAKKER & MARKANDEY KATJU

JUDGMENT: J U D G M E N T

CRIMINAL APPEAL NO. 1679 OF 2007 ARISING OUT OF SPECIAL LEAVE PETITION (CRL.) NO. 6908 OF 2007

C.K. THAKKER, J.

1.              Delay Condoned.  Leave granted. 2.              The 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. 3.              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 tried. 4.              The 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  

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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. 5.              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. 6.              The 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.   When 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.  Thus, 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.   Accordingly, 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. 8.              We 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

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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. 9.              The 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.   10.             In 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. 11.             It 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. 12.             So 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.   Similarly, offences punishable under laws other  than the Indian Penal Code also cannot be  compounded. 13.             In 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

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parties, the offence can be compounded, other  High Courts took a contrary view. 14.             In 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 with law. 15.             In 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.   Thereafter, 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;  Shailesh Shyam Parsekar v. Baban @ Vishwanath,  (2005) 4 SCC 162; K.J.B.L. Rama Reddy v.  Annapurna Seeds & Anr., (2005) 10 SCC 632]. 16.             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. 17.             As 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

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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.   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.\027 Notwithstanding anything contained in  the Code of Criminal Procedure, 1973  (2 of 1974), every offence punishable  under this Act shall be compoundable.

18.             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. 19.             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 against him. 20.             Ordered accordingly.