Date: 5 October 2017

Composition of the bench: Single judge bench of hon’ble Justice Adarsh Kumar Goel. 

Facts in brief: 

15 July 2016: One Kanchan Mehta filed a complaint alleging that the appellant (in the instant case) were to pay her a monthly amount under an agreement. 

A cheque to the tune of ₹29,319/- dated 31st March 2016 had bounced due to insufficient funds in the account. 

The same was not paid by the appellant despite a legal notice being served. 

9 November 2016: The Magistrate observed that the case could not be tried summarily since the final order could entail a prison sentence of more than one year. 

On the same day, notice of accusation was served to the appellant under Section 251 of CrPC (Substance of accusation to be stated) 

The appellant firm was ready to pay the cheque amount. 

However, the complainant refused to accept the demand draft. 

The case was adjourned for evidence. 

12 Jan 2017: The appellant filed an application under Section 147 of the Negotiable Instruments Act, 1881 (hereinafter ‘1881 Act’) which stipulates every offence under the 1881 Act to be compoundable. The counsel for appellant placed reliance on Damodar S. Prabhu versus Sayed Babalal. 

The application was dismissed by the Court, reliance was placed on JIK Industries Ltd. versus Amarlal Jumani wherein the consent of the complainant for compounding the offence was deemed essential. Hence, offences could not be compounded unilaterally. 

The High Court did not find any ground to interfere with the order of the Magistrate. 

Hence, the present Special leave petition was filed under article 136 of the Constitution. 

Rationale behind s. 138 of Negotiable Instruments Act, 1881

The Court commenced by delineating the steps taken to enhance the acceptability of cheques in the settlement of liabilities and the importance of Section 138 and other provisions of chapter XVII of the 1881 act in the same. 

The Negotiable Instruments (Amendment and Miscellaneous Provisions) Act, 2002 was promulgated inter-alia, to simplify the procedure under the 1881 Act. 

Under the 2002 amendment, sections 143-147 were inserted in the 1881 Act. This meant  that- 

• Complaints could be tried summarily except when the Magistrate felt that a sentence of more than one year had to be passed. 
• Even when sentence of more than one year has to be passed, s. 143 provides sufficient flexibility to ensure quick flow of the trial proceedings. 
• The trials should be conducted on a day to day basis as far as possible. 
• The Magistrate shall endeavour to finish the trial within six months. 
• The affidavit of the complainant can be read as evidence. 
• Bank slip/memo can give rise to presumption of dishonor. 

Nature and Gravamen and Objective of offences under S. 138 of Negotiable Instruments Act, 1881

The Court observed that offences under s. 138 are a civil wrong, made compoundable pursuant to the 2002 amendment. 

Presumption under s. 139 of the 1881 Act (Presumption in favour of holder) leads to the burden of proof being on the accused. 

The standard of proof is “preponderance of probabilities” 

The objective of the provision is twofold-

1. Punitive 
2. Compensatory: The complainant receives the amount of cheque by way of compensation. To clear the interest amount and costs, the compensation awarded is double the cost of cheque. 

Thus, the objective is not merely penal but also to make the accused honour the promise, in other words, the punitive element enforces the compensatory element. 

Application for Compounding of offence. 

As mentioned before, according to the established jurisprudence, consent of complainant was essential for compounding the offence. 

If the application was moved at the first or the second hearing, the Court ought to allow compounding of the offence.  

If the application was moved later, the consent of the complainant became essential. 

Change in jurisprudence post statutory scheme 2002 amendment as considered in Mandvi Cooperative Bank & J.V. Baharuni.

The statutory changes brought by the 2002 amendment have been enumerated earlier, this of course, translated into jurisprudential changes as enumerated in the two cases-

Section 143 of the Act confers implied power on the Magistrate to discharge the accused if the accused tenders the cheque amount with interest and reasonable cost of litigation as assessed by the Court.

The court has to balance the rights of the complainant and the accused and also to enhance access to justice. Basic object of the law is to enhance credibility of the cheque transactions by providing speedy remedy to the complainant without intending to punish the drawer of the cheque whose conduct is reasonable or where compensation to the complainant meets the ends of justice. 

Power under s. 258 CrPC (power to stop proceedings in certain cases) is to be used with certain deviation as maybe necessary for speedy trial under s. 143 of the 1881 Act. 

Thus, even in absence of consent, the Court, in the interests of justice, on being satisfied that the complainant has been duly compensated, can exercise its discretion to close the proceedings and discharge the accused.

Furthermore, even though compounding at the initial stage has to be encouraged,  it is not debarred at a later stage subject to appropriate compensation as may be found acceptable to the parties or the Court.

In Indian Bank Association v. Union of India, the Court upheld the creative interpretation of s. 138 for further  simplifying the procedure by the Bombay, Calcutta and Delhi High Courts. 

The Supreme Court had observed- 

“23. Many of the directions given by the various High Courts, in our view, are worthy of emulation by the criminal courts all over the country dealing with cases under Section 138 of the Negotiable Instruments Act, for which the following directions are being given: 

23.1. The Metropolitan Magistrate/Judicial Magistrate (MM/JM), on the day when the complaint under Section 138 of the Act is presented, shall scrutinise the complaint and, if the complaint is accompanied by the affidavit, and the affidavit and the documents, if any, are found to be in order, take cognizance and direct issuance of summons.

 23.2. The MM/JM should adopt a pragmatic and realistic approach while issuing summons. Summons must be properly addressed and sent by post as well as by email address obtained from the complainant. The court, in appropriate cases, may take the assistance of the police or the nearby court to serve notice on the accused. For notice of appearance, a short date is to be fixed. If the summons is received back unserved, immediate follow-up action be taken.

23.3. The court may indicate in the summons that if the accused makes an application for compounding of offences at the first hearing of the case and, if such an application is made, the court may pass appropriate orders at the earliest.

23.4. The court should direct the accused, when he appears to furnish a bail bond, to ensure his appearance during trial and ask him to take notice under Section 251 CrPC to enable him to enter his plea of defence and fix the case for defence evidence, unless an application is made by the accused under Section 145(2) for recalling a witness for cross-examination.

23.5. The court concerned must ensure that examination-in-chief, cross-examination and re-examination of the complainant must be conducted within three months of assigning the case. The court has the option of accepting affidavits of the witnesses instead of examining them in the court. The witnesses to the complaint and the accused must be available for cross-examination as and when there is direction to this effect by the court.

However, general directions were not issued so as not to deprive the power of the Magistrate under s. 205 CrPC (power of Magistrate to dispense with personal attendance of accused)

Conducting trial in the absence of accused. 

In Bhaskar Industries Ltd. v. Bhiwani Industries and Apparels Ltd. 

The Court considered the hardships caused due to personal attendance of the accused especially when the jurisdiction of the Court is far from the area of residence. 

The Court held that even in absence of the accused the evidence can be recorded in presence of the Counsel under s. 237 CrPC

The Court opined that ss. 205 and 317 of the CrPC (provision for inquiries and trial being held in the absence of the accused in certain case trial) can be invoked. 

Further considerations to be accounted for while invoking provisio 2 of s. 143 of the 1881 Act. 

The SC posited an alternate approach which would obviate the need for a prison sentence of more than one year, ensuring that the accused could be tried summarily and the trial would conclude in an expedited manner. 

The Court proposed that Section 357(3) of Cr.P.C. could be invoked  to award suitable compensation with a default sentence under Section 64 IPC in tandem with powers of recovery under Section 431 Cr.P.C. The scheme of the 1881 Act and subsequent legislative amendments, the Court opined, was to follow a summary procedure except when compensation under Section 357(3) is considered inadequate, having regard to the amount of the cheque, the financial capacity and the conduct of the accused or any other

Ratio Decidendi 

• Issuing of summons. 

In every complaint under Section 138 of the Act, it may be desirable that the complainant gives his bank account number and if possible e-mail ID of the accused. If e-mail ID is available with the Bank where the accused has an account, such Bank, on being required, should furnish such e-mail ID to the payee of the cheque. 

• Early resolution of trial. 

In every summons, issued to the accused, it may be indicated that if the accused deposits the specified amount, which should be assessed by the Court having regard to the cheque amount and interest/cost, by a specified date, the accused need not appear unless required and proceedings may be closed subject to any valid objection of the complainant . If the accused complies with such summons and informs the Court and the complainant by e-mail, the Court can ascertain the objection, if any, of the complainant and close the proceedings unless it becomes necessary to proceed with the case. 

• Power of Magistrate to dispense with physical appearance of the accused. 

In case the trial has to proceed, the accused’s presence can be required, unless the presence is otherwise exempted subject to such conditions as may be considered appropriate. The accused, who wants to contest the case, must be required to disclose specific defence for such a contest.

• Power of Magistrate to explore other possible remedies. 

 It will be open to the Court to explore the possibility of settlement. It will also be open to the Court to consider the provisions of plea bargaining. 

• Endeavour for timely conclusion of trial.  

Subject to this, the trial can be on a day to day basis and endeavour must be to conclude it within six months. The guilty must be punished at the earliest as per law and the one who obeys the law need not be held up in proceedings for long unnecessarily.

• Endeavour for de-congestion of courts by conducting trial online.  

The hon’ble court left it open to the High Courts to consider and lay down categories of cases where proceedings or part thereof can be conducted online by designated courts or otherwise. The SC opined that cases similar to the present case could be held completely online. 

Denouement

The Court in the present case took cognizance of the 213th report of the law commission threw light on the sheer amount of pending cases in the Indian courts. 

The report submitted in 2008, nine year prior to the present judgement, pegged the number of pending cases at a whopping 1.8 crores, out of this, nearly 20% of the cases related to Section 138 of the Negotiable Instruments Act, 1881. 

Such multiplicity of pending cases failed to give effect to the legislative scheme of the 1881 Act, which envisaged greater confidence in cheques as financial Instruments to settle liabilities. 

The Court in the instant case stuck a pragmatic balance, safeguarding the rights of accused without being prejudicial to the legitimate right of the complainant over their due compensation. 

The flexibility accorded in the procedural aspects to ensure early resolution of the trial making computing of the offence easier can be reasonably expected to go a long way in ensuring quick resolution of cases bringing down the amount of pending cases under s. 138.