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Sunday, September 28, 2014

Sec.138 N.I.Act - Sec.147 of N.I.Act - compromise before Lokadalat - in compromises court has got jurisdiction to relax the guidelines mentioned in Damodar S. Prabhu case in suitable cases - rejected as 15% costs not deposited as per Apex court judgement held in Damodar S. Prabhu v. Sayed Babalal H., (2010) 5 SCC 663 - High court confirmed the same - Apex court held that since Section 147 of the Act did not carry any guidance on how to proceed with compounding of the offences under the Act and Section 320 of the Code of Criminal Procedure, 1973 could not be followed in strict sense in respect of offences pertaining to Section 138 of the Act, there was a legislative vacuum which prompted the Court to frame those guidelines to achieve the following objectives: (i) to discourage litigants from unduly delaying the composition of offences in cases involving Section 138 of the Act; (ii) it would result in encouraging compounding at an early stage of litigation saving valuable time of the Court which is spent on the trial of such cases; and (iii) even though imposition of costs by the competent Court is a matter of discretion, the scale of cost had been suggested to attain uniformity. At the same time, the Court also made it abundantly clear that the concerned Court would be at liberty to reduce the costs with regard to specific facts and circumstances of a case, while recording reasons in writing for such variance.What follows from the above is that normally costs as specified in the guidelines laid down in the said judgment has to be imposed on the accused persons while permitting compounding. There can be departure therefrom in a particular case, for good reasons to be recorded in writing by the concerned Court. It is for this reason that the Court mentioned three objectives which were sought to be achieved by framing those guidelines, as taken note of above. It is thus manifestly the framing of “Guidelines” in this judgment was also to achieve a particular public purpose. Here comes the issue for consideration as to whether these guidelines are to be given a go by when a case is decided/settled in the Lok Adalat? Our answer is that it may not be necessarily so and a proper balance can be struck taking care of both the situations. Having regard thereto, we are of the opinion that even when a case is decided in Lok Adalat, the requirement of following the guidelines contained in Damodar S. Prabhu (supra) should normally not be dispensed with. However, if there is a special/specific reason to deviate therefrom, the Court is not remediless as Damodar S. Prabhu (supra) itself has given discretion to the concerned Court to reduce the costs with regard to specific facts and circumstances of the case, while recording reasons in writing about such variance. Therefore, in those matters where the case has to be decided/settled in the Lok Adalat, if the Court finds that it is a result of positive attitude of the parties, in such appropriate cases, the Court can always reduce the costs by imposing minimal costs or even waive the same. For that, it would be for the parties, particularly the accused person, to make out a plausible case for the waiver/reduction of costs and to convince the concerned Court about the same. This course ofaction, according to us, would strike a balance between the two competing but equally important interests, namely, achieving the objectives delineated in Damodar S. Prabhu (supra) on the one hand and the public interest which is sought to be achieved by encouraging settlements/resolution of case through Lok Adalats. = CIVIL APPEAL NO. 8614 OF 2014 (arising out of Special Leave Petition (Civil) No. 38519 of 2012) |MADHYA PRADESH STATE LEGAL | | |SERVICES AUTHORITY |.....APPELLANT(S) | |VERSUS | | |PRATEEK JAIN & ANR. |.....RESPONDENT(S) = 2014 - Sept. Month - http://judis.nic.in/supremecourt/filename=41902

   Sec.138 N.I.Act - Sec.147 of N.I.Act - compromise before Lokadalat - in compromises court has got jurisdiction to relax the guidelines mentioned in Damodar S. Prabhu case in suitable cases -  rejected as 15% costs not deposited as per Apex court judgement held in Damodar S. Prabhu v. Sayed Babalal H., (2010) 5 SCC  663 - High court confirmed the same - Apex court held that since Section 147 of the Act  did not carry any guidance on how to proceed with compounding  of  the  offences under the Act and  Section 320 of the Code of Criminal Procedure, 1973  could not be followed in strict  sense  in  respect  of  offences   pertaining  to Section 138 of the Act, there was a legislative vacuum  which  prompted  the Court to frame those guidelines to achieve the following objectives:
(i)   to discourage  litigants  from  unduly  delaying  the  composition  of
offences in cases involving Section 138 of the Act;
(ii)  it would result in  encouraging  compounding  at  an  early  stage  of
litigation saving valuable time of the Court which is spent on the trial  of
such cases; and
(iii) even though imposition of costs by the competent Court is a matter  of
discretion, the scale of cost had been suggested to attain uniformity.
            At the same time, the Court also made it abundantly  clear  that the concerned Court would be at liberty to reduce the costs with  regard  to specific facts and circumstances of  a  case,  while  recording  reasons  in writing for such variance.What follows from the above is that  normally  costs  as  specified  in  the guidelines laid down in the said judgment has to be imposed on  the  accused persons while permitting compounding.   There can be departure  therefrom  in
a particular case, for good  reasons  to  be  recorded  in  writing  by  the concerned Court.  
It is for this  reason  that  the  Court  mentioned  three objectives which were sought to be achieved by framing those guidelines,  as taken note of above.   It is thus manifestly the framing of  “Guidelines”  in this judgment was also to achieve a particular public purpose.   
Here  comes the issue for consideration as to whether these guidelines are to  be  given
a go by when a case is decided/settled in the  Lok  Adalat?  Our  answer  is that it may not be necessarily so and a proper balance can be struck  taking care of both the situations. Having regard thereto, we are of the  opinion  that  even  when  a  case  is decided  in  Lok  Adalat,  the  requirement  of  following  the   guidelines contained in Damodar S. Prabhu (supra)  should  normally  not  be  dispensed with.  However, if there is a special/specific reason to deviate  therefrom, the Court is not remediless as Damodar S. Prabhu (supra)  itself  has  given discretion to the concerned  Court  to  reduce  the  costs  with  regard  to specific facts and circumstances of the case,  while  recording  reasons  in writing about such variance.   Therefore, in those  matters  where  the  case has to be decided/settled in the Lok Adalat, if the Court finds that  it  is a result of positive attitude of the parties,  in  such  appropriate  cases, the Court can always reduce the costs by  imposing  minimal  costs  or  even waive the same.  For that, it would be for  the  parties,  particularly  the accused person, to make out a plausible case  for  the  waiver/reduction  of
costs and to convince the concerned Court about the same.   This  course  ofaction, according to us, would strike a balance between  the  two  competing but  equally  important  interests,   namely,   achieving   the   objectives delineated in Damodar S. Prabhu (supra) on  the  one  hand  and  the  public interest   which   is    sought    to    be    achieved    by    encouraging settlements/resolution of case through Lok Adalats. =

 Essentially the lis  was  between  respondent  Nos.  1  and  2.
Respondent No.1 had filed a complaint under Section 138  of  the  Negotiable
Instruments Act,  1881  (hereinafter  referred  to  as  the  'Act')  against
respondent No.2.  
Matter reached before the Additional Sessions  Judge  in
the form of criminal appeal.  During the pendency of the  said  appeal,  the
matter was settled between the parties.
On their  application,  the  matter was referred to Mega Lok Adalat.
However, the concerned  Presiding  Officer
in the Lok Adalat did not give his imprimatur to the said settlement in  the
absence of deposit made as per the direction given in the  judgment of  this
Court in Damodar S. Prabhu v. Sayed Babalal H., (2010) 5 SCC  663.
Against
the order of Additional  Sessions  Judge,  a  writ  petition  was  filed  by
respondent No.2 but the same is also dismissed by the High Court,  accepting
the view taken by the Additional Sessions Judge.=

When the matter was placed before the  Lok  Adalat,  the  Presiding  Officer
refused to act upon the settlement  recorded  between  the  parties  on  the
ground that the accused person had not deposited 15% amount  of  the  cheque
for compounding of matter at  the  appeal  stage  as  per  “The  Guidelines”
contained in the judgment of this Court in the case  of  Damodar  S.  Prabhu
(supra).  
The exact order passed is reproduced below:
“30.07.2011

The matter produced before the bench of Lok Adalat No.1.

Appellant along with Shri N.S. Yadav, Advocate.

Non-Applicant along with Shri Mohan Babu Mangal Advocate.

The instant matter is related to the appeal  filed  against  the  conviction
order passed under Section 138  of  Negotiation  (sic)  of  Instrument  Act,
wherein, both parties, being  appeared  along  with  their  counsels,  while
filing application for compromise, have requested to  mitigate  the  matter.
But, the defendant/accused has not deposited 15  percent  amount  of  cheque
for mitigation of matter at the appeal stage according to  the  guide  lines
of judgment dated 3.5.2010 passed in Criminal Appeal  No.  963/2010  in  the
matter of Damodar M. Prabhu Vs.  Sayyad  Baba  Lal  passed  by  the  Hon'ble
Supreme Court, in  the  District  Legal  Services  Authority,  due  to  said
reason, it is not lawful to grant permission of mitigation of the matter  to
both sides.  Hence, the compromise application is hereby dismissed.

The matter  be  returned  back  to  the  Regular  Court  for  abrogation  in
accordance with law.”
=

    In the opinion of the Court,
since Section 147 of the Act  did
not carry any guidance on how to proceed with compounding  of  the  offences
under the Act and
Section 320 of the Code of Criminal Procedure, 1973  could
not be followed in strict  sense  in  respect  of  offences   pertaining  to
Section 138 of the Act,
there was a legislative vacuum  which  prompted  the
Court to frame those guidelines to achieve the following objectives:
(i)   to discourage  litigants  from  unduly  delaying  the  composition  of
offences in cases involving Section 138 of the Act;
(ii)  it would result in  encouraging  compounding  at  an  early  stage  of
litigation saving valuable time of the Court which is spent on the trial  of
such cases; and
(iii) even though imposition of costs by the competent Court is a matter  of
discretion, the scale of cost had been suggested to attain uniformity.
         
At the same time, the Court also made it abundantly  clear  that
the concerned Court would be at liberty to reduce the costs with  regard  to
specific facts and circumstances of  a  case,  while  recording  reasons  in
writing for such variance.

What follows from the above is that  normally  costs  as  specified  in  the
guidelines laid down in the said judgment has to be imposed on  the  accused
persons while permitting compounding.
There can be departure  therefrom  in
a particular case, for good  reasons  to  be  recorded  in  writing  by  the
concerned Court.
It is for this  reason  that  the  Court  mentioned  three
objectives which were sought to be achieved by framing those guidelines,  as
taken note of above.
It is thus manifestly the framing of  “Guidelines”  in
this judgment was also to achieve a particular public purpose.  
Here  comes
the issue for consideration as to
whether these guidelines are to  be  given
a go by when a case is decided/settled in the  Lok  Adalat?  
Our  answer  is
that it may not be necessarily so and a proper balance can be struck  taking
care of both the situations.

Having regard thereto, we are of the  opinion  that  even  when  a  case  is
decided  in  Lok  Adalat,  the  requirement  of  following  the   guidelines
contained in Damodar S. Prabhu (supra)  should  normally  not  be  dispensed
with.  However, if there is a special/specific reason to deviate  therefrom,
the Court is not remediless as Damodar S. Prabhu (supra)  itself  has  given
discretion to the concerned  Court  to  reduce  the  costs  with  regard  to
specific facts and circumstances of the case,  while  recording  reasons  in
writing about such variance.
Therefore, in those  matters  where  the  case
has to be decided/settled in the Lok Adalat, if the Court finds that  it  is
a result of positive attitude of the parties,  in  such  appropriate  cases,
the Court can always reduce the costs by  imposing  minimal  costs  or  even
waive the same.  For that, it would be for  the  parties,  particularly  the
accused person, to make out a plausible case  for  the  waiver/reduction  of
costs and to convince the concerned Court about the same.
This  course  of
action, according to us, would strike a balance between  the  two  competing
but  equally  important  interests,   namely,   achieving   the   objectives
delineated in Damodar S. Prabhu (supra) on  the  one  hand  and  the  public
interest   which   is    sought    to    be    achieved    by    encouraging
settlements/resolution of case through Lok Adalats.

Having straightened the  position  in  the  manner  above,  insofar  as  the
present case is concerned, as we find that the parties had  already  settled
the matter and the purpose of going to the Lok Adalat was  only  to  have  a
rubber stamp of the Lok Adalat in the form of its imprimatur thereto, we  do
not find any error in the impugned judgment, though we are  giving  our  own
reasons in support of the  conclusion  arrived  at  by  the  High  Court  in
dismissing the writ petition filed by respondent No.2,  while  straightening
the approach that should be  followed  henceforth  in  such  matters  coming
before the Lok Adalats.

2014 - Sept. Month - http://judis.nic.in/supremecourt/filename=41902
                                                           REPORTABLE

                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                       CIVIL APPEAL NO.  8614 OF 2014
      (arising out of Special Leave Petition (Civil) No. 38519 of 2012)


|MADHYA PRADESH STATE LEGAL               |                               |
|SERVICES AUTHORITY                       |.....APPELLANT(S)              |
|VERSUS                                   |                               |
|PRATEEK JAIN & ANR.                      |.....RESPONDENT(S)             |


                               J U D G M E N T


A.K. SIKRI, J.
                 Leave granted.

Madhya Pradesh State Legal Services Authority,  the  appellant  herein,  has
filed the instant appeal challenging the propriety of orders dated  February
27, 2012 passed by the High Court of Madhya Pradesh  in  Writ  Petition  No.
1519 of 2012, which was filed by one  Rakesh  Kumar  Jain  (respondent  No.2
herein) impleading  Prateek  Jain  (respondent  No.1  herein)  as  the  sole
respondent.  Essentially the lis  was  between  respondent  Nos.  1  and  2.
Respondent No.1 had filed a complaint under Section 138  of  the  Negotiable
Instruments Act,  1881  (hereinafter  referred  to  as  the  'Act')  against
respondent No.2.    Matter reached before the Additional Sessions  Judge  in
the form of criminal appeal.  During the pendency of the  said  appeal,  the
matter was settled between the parties.  On their  application,  the  matter
was referred to Mega Lok Adalat.  However, the concerned  Presiding  Officer
in the Lok Adalat did not give his imprimatur to the said settlement in  the
absence of deposit made as per the direction given in the  judgment of  this
Court in Damodar S. Prabhu v. Sayed Babalal H., (2010) 5 SCC  663.   Against
the order of Additional  Sessions  Judge,  a  writ  petition  was  filed  by
respondent No.2 but the same is also dismissed by the High Court,  accepting
the view taken by the Additional Sessions Judge.

From the aforesaid, it would be clear that the matter in issue  was  between
respondent Nos. 1 and 2.  The appellant comes in picture  only  because  the
parties had approached the Mega Lok Adalat organised by the appellant.   The
reason for filing the present appeal is the apprehension  of  the  appellant
that if the settlement arrived at in the Lok Adalats  are  not  accepted  by
the Courts, one of  the  essential  function  and  duty  of  Legal  Services
Authority  cast  upon  by  the  Legal   Services   Authorities   Act,   1987
(hereinafter referred to as the '1987  Act')  would  be  greatly  prejudiced
and, therefore, it is  necessary  to  straighten  the  law  on  the  subject
matter. Acknowledging the significance of  the  issue  involved,  permission
was granted to the appellant to file the special leave petition  and  notice
was issued in the special leave petition on December  06,  2012.   Operation
of the impugned order of the High Court was also  stayed  in  the  following
words:
“In the meantime, having regard  to  the  objects  to  be  achieved  by  the
provisions of the Legal Services Authorities Act,  1987,  the  operation  of
the order passed by the Lok  Adalat-I,  Gwalior,  Madhya  Pradesh,  on  30th
July, 2011, and that of the High Court  impugned  in  this  petition,  shall
remain stayed.”

Notice has been duly served upon both the respondents, but neither  of  them
have put in appearance.  Be that as it may, since we are concerned with  the
larger question raised in this appeal, we hard the learned counsel  for  the
appellant  in  the  absence  of  any  representation  on  the  part  of  the
respondents.

With the aforesaid gist of the controversy involved, we now proceed to  take
note of the relevant facts in some detail.

As pointed out above, there was some dispute between respondent Nos.  1  and
2.  Nature of the dispute is not reflected from  the  papers  filed  by  the
appellant.  However, since it pertains to a complaint  filed  under  Section
138 of the Act, one can safely infer that the complaint  was  filed  because
of dishonour of the cheque.  It also  appears  from  the  record  that  this
complaint was filed by respondent  No.1  against  respondent  No.2  and  had
resulted in some conviction/adverse order against  respondent  No.2,  though
exact nature of the orders passed  by  the  learned  Magistrate  is  not  on
record.  Be that as it may, respondent No.2 had  filed  the  appeal  against
the order of the Magistrate in the Court of Additional Sessions Judge.

During the pendency of this appeal, a joint application was  filed  by  both
the parties stating that a compromise had  taken  place  between  them  with
mutual consent and they have reestablished their relationship and wanted  to
maintain the same cordial relation in future as well.  On that basis it  was
stated in the application that  respondent  No.1  herein  did  not  want  to
proceed against respondent No.2 and wanted the appeal to be disposed  of  on
the basis of compromise by filing a compromise deed  in  the  appeal.   This
application  was  filed  under  Section  147  of  the  Act   which   permits
compounding of such offences.  We would like to  point  out  at  this  stage
that on what terms the parties had settled the matter is not  on  record  as
compromise deed has not been filed.

When this application came up for  hearing  on  July  30,  2011  before  the
learned appellate Court, counsel for both the  parties  requested  that  the
matter be forwarded to the Mega Lok Adalat which was being organized on  the
same date.  On this application, following order was passed by  the  learned
Additional Sessions Judge:
“30.07.2011

            xx         xx         xx

An application under section 147 Negotiation (sic) Instrument Act  filed  on
behalf of both sides for compromise  and  request  is  made  to  direct  the
matter be taken up before the Lok Adalat organized today's date.

In view of the facts mentioned in the application,  for  abrogation  of  the
compromise application, the matter be taken up today  before  the  concerned
bench of Lok-Adalat.”

When the matter was placed before the  Lok  Adalat,  the  Presiding  Officer
refused to act upon the settlement  recorded  between  the  parties  on  the
ground that the accused person had not deposited 15% amount  of  the  cheque
for compounding of matter at  the  appeal  stage  as  per  “The  Guidelines”
contained in the judgment of this Court in the case  of  Damodar  S.  Prabhu
(supra).  The exact order passed is reproduced below:
“30.07.2011

The matter produced before the bench of Lok Adalat No.1.

Appellant along with Shri N.S. Yadav, Advocate.

Non-Applicant along with Shri Mohan Babu Mangal Advocate.

The instant matter is related to the appeal  filed  against  the  conviction
order passed under Section 138  of  Negotiation  (sic)  of  Instrument  Act,
wherein, both parties, being  appeared  along  with  their  counsels,  while
filing application for compromise, have requested to  mitigate  the  matter.
But, the defendant/accused has not deposited 15  percent  amount  of  cheque
for mitigation of matter at the appeal stage according to  the  guide  lines
of judgment dated 3.5.2010 passed in Criminal Appeal  No.  963/2010  in  the
matter of Damodar M. Prabhu Vs.  Sayyad  Baba  Lal  passed  by  the  Hon'ble
Supreme Court, in  the  District  Legal  Services  Authority,  due  to  said
reason, it is not lawful to grant permission of mitigation of the matter  to
both sides.  Hence, the compromise application is hereby dismissed.

The matter  be  returned  back  to  the  Regular  Court  for  abrogation  in
accordance with law.”


It is this order which was challenged by respondent No.2 by  filing  a  writ
petition under Article 227 of the Constitution of  India.   The  High  Court
has dismissed the said writ petition  stating  that  the  judgment  of  this
Court in Damodar S. Prabhu (supra) is  binding  on  the  subordinate  Courts
under Article 141 of the Constitution and, therefore, the subordinate  Court
had not committed any legal error.

“The Guidelines” in the form of directions given in the  aforesaid  judgment
read as under:
                               “THE GUIDELINES

(I)  In the circumstances, it is proposed as follows:

(a)  That directions can be given that  the  Writ  of  Summons  be  suitably
modified making it clear to the accused that he could  make  an  application
for compounding of the offences at the first or second hearing of  the  case
and that if such an application is made, compounding may be allowed  by  the
court without imposing any costs on the accused.

(b)  If the  accused  does  not  make  an  application  for  compounding  as
aforesaid, then if  an  application  for  compounding  is  made  before  the
Magistrate at the subsequent stage, compounding can be  allowed  subject  to
the condition that the accused will be required to pay  10%  of  the  cheque
amount to be deposited  as  a  condition  for  compounding  with  the  Legal
Services Authority, or such authority as the Court deems fit.

(c)  Similarly, if the  application  for  compounding  is  made  before  the
Sessions Court or a High Court in revision or appeal, such  compounding  may
be allowed on the condition that the accused pays 15% of the  cheque  amount
by way of costs.

(d)  Finally, if the application for compounding is made before the  Supreme
Court, the figure would increase to 20% of the cheque amount."

The question of consideration in the aforesaid backdrop  is  as  to  whether
directions/guidelines given by this Court  in  the  aforesaid  judgment  are
inapplicable in cases which are resolved/settled in Lok Adalats.

What was argued before us by the learned counsel for the appellant was  that
these guidelines containing  the  schedule  of  costs  should  not  be  made
applicable to the settlements which  are  arrived  at  in  the  Lok  Adalats
inasmuch as provision for imposition of such costs  would  run  contrary  to
the very purpose of Lok Adalats constituted under Section  19  of  the  1987
Act.  It was emphasized that Lok Adalats were  constituted  to  promote  the
resolution of disputes pending before Court by amicable  settlement  between
the parties and in order to reduce the pendency of cases before the  Courts,
including appellate Courts.  Learned counsel also referred to  the  judgment
of this Court in K.N. Govindan Kutty Menon v. C.D. Shaji, (2012) 2  SCC  51,
wherein it is held that a compromise or settlement  arrived  at  before  the
Lok Adalat and award passed pursuant thereto is to be treated as  decree  of
civil Court by virtue of deeming  provision  contained  in  Section  21  and
Section 2(aaa) and (c) of  the  1987  Act.   The  Court  held  that  even  a
settlement of a case under Setion 138  of  the  Act  and  Lok  Adalat  award
passed pursuant thereto would be a  decree  executable  under  the  Code  of
Civil Procedure, 1908.  The position in this behalf is summed up in para  26
of the said judgment, which reads as under:
“26.  From the above discussion, the following propositions emerge:

(1)   In view of the unambiguous language of Section 21 of  the  Act,  every
award of the Lok Adalat shall be deemed to be a decree of a civil court  and
as such it is executable by that court.

(2)   The Act does not make out any such distinction between  the  reference
made by a civil court and a criminal court.

(3)   There is no restriction on the power of the  Lok  Adalat  to  pass  an
award based on the compromise arrived at between the parties in  respect  of
cases referred to by various courts (both civil  and  criminal),  tribunals,
Family Court, Rent Control Court, Consumer Redressal Forum, Motor  Accidents
Claims Tribunal and other forums of similar nature.

(4)   Even if a matter is referred by a criminal court under Section 138  of
the  Negotiable  Instruments  Act,  1881  and  by  virtue  of  the   deeming
provisions, the award passed by the Lok Adalat based on a compromise has  to
be treated as a decree capable of execution by a civil court.”

Taking sustenance from  the  aforesaid  dicta,  the  submission  of  learned
counsel for the appellant was that even the proceedings  under  Section  138
of the Act were governed by the Code of Criminal Procedure,  1973,  such  an
award was executable as a decree of the civil Court under the Code of  Civil
Procedure, 1908. The submission, therefore, was that once award of  the  Lok
Adalat is given the effect of the decree and attaches this kind of  sanctity
behind it, it should be carved out  as  an  exception  to  'The  Guidelines'
framed by this Court in Damodar S. Prabhu's case (supra).

We have considered the aforesaid submission  of  the  learned  counsel  with
utmost intensity of thought.  It appears to be of  substance  in  the  first
blush when this submission is  to  be  considered  in  the  context  of  the
purpose and objective with which Lok Adalats  have  been  constituted  under
Section 19 of the 1987 Act.  No doubt, the manifest  objective  is  to  have
speedy resolution of the disputes through  these  Lok  Adalats,  with  added
advantage of cutting the cost of litigation and  avoiding  further  appeals.
The advent of the 1987 Act gave a statutory status to Lok Adalats,  pursuant
to the constitutional mandate in Article 39-A of the Constitution of  India,
contains various provisions of settlement of disputes  through  Lok  Adalat.
It is an Act to constitute legal services authorities to  provide  free  and
competent legal services to the weaker sections of  the  society  to  ensure
that opportunities for securing justice are not denied  to  any  citizen  by
reason of economic or other disabilities, and to  organize  Lok  Adalats  to
secure that the operation of the legal system promotes justice  on  a  basis
of equal opportunity.  In fact, the concept of Lok Adalat is  an  innovative
Indian contribution to the world jurisprudence.  It is a  new  form  of  the
justice dispensation  system  and  has  largely  succeeded  in  providing  a
supplementary forum to the victims for settlement of their  disputes.   This
system is based on Gandhian principles.  It is  one  of  the  components  of
Alternate Dispute Resolution systems specifically provided in Section 89  of
the Code of Civil Procedure, 1908 as well.  It  has  proved  to  be  a  very
effective alternative to litigation.   Lok  Adalats  have  been  created  to
restore access to remedies and protections and alleviate  the  institutional
burden of the millions of petty  cases  clogging  the  regular  courts.   It
offers the aggrieved claimant whose case would otherwise sit in the  regular
courts for decades, at least some compensation now.  The Presiding Judge  of
a Lok Adalat is an experienced  adjudicator  with  a  documented  record  of
public service and has legal acumen.  Experience has  shown  that  not  only
huge number of cases are  settled  through  Lok  Adalats,  this  system  has
definite advantages, some of which are listed below:
(a)  speedy justice and saving from the lengthy court procedures;
(b)  justice at no cost;
(c)  solving problems of backlog cases; and
(d) maintenance of cordial relations.
            Thus, it cannot be doubted  that  Lok  Adalats  are  serving  an
important public purpose.

Having said so, it needs to be examined as to whether in the given  case  it
becomes derogatory  to  the  movement  of  the  Lok  Adalats  if  the  costs
amounting to 15% of the cheque amount, as per the  guidelines  contained  in
Damodar S. Prabhu (supra), is  insisted?  However,  before  discussing  this
central issue, we would like to analyse the events of the present  case,  as
that would be of help to answer the pivotal issue raised before us.

As pointed out above while taking note of the factual details of  the  case,
it was not a situation where the Court persuaded  the  parties  to  use  the
medium of Lok Adalat for the settlement of their dispute.  On the  contrary,
the parties had already settled the matter between  themselves  before  hand
and filed the application in  this  behalf  before  the  learned  Additional
Sessions Judge on July 30, 2011 with a request which the matter be taken  up
before the Lok Adalat that was being organized on  the  same  date.   It  is
clear from the order passed by the  learned  Additional  Sessions  Judge  on
July 30, 2011, which is already extracted above.

In the first instance, we do not understand as to why the  matter  was  sent
to Lok Adalat when the parties had settled  the  matter  between  themselves
and application  to  this  effect  was  filed  in  the  Court.   In  such  a
situation, the  Court  could  have  passed  the  order  itself,  instead  of
relegating the matter to the Lok Adalat.  We have ourselves highlighted  the
importance and significance of the Institution of Lok Adalat.  We  would  be
failing in our duty if we do not  mention  that,  of  late,  there  is  some
criticism as well which, inter alia, relates to the manner  in  which  cases
are posted before the Lok Adalats.  We have to devise the methods to  ensure
that faith in the system is maintained as in the holistic  terms  access  to
justice is achieved through this  system.   We,  therefore,  deprecate  this
tendency of referring even those  matters  to  the  Lok  Adalat  which  have
already been settled.  This tendency of sending settled matters to  the  Lok
Adalats just to inflate  the  figures  of  decision/settlement  therein  for
statistical purposes is not a healthy practice.  We are also  not  oblivious
of the criticism from the lawyers,  intelligentsia  and  general  public  in
adopting this kind of methodology for window dressing and showing  lucrative
outcome of particular Lok Adalats.

Be that as it may, reverting to the facts of the present case, we find  that
when the case had been settled between the parties and application  in  this
behalf was made before the Court, it cannot be denied  that  had  the  Court
passed the compouding order on this application under  Section  147  of  the
Act, as per the rigours of Damodar S.  Prabhu  (supra),  15%  f  the  cheque
amount had to be necessarily deposited by  the  accused  person  (respondent
No.2).  If we hold that such a cost is not to be paid  when  the  matter  is
sent to the Lok Adalat, this  route  would  be  generally  resorted  to,  to
bypass the applicability of the directions contained in  Damodar  S.  Prabhu
(supra).  Such a situation cannot be countenanced.

The purpose of laying down the guidelines in Damodar S.  Prabhu  (supra)  is
explained in  the  said  judgment  itself.   The  Court  in  that  case  was
concerned with the stage of the  case  when  compounding  of  offence  under
Section 147 of the Act is  to  be  permitted.   To  put  it  otherwise,  the
question was as to whether such a compounding  can  be  only  at  the  trial
Court stage or it is permissible even at the appellate stage.  It was  noted
that even before the insertion  of  Section  147  of  the  Act,  by  way  of
amendment in the year 2002, some High Courts had permitted  the  compounding
of offence contemplated by Section 138 of the Act during  the  later  stages
of litigation.  This was so done by this Court  also  in  O.P.  Dholakia  v.
State of Haryana, (2000) 1 SCC 672  and  in  some  other  cases  which  were
noticed by the Bench. From these judgments  the  Court  concluded  that  the
compounding of offence at later stages  of  litigation  in  cheque  bounding
cases was held to be permissible.

While holding so, the Court also  took  note  of  the  phenomena  which  was
widely prevalent in the manner in which cases under Section 138 of  the  Act
proceed in this country.  It noticed that there was a tendency on  the  part
of  the  accused  persons  to  drag  on  these  proceedings  and  resort  to
settlement process only at a stage when the accused persons were  driven  to
wall.  It is for this reason that most of the  complaints  filed  result  in
compromise or settlement before the final judgment on the one side and  even
in those cases where judgment is  pronounced  and  conviction  is  recorded,
such cases are settled at appellate stage.  This was so noted in para 13  of
the judgment, which reads as under:

“13.  It is quite obvious that with respect to the offence of  dishonour  of
cheques, it is the compensatory aspect of the remedy which should  be  given
priority over the punitive aspect.  There  is  also  some  support  for  the
apprehensions raised by the learned Attorney  General  that  a  majority  of
cheque bounce cases are indeed  being  compromised  or  settled  by  way  of
compounding,  albeit  during  the  later  stages   of   litigation   thereby
contributing to undue delay in  justice-delivery.   The  problem  herein  is
with the tendency of litigants to belatedly choose compounding  as  a  means
to resolve their dispute.  Further more, the  writen  submissions  filed  on
behalf of the learned Attorney  General  have  stressed  on  the  fact  that
unlike Section 320 of the CrPC, Section 147 of  the  Negotiable  Instruments
Act provides no explicit guidance  as  to  what  stage  compounding  can  or
cannot be done and whether compounding can be done at the  instance  of  the
complainant or with the leave of  the  court.   As  mentioned  earlier,  the
learned Attorney General's submission is that in the  absence  of  statutory
guidance, parties are choosing  compounding  as  a  method  of  last  resort
instead of opting for it as soon as the Magistrates take cognizance  of  the
complaints.  One explanation for such behaviour could be  that  the  accused
persons are willing to take the chance of progressing  through  the  various
stages of litigation and then choose the route of settlement  only  when  no
other route remains.  While such behaviour may be viewed  as  rational  from
the viewpoint of litigants, the hard facts  are  that  the  undue  delay  in
opting for compounding contributes to the arrears pending before the  courts
at various levels.  If the accused is willing to  settle  or  compromise  by
way of compounding of the offence at a later  stage  of  litigation,  it  is
generally indicative of some merit  in  the  complainant's  case.   In  such
cases it would  be  desirable  if  parties  choose  compounding  during  the
earlier stages of litigation.  If however, the accused has a  valid  defence
such as a mistake, forgery or coercion among other grounds, then the  matter
can be litigated through the specified forums.”

This particular tendency had prompted the Court to accept the submission  of
the Attorney General to frame guidelines for a  graded  scheme  of  imposing
costs on parties who unduly delay compounding of  the  offence  inasmuch  as
such a requirement of deposit of the costs  will  act  as  a  deterrent  for
delayed composition since free and  easy  compounding  of  offences  at  any
stage, however belated, was given incentive to the drawer of the  cheque  to
delay settling of cases for years.  For this reason, the  Court  framed  the
guidelines permitting compounding  with  the  imposition  of  varying  costs
depending upon the stage at which the settlement took place in a  particular
case.

After formulating “The Guidelines”, which are already extracted  above,  the
Court made very pertinent observations in  para  17  of  the  said  judgment
which would have bearing in the present case.  Thus, we reproduce  the  same
below:
“17.  We are also conscious of the view that  the  judicial  endorsement  of
the above quoted guidelines could be seen as an act of  judicial  law-making
and therefore an intrusion into the legislative domain.  It must be kept  in
mind that Section 147 of the Act does not  carry  any  guidance  on  how  to
proceed with the compounding of offences under the  Act.   We  have  already
explained that the scheme contemplated under Section 320 of the CrPC  cannot
be followed in the strict sense.  In view of the legislative vacuum, we  see
no hurdle to the endorsement of some suggestions which  have  been  designed
to discourage litigants from unduly delaying the composition of the  offence
in cases involving Section 138 of the Act.  The graded scheme  for  imposing
costs is a means to encourage compounding at an early stage  of  litigation.
In the status quo, valuable time of the Court  is  spent  on  the  trial  of
these cases and the parties are not liable to pay any Court  fee  since  the
proceedings are governed by the Code of Criminal Procedure, even though  the
impact of the offence is largely confined  to  the  private  parties.   Even
though the imposition of costs  by  the  competent  court  is  a  matter  of
discretion, the scale of  costs  has  been  suggested  in  the  interest  of
uniformity.  The competent Court can of course reduce the costs with  regard
to the specific facts and circumstances of a case, while  recording  reasons
in writing for such variance.  Bona fide litigants should of course  contest
the proceedings to their logical end.  Even in  the  past,  this  Court  has
used its power to do complete justice under Article 142 of the  Constitution
to frame  guidelines  in  relation  to  subject-matter  where  there  was  a
legislative vacuum.”

It is clear from the reading of the aforesaid para that the  Court  made  it
clear that framing of  the  said  guidelines  did  not  amount  to  judicial
legislation.  In the opinion of the Court, since Section 147 of the Act  did
not carry any guidance on how to proceed with compounding  of  the  offences
under the Act and Section 320 of the Code of Criminal Procedure, 1973  could
not be followed in strict  sense  in  respect  of  offences   pertaining  to
Section 138 of the Act, there was a legislative vacuum  which  prompted  the
Court to frame those guidelines to achieve the following objectives:
(i)   to discourage  litigants  from  unduly  delaying  the  composition  of
offences in cases involving Section 138 of the Act;
(ii)  it would result in  encouraging  compounding  at  an  early  stage  of
litigation saving valuable time of the Court which is spent on the trial  of
such cases; and
(iii) even though imposition of costs by the competent Court is a matter  of
discretion, the scale of cost had been suggested to attain uniformity.
            At the same time, the Court also made it abundantly  clear  that
the concerned Court would be at liberty to reduce the costs with  regard  to
specific facts and circumstances of  a  case,  while  recording  reasons  in
writing for such variance.

What follows from the above is that  normally  costs  as  specified  in  the
guidelines laid down in the said judgment has to be imposed on  the  accused
persons while permitting compounding.  There can be departure  therefrom  in
a particular case, for good  reasons  to  be  recorded  in  writing  by  the
concerned Court.  It is for this  reason  that  the  Court  mentioned  three
objectives which were sought to be achieved by framing those guidelines,  as
taken note of above.  It is thus manifestly the framing of  “Guidelines”  in
this judgment was also to achieve a particular public purpose.   Here  comes
the issue for consideration as to whether these guidelines are to  be  given
a go by when a case is decided/settled in the  Lok  Adalat?  Our  answer  is
that it may not be necessarily so and a proper balance can be struck  taking
care of both the situations.

Having regard thereto, we are of the  opinion  that  even  when  a  case  is
decided  in  Lok  Adalat,  the  requirement  of  following  the   guidelines
contained in Damodar S. Prabhu (supra)  should  normally  not  be  dispensed
with.  However, if there is a special/specific reason to deviate  therefrom,
the Court is not remediless as Damodar S. Prabhu (supra)  itself  has  given
discretion to the concerned  Court  to  reduce  the  costs  with  regard  to
specific facts and circumstances of the case,  while  recording  reasons  in
writing about such variance.  Therefore, in those  matters  where  the  case
has to be decided/settled in the Lok Adalat, if the Court finds that  it  is
a result of positive attitude of the parties,  in  such  appropriate  cases,
the Court can always reduce the costs by  imposing  minimal  costs  or  even
waive the same.  For that, it would be for  the  parties,  particularly  the
accused person, to make out a plausible case  for  the  waiver/reduction  of
costs and to convince the concerned Court about the same.   This  course  of
action, according to us, would strike a balance between  the  two  competing
but  equally  important  interests,   namely,   achieving   the   objectives
delineated in Damodar S. Prabhu (supra) on  the  one  hand  and  the  public
interest   which   is    sought    to    be    achieved    by    encouraging
settlements/resolution of case through Lok Adalats.

Having straightened the  position  in  the  manner  above,  insofar  as  the
present case is concerned, as we find that the parties had  already  settled
the matter and the purpose of going to the Lok Adalat was  only  to  have  a
rubber stamp of the Lok Adalat in the form of its imprimatur thereto, we  do
not find any error in the impugned judgment, though we are  giving  our  own
reasons in support of the  conclusion  arrived  at  by  the  High  Court  in
dismissing the writ petition filed by respondent No.2,  while  straightening
the approach that should be  followed  henceforth  in  such  matters  coming
before the Lok Adalats.

The appeal stands disposed of in the aforesaid terms.


                             .............................................J.
                                                            (J. CHELAMESWAR)



                             .............................................J.
                                                                (A.K. SIKRI)

NEW DELHI;
SEPTEMBER 10, 2014.

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