[2024] 5 S.C.R. 203 : 2024 INSC 347
Raj Reddy Kallem
v.
The State of Haryana & Anr.
(Criminal Appeal No. 2210 of 2024)
08 April 2024
[A.S. Bopanna and Sudhanshu Dhulia, JJ.]
Issue for Consideration
Appellant was convicted u/s.138 of the Negotiable Instruments Act,
1881. Additionally, an FIR was also filed against the appellant u/
ss.406, 420, 120B, IPC. Parties agreed to compound the offence
at the appellate stage and a settlement was reached. But, the
appellant could not pay the amount within the time stipulated in
the settlement agreement. However, eventually, entire amount was
paid by him but, the complainant did not agree for compounding
of the offence. Complainant, if can be compelled by the courts to
give consent for compounding of the matter.
Headnotes
Negotiable Instruments Act, 1881 – s.138 – Compounding of
offence – “Consent”:
Held: Even though the complainant was 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 – Mere repayment of the
amount cannot mean that the appellant is absolved from the criminal
liabilities u/s.138 – However, in the present case, the appellant
was in jail for more than 1 year before being released on bail and
had also compensated the complainant and in compliance of the
order passed by this Court, he deposited an additional amount of
Rs.10 lacs towards interest for delayed payment – Thus, there is
no purpose now to keep the proceedings pending in appeal before
the lower appellate court – Even though the complainant is unwilling
to compound the case but, in the facts and circumstances of the
present case the proceedings must come to an end – Quashing of
a case is different from compounding – All the criminal proceedings
qua appellant arising out of FIR No.35 of 2014 pending before
Chief Judicial Magistrate, quashed – Since, criminal appeals filed
by appellant against his conviction u/s.138 are also pending, said
proceedings also quashed – Hence, all the pending criminal appeals
204 [2024] 5 S.C.R.
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against the appellant in the present matter quashed in exercise
powers u/Article 142 of the Constitution of India – Impugned order
of High Court as also the conviction and sentence awarded by
trial court, set aside. [Paras 12,14]
Penal Code, 1860 – ss.406, 420, 120B – Appellant took advance
money from the complainant but failed to supply the machine
– FIR against the appellant in addition to proceedings u/s.138,
Negotiable Instruments Act, 1881 – Allegations that from the
very beginning the appellant had the intention of cheating
the complainant:
Held: As far as FIR case u/ss.406, 420, 120B is concerned,
there is no merit in the allegations that the appellant from the
very beginning had the intention of cheating the complainant –
Though, 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 – Transaction between the parties was purely civil in
nature which does not attract criminal law in any way. [Para 13]
Negotiable Instruments Act, 1881 – ss.147, 138 – Offences to
be compoundable:
Held: As per s.147, all offences punishable under the Negotiable
Instruments Act are compoundable – However, unlike s.320 of
CrPC, the NI Act does not elaborate upon the manner in which
offences should be compounded – In cases of s.138, 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. [Para 12]
Case Law Cited
Damodar S. Prabhu v. Sayed Babalal H. [2010] 5 SCR
678 : (2010) 5 SCC 663; K.M Ibrahim v. K.P Mohammed
& Anr. [2009] 15 SCR 1300 : (2010) 1 SCC 798; O.P
Dholakia v. State of Haryana & Anr. (2000) 1 SCC 762;
JIK Industries Limited & Ors. v. Amarlal V. Jamuni &
Anr. [2012] 3 SCR 114 : (2012) 3 SCC 255; Meters and
Instruments Private Ltd. And Another. v. Kanchan Mehta
[2017] 10 SCR 66 : (2018) 1 SCC 560 – referred to.
[2024] 5 S.C.R. 205
Raj Reddy Kallem v. The State of Haryana & Anr.
List of Acts
Negotiable Instruments Act, 1881; Penal Code, 1860; Constitution
of India.
List of Keywords
Compounding of offence; Consent for compounding of offences
under Section 138, Negotiable Instruments Act, 1881; Unwillingness
to compound the case; Quashing; Complete justice; Transaction
civil in nature; Intention of cheating or defrauding.
Case Arising From
CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No. 2210
of 2024
From the Judgment and Order dated 29.11.2022 of the High Court
of Punjab and Haryana at Chandigarh in CRMM No.54820 of 2022
Appearances for Parties
Ashish Kumar Tiwari, Adv. for the Appellant.
Birender Bikram, DAG, Samar Vijay Singh, Keshav Mittal, Ms. Sabarni
Som, Fateh Singh, M. K. Dua, Shantanu Sagar, Anil Kumar, Gunjesh
Ranjan, Advs. for the Respondents.
Judgment / Order of the Supreme Court
Order
Leave granted.
2. The brief facts leading to this appeal are that in the year 2012
Respondent No.2-complainant placed a purchase order for the supply
of “Promotec Fiber Laser Cutting Machine” to the company (M/s
Farmax) of the appellant. For the said purchase, an advance amount
of Rs.1,55,00,000 was paid to the company of the appellant. All the
same, for some reasons, M/s Farmax failed to procure and supply this
machine to respondent No.2-complainant. Thereafter, the appellant
issued 5 cheques to the complainant towards return of the advance
money. Admittedly, some of these cheques were dishonoured and in
Nov-Dec 2013 the complainant initiated proceedings under section
138 of the Negotiable Instruments Act (hereinafter referred to as “NI
Act”). Additionally, in January 2014 complainant filed a complaint
206 [2024] 5 S.C.R.
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under Section 156(3) of Criminal Procedure Code (hereinafter referred
to as ‘CrPC’) which led to an FIR No.35 of 2014 at Police Station
Mahesh Nagar (Ambala) under Sections 406, 420 and 120B of Indian
Penal Code (hereinafter referred to as ‘IPC’) against the appellant,
wherein it was said that the appellant had wrongfully retained the
hard-earned money of the complainant and had cheated her. The
charge sheet dated 21.07.2014 under Sections 406, 420 r/w 120B
of IPC was filed against the appellant and trial commenced in the
said FIR case.
3. In NI Act case, the trial court vide order dated 25.05.2015/29.05.2015
convicted the appellant under Section 138 of the NI Act and sentenced
him to 2 years of rigorous imprisonment along with direction to pay
the amount of cheques. In the appeal filed by appellant before the
Additional Sessions Judge, both sides made an effort to settle the
dispute and consequently the matter was placed before the Lok Adalat,
where after negotiations, parties reached a settlement. Consequently,
the Additional Session Judge, Pre-Lok Adalat, Amabala passed the
settlement order dated 05.12.2015 where the appellant agreed to
pay back the entire amount of Rs.1.55 crore, which was to be paid
within a period of about 16 months. Once the entire amount was
paid, the entire proceedings under Section 138 of NI Act as well as
offences under Section 406, 420 read with 120B of IPC arising out
of the FIR had to be compounded. This was also mentioned in the
settlement order dated 05.12.2015, the relevant portion of the said
order is reproduced below:
“That if appellant shall pay entire amount as per settlement,
then the offence u/s 138 of NI Act shall be compounded
and FIR bearing No.35 of 2014 u/s 420, 406, 120-B, PS
Mahesh Nagar, Ambala Cantt. shall be treated either as
quashed or offences shall be treated as compounded.”
However, the appellant could not discharge his liability in terms of
the settlement and the Additional Sessions Judge passed an order
dated 11.07.2016 holding that the settlement dated 05.12.2015
stood frustrated.
4. During 2016-2020, appellant approached various courts including
this Court seeking an extension of time to pay back the amount and
meanwhile a substantial amount has been paid to the complainant.
Finally, this matter came before this Court in SLP(Crl) No.10560 of
[2024] 5 S.C.R. 207
Raj Reddy Kallem v. The State of Haryana & Anr.
2019 filed by the appellant’s wife and this court vide order dated
29.11.2019 passed an order directing the appellant’s wife to deposit
Rs.20 lacs before the trial court within three weeks as only Rs.20
lacs was the outstanding amount out of the total amount of Rs.1.55
crore at that relevant time. Appellant’s wife failed to comply with this
Court’s order dated 29.11.2019 and that SLP was dismissed vide
order dated 14.02.2020.
5. Thereafter, the appellant approached the trial court and presented
a Demand Draft dated 12.02.2020 of Rs.20 lacs in favour of the
complainant as repayment towards the remaining amount of Rs.20
lacs. In this application, the appellant prayed that criminal proceedings
pending against the appellant, initiated on the instance of the
complainant, should either be compounded or quashed. However,
considering the submission of counsel of the complainant that SLP in
which the appellant’s wife was directed to deposit the amount before
the trial court has already been dismissed, the trial court vide order
dated 09.02.2021 refused to accept the Demand Draft presented by
the appellant by noting that such an application is not maintainable.
6. This order dated 09.02.2021, where the trial court refused to accept
the DD for the remaining Rs.20 lacs, was challenged by the appellant
before the High Court through an application under Section 482
of CrPC. Vide impugned order dated 29.11.2022, the High Court
dismissed the application of appellant on the ground that the appellant
failed to deposit the remaining Rs. 20 lacs within the time stipulated
(3 weeks) in the Supreme Court order dated 29.11.2019. Now, the
appellant is before us in the present appeal.
7. On 14.03.2023, this Court passed an interim order directing the
appellant to deposit Rs.20 lacs before the trial court and sought
a compliance report from the trial court. This Court order dated
14.03.2023 reads as follows:
“The petitioner shall deposit the sum of ₹ 20 lakhs before
the trial court within two weeks. The trial court shall pass
an order recording the deposit and also indicate whether
the petitioner has duly complied with the present order.
A copy of this order shall be communicated directly to the
Judicial Magistrate First Class, Ambala (seized of Criminal
Case No. 78 of 2014 arising out of FIR 35 of 2014).
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The trial court shall then report compliance to the Registry
to this Court.
List after three weeks.”
Pursuant to the aforesaid order of this Court, appellant submitted two
cheques of amount Rs.10 lacs each before the trial court and the trial
court forwarded a compliance report to this Court mentioning that
appellant has duly complied with the interim order dated 14.03.2023
Thereafter, on the next date of hearing on 08.08.2023, this Court
recorded the compliance of its previous order and directed the
appellant to further deposit Rs.10 lacs towards interest for delayed
payment. To make the matter clear, we would like to reproduce that
interim order of this Court, which read as follows:
“It is submitted that the petitioner has deposited ₹20 lakhs in
trial court, having regard to the delay in payment (8 years).
In the circumstances of the case, justice would demand that
the petitioner deposits a further sum of ₹10 lakhs towards
interest for the delayed payment (working out to 6% p.a. for
the last 8 years). This amount shall be deposited in Court
within four weeks from today. The demand draft which has
been deposited before the trial court shall be re-validated,
in case it has expired in the meanwhile.
List after six weeks.”
8. Trial Court vide order dated 01.09.2023 noted the compliance of
the above order of this Court. In this way, the appellant has by now
returned the entire due amount and also paid Rs.10 lacs more towards
the interest for the delayed payment. When the matter again came
up for hearing on 12.02.2024, this Court recorded that the entire
amount had been paid and, at the request of both sides, granted
time to both sides to draw a settlement. Later on, 11.03.2024, the
counsel representing the appellant stated that a settlement had
been reached between the parties whereas counsel for respondents
sought some time to verify the same, and consequently, the matter
was adjourned for today.
9. Today, we heard both sides again. The counsel of Respondent No.2
i.e., the complainant states that there is no settlement between
[2024] 5 S.C.R. 209
Raj Reddy Kallem v. The State of Haryana & Anr.
the parties and the complainant is not willing to compromise the
matter. After the passing of the previous order dated 11.03.2024,
Respondent No.2 (Complainant) has also filed an affidavit stating
that no settlement has been reached between the parties as alleged
by the appellant. On the other side, the counsel of the appellant
contended that since the appellant has paid back the entire amount
of Rs.1.55 crore and has also paid a further sum of Rs.10 lacs
towards the interest, there is no ground left for continuing criminal
proceedings against the appellant.
10. The significant fact here is that pending appeals before Additional
Sessions Judge against the appellant’s conviction under Section 138
of the NI Act, initially both the sides had entered into a settlement in
the Lok Adalat, where they agreed that if the appellant compensates
the complainant by repaying the entire amount of Rs.1.55 crore then
they would get the offences compounded or quashed. However,
the trial court by order dated 11.07.2016 declared the settlement
as frustrated on the ground that the appellant could not pay the
complainant on the deadlines stipulated in the said settlement and
the trial court might have been right in doing so because settlement
itself had a clause which read as follows:
“5. That in case of default of making payment well in time
according to dates mentioned above, the settlement shall
be frustrated with immediate effect and then appeal shall
be decided on merit.”
Be that as it may, it is also true that the complainant had accepted
the amount from the appellant later when the appellant approached
higher courts showing his willingness to pay the amount as agreed
between the parties.
11. As per section 147 of the NI Act, all offences punishable under the
Negotiable Instruments Act are compoundable. However, unlike
Section 320 of CrPC, the NI Act does not elaborate upon the manner
in which offences should be compounded. To fill up this legislative
gap, three Judges Bench of this Court in Damodar S. Prabhu v.
Sayed Babalal H. (2010) 5 SCC 663, passed some guidelines under
Article 142 of the Constitution of India regarding compounding of
offence under Section 138 of NI Act. But most importantly, in that
case, this Court discussed the importance of compounding offence
210 [2024] 5 S.C.R.
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under Section 138 of the NI Act and also the legislative intent behind
making the dishonour of cheque a crime by enacting a special law.
This Court had observed that:
“4. …………. What must be remembered is that the
dishonour of a cheque can be best described as a
regulatory offence that has been created to serve the public
interest in ensuring the reliability of these instruments. The
impact of this offence is usually confined to the private
parties involved in commercial transactions.
5. Invariably, the provision of a strong criminal remedy has
encouraged the institution of a large number of cases that
are relatable to the offence contemplated by Section 138
of the Act. So much so, that at present a disproportionately
large number of cases involving the dishonour of cheques
is choking our criminal justice system, especially at the
level of Magistrates' Courts……..”
Further, after citing authors pointing towards compensatory
jurisprudence within the NI Act, this Court observed that:
“18. 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.”
12. 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.
[2024] 5 S.C.R. 211
Raj Reddy Kallem v. The State of Haryana & Anr.
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. This Court observed that:
“57. Section 147 of the Negotiable Instruments Act reads
as follows:
“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.”
58. Relying on the aforesaid non obstante clause in
Section 147 of the NI Act, the learned counsel for the
appellant argued that a three-Judge Bench decision of
this Court in Damodar [(2010) 5 SCC 663 : (2010) 2
SCC (Civ) 520 : (2010) 2 SCC (Cri) 1328] , held that in
view of non obstante clause in Section 147 of the NI Act,
which is a special statute, the requirement of consent of
the person compounding in Section 320 of the Code is
not required in the case of compounding of an offence
under the NI Act.
59. This Court is unable to accept the aforesaid contention
for various reasons……”
Further this Court observed in para 89 of the said judgement that:
“Section 147 of the NI Act must be reasonably construed
to mean that as a result of the said section the offences
under the NI Act are made compoundable, but the main
principle of such compounding, namely, the consent of the
person aggrieved or the person injured or the complainant
cannot be wished away nor can the same be substituted
by virtue of Section 147 of the NI Act.”
This Court in Meters and Instruments private Ltd. And Another.
v. Kanchan Mehta (2018) 1 SCC 560 after discussing the series
of judgments including the JIK Industries Ltd. (supra) observed
that even in the absence of ‘consent’ court can close criminal
212 [2024] 5 S.C.R.
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proceedings against an accused in cases of section 138 of NI Act
if accused has compensated the complainant. The exact words of
this Court were as follows:
“18.3. Though compounding requires consent of both
parties, even in absence of such consent, the court, in the
interests of justice, on being satisfied that the complainant
has been duly compensated, can in its discretion close
the proceedings and discharge the accused.”
In our opinion, Kanchan Mehta (supra) nowhere contemplates
that ‘compounding’ can be done without the ‘consent’ of the parties
and even the above observation of Kanchan Mehta (supra) giving
discretion to the trial court to ‘close the proceedings and discharge
the accused’, by reading section 2581
of CrPC, has been held to
be ‘not a good law’ by this Court in the subsequent 5 judges bench
judgement in Expeditious Trial of Cases Under Section 138 of
NI Act, 1881, In re, (2021) 16 SCC 1162
.
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. It is also true that mere repayment of the amount cannot
mean that the appellant is absolved from the criminal liabilities under
Section 138 of the NI Act. But this case has some peculiar facts
as well. In the present case, the appellant has already been in jail
for more than 1 year before being released on bail and has also
compensated the complainant. Further, in compliance of the order
dated 08.08.2023, the appellant has deposited an additional amount
of Rs.10 lacs. There is no purpose now to keep the proceedings
pending in appeal before the lower appellate court. Here, we would
like to point out that quashing of a case is different from compounding.
1 258. Power to stop proceedings in certain cases.—In any summons-case instituted otherwise
than upon complaint, a Magistrate of the first class or, with the previous sanction of the Chief Judicial
Magistrate, any other Judicial Magistrate, may, for reasons to be recorded by him, stop the proceedings
at any stage without pronouncing any judgment and where such stoppage of proceedings is made after
the evidence of the principal witnesses has been recorded, pronounce a judgment of acquittal, and in
any other case, release the accused, and such release shall have the effect of discharge.
2 Para 20.
[2024] 5 S.C.R. 213
Raj Reddy Kallem v. The State of Haryana & Anr.
This Court in JIK Industries Ltd.3
(Supra) distinguished the quashing
of case from compounding in the following words:
“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.”
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.
13. 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.
14. 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
3 [2012] 3 SCR 114 : Para 43.
214 [2024] 5 S.C.R.
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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.
15. 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 handedover till now.
Pending application(s), if any, stand(s) disposed of.
Headnotes prepared by: Divya Pandey Result of the case:
Appeal allowed.
