Law on Automatic Compounding of Offence of Cheque Dishonour under Section 138 of Negotiable Instruments Act, 1881

Law on Automatic Compounding of Offence of Cheque Dishonour under Section 138 of Negotiable Instruments Act, 1881

Section 138 - Automatic Compounding and effect of Sanction of Scheme under the provisions of Companies Act, 1956  - It cannot be said that as a result of sanction of a scheme under Section 391 of the Companies Act, 1956 there is an automatic compounding of offences under Section 138 of the N.I. Act even without the consent of the complainant - Effect of approval of a scheme of compromise and arrangement under Section 391 of the Companies Act, 1956 is that it binds the dissenting minority, the company as also the liquidator if the company is under winding up. Therefore, Section 391 of the Companies Act gives very wide discretion to the Court to approve any set of arrangement between the company and its shareholders - A scheme under Section 391 of the Companies Act does not have the effect of creating new debt. The scheme simply makes the original debt payable in a manner and to the extent provided for in the scheme -  The offence which has already been committed prior to the scheme does not get automatically compounded only as a result of the said scheme - A scheme under Section 391 of the Companies Act is binding on all shareholders including those who oppose it from being sanctioned - It has also been reiterated that the jurisdiction of the Company Court while sanctioning the scheme under Companies Act, 1956 is supervisory - Quashing of a case is different from compounding. In quashing the Court applies it but in compounding it is primarily based on consent of injured party. Therefore, the two cannot be equated - Compounding of an offence is statutorily provided under Section 320 of the Code of Criminal Procedure, 1973 ("Code") - If we look at the list of offences which are specified in the Table attached to Section 320 of the Code, it would be clear that there are basically two categories of offences under the provisions of Indian Penal Code which have been made compoundable - There is a category of offence for the compounding of which leave of the Court is required and there is another category of offences where for compounding the leave of the Court is not required. But all cases of compounding can take place at the instance of persons mentioned in the Third Column of the Table. If the said Table is perused, it will be clear that compounding can only be possible at the instance of the person who is either a complainant or who has been injured or is aggrieved - Sub-sections 4(a) and 4(b) of Section 320 of Code, 1973 also reiterate the same principle that in case of compounding, the person competent to compound, must be represented in a manner known to law - If the person compounding is a minor or an idiot or a lunatic, the person competent to contract on his behalf may, with the permission of the Court, compound the offence - Legislature has, therefore, provided that if the aforesaid category of person was suffering from some disability, a person to represent the aforesaid category of persons is only competent to compound the offence and in such cases the permission of the Court is statutory required  - The insertion of a non-obstante clause is a well known legislative device and in olden times it had the effect of non obstante aliquo statuto in contrarium (notwithstanding any statute to the contrary). Under the Scheme of modern legislation, nonobstante clause has a contextual and limited application. - JIK Industries Ltd v. Amarlal V. Jumani [2012] GCtR 6483 (SC)

Section 147 - Interface with Code of Criminal Procedure, 1973 - In the instant case the non-obstante clause used in Section 147 of N.I. Act, 1881 does not refer to any particular section of the Code of Criminal Procedure but refers to the entire Code. When non-obstante clause is used in the aforesaid fashion the extent of its impact has to be found out on the basis of consideration of the intent and purpose of insertion of such a clause - Section 147 in N.I. Act came by way of amendment - From the Statement of Objects and Reasons of Negotiable Instrument (Amendment) Bill 2001, which ultimately became Act 55 of 2002, these amendments were introduced to deal with large number of cases which were pending under the N.I. Act in various Courts in the country - Considering the said pendency, a Working Group was constituted to review Section 138 of the N.I. Act and make recommendations about changes to deal with such pendency - It is clear from a perusal of the Statement of Objects and Reasons that offence under the N.I. Act, which was previously noncompoundable in view of Section 320 sub-Section 9 of the Code has now become compoundable. That does not mean that the effect of Section 147 is to obliterate all statutory provisions of Section 320 of the Code relating to the mode and manner of compounding of an offence - Section 147 will only override Section 320 (9) of the Code in so far as offence under Section 147 of N.I. Act is concerned - In the absence of special procedure relating to compounding, the procedure relating to compounding under Section 320 shall automatically apply in view of clear mandate of sub-section (2) of Section 4 of the Code, 1973 - In view of Section 4(2) of the Code, 1973, the basic procedure of compounding an offence laid down in Section 320 of the Code, 1973 will apply to compounding of an offence under N.I. Act - basic mode and manner of effecting the compounding of an offence under Section 320 of the Code, 1973 cannot be said to be not attracted in case of compounding of an offence under N.I. Act in view of Section 147 of the same - Compounding as codified in Section 320 of the Code, 1973 has a historical background. In common law compounding was considered a misdemeanour - In our country also when the Criminal Procedure Code, 1861 was enacted it was silent about the compounding of offence. Subsequently, when the next Code of 1872 was introduced it mentioned about compounding in Section 188 by providing the mode of compounding. However, it did not contain any provision declaring what offences were compoundable. The decision as to what offences were compoundable was governed by reference to the exception to Section 214 of the Indian Penal Code - The present Code, which repealed the 1898 Code, contains Section 320 containing comprehensive provisions for compounding - A perusal of Section 320 of Code, 1973 makes it clear that the provisions contained in Section 320 and the various sub-sections is a Code by itself relating to compounding of offence. It provides for the various parameters and procedures and guidelines in the matter of compounding. - Section 147 of the N.I. Act must be reasonably construed to mean that as a result of the said Section the offences under N.I. 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 N.I. Act. - JIK Industries Ltd v. Amarlal V. Jumani [2012] GCtR 6483 (SC)