Power Of Compounding Must Be Expressly Conferred By Statute Which Creates Offence: Supreme Court

The power of compounding must be expressly conferred by the statute which creates the offence, the Supreme Court observed in a judgment passed today.

The bench of Justices DY Chandrachud and MR Shah observed that in respect of offences which lie outside the Indian Penal Code, compounding may be permitted only if the statute which creates the offence contains an express provision for compounding before such an offence can be made compoundable. This is because Section 320 CrPC provides for the compounding of offences only under the IPC.

In its judgment interpreting the compounding provision under Section 24A of Securities and Exchange Board of India Act, the bench referred to provisions of Section 320 of the Code of Criminal Procedure. Also referring to some Law commission reports and precedents, the bench noted that the legislative sanction for compounding of offences is based upon two contrasting principles.

First, that private parties should be allowed to settle a dispute between them at any stage (with or without the permission of the Court, depending on the offence), even of a criminal nature, if proper restitution has been made to the aggrieved party. Second, that, however, this should not extend to situations where the offence committed is of a public nature, even when it may have directly affected the aggrieved party.

The bench made the following observations in the judgment in this regard:

Societal interest in the prosecution of crime which has a wider social dimension must be borne in min

"59....The first of these principles is crucial so as to allow for amicable resolution of disputes between parties without the adversarial role of Courts, and also to ease the burden of cases coming before the Courts. However, the second principle is equally important because even an offence committed against a private party may affect the fabric of society at large. Non-prosecution of such an offence may affect the limits of conduct which is acceptable in the society. The Courts play an important role in setting these limits through their adjudication and by prescribing punishment in proportion to how far away from these limits was the offence which was committed. As such, in deciding on whether to compound an offence, a Court does not just have to understand its effect on the parties before it but also consider the effect it will have on the public. Hence, societal interest in the prosecution of crime which has a wider social dimension must be borne in mind"

The power of compounding must be expressly conferred by the statute which creates the offence.

"62. However, Section 320 provides for the compounding of offences only under the IPC. Hence, in respect of offences which lie outside the IPC, compounding may be permitted only if the statute which creates the offence contains an express provision for compounding before such an offence can be made compoundable. The power of compounding must, in other words, be expressly conferred by the statute which creates the offence."

In this regard, the bench noted the judgment in JIK Industries Limited vs Amarlal v. Jumani in which it was observed that the 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. The bench also noted that a three judge bench in Damodar S Prabhu vs Sayed Babalal H had held that the scheme contemplated under Section 320 CrPC cannot be followed in the strict sense.

" 72....The consideration which weighed with the two judge Bench while interpreting the provisions of Section 147 of the NI Act in JIK Industries (supra) will therefore not be ipso facto attracted while construing the provisions of Section 24A of the SEBI Act. Further, since the two statutory provisions are not in pari materia, it is not necessary for this Court to express any opinion on the issue as to whether the judgment in JIK Industries (supra), which is of a two judge Bench, is contrary to the earlier three judge Bench decision in Damodar S Prabhu (supra). We are concerned in the present case with interpreting the provisions of Section 24A of the SEBI Act, and hence it is not necessary for this Court to construe Section 147 of the NI Act.", the bench observed.

Case: Prakash Gupta vs. Securities and Exchange Board of India [CrA 569 of 2021]

Coram: Justices DY Chandrachud and MR Shah

Counsel: Sr. Adv Shyam Divan, Sr. Adv CU Singh, Sr. Adv Mahesh Jethmalani

Citation: LL 2021 SC 320

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