Every Offence Under Negotiable Instruments Act Is Compoundable: Gujarat High Court

Background

The Applicant prayed for quashing and setting aside the judgement of the Judicial Magistrate for an offence punishable under Section 138 of the Negotiable Instruments Act which sentenced him to simple imprisonment for six months. The Applicant was also directed to pay INR 10,000 by way of fine.

The Applicant contended that the dispute had been settled amicably with Respondent 2 and therefore, the judgement must be quashed. The Applicant relied on Damodar S. Prabhu Vs. Sayed Babalal H. [(2010) 5 SCC 663] where the Supreme Court had permitted the compounding of offence even after conviction under Section 138. Respondent 2, the Manager of the relevant Bank, also did not object to the setting aside of the judgement.

Judgement

The Bench referred to the Khokhar Iliyas Bismilla Khan Vs. State of Gujarat & Anr. Judgement [R/CR.MA/1046/2022] where it was held that every offence punishable under the NI Act is compoundable since the transaction is between private parties where the State is not the affected party. The Court in Khokhar Khan also opined:

"…the object of Section 138 of the NI Act, which is mainly to inculcate faith in the efficacy of banking operations and credibility of transacting business through cheque as also taking into account the provisions of Section 147 which states that every offence punishable under this Act shall be compoundable."

In the Damodar Prabhu case as well, it was held: "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."

"…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."

Therefore, keeping in view the precedents, the Bench allowed the Application filed under Section 482 CrPC for quashing the judgment of conviction. The Bench required a deposit of 15% of the amount of the cheque with the Gujarat State Legal Services Authority.

Case Title: Maheshsinh Babusinh Zala vs State of Gujarat

Citation: 2022 LiveLaw (Guj) 14

Case No.: R/CR.MA/1046/2022

Click Here To Read/Download Order