"Landmark Judgment Emphasizes Discretion in Compounding Section 138 Cases, Says Court"

In a significant ruling, the Allahabad High Court, presided over by Justice Jyotsna Sharma, has underscored the importance of discretion in compounding cases under Section 138 of the Negotiable Instrument Act. The judgment, delivered on May 24, 2023, has garnered attention for its clarification on when a court can proceed without the direct consent of the complainant in such cases.

The judgment, which pertained to a criminal revision filed by Smt. Rani Gaur, challenged an order by the Session Judge that had set aside a decision by the Additional Special Court in a case involving Vishwakarma Builders and Others. The case was filed under Section 138 of the Negotiable Instrument Act for a bounced cheque.

Justice Sharma's observations, drawn from the apex court's ruling in M/s Meters and Instruments Private Limited vs. Kanchan Mehta, are at the heart of this judgment. The court highlighted that cases under Section 138 of the Negotiable Instruments Act are primarily civil wrongs and should be tried summarily. Justice Sharma quoted the Supreme Court, stating that the burden of proof in such cases is on the accused, but the standard of proof is "preponderance of probabilities."

"The object of the provision being primarily compensatory, punitive element being mainly with the object of enforcing the compensatory element, compounding at the initial stage has to be encouraged but is not debarred at later stage subject to appropriate compensation as may be found acceptable to the parties or the Court," noted the court, emphasizing the compensatory nature of such cases.

The judgment clarified that under certain circumstances, courts have the discretion to proceed without obtaining the direct consent of the complainant, especially when an appropriate amount has been offered that adequately compensates the complainant. The court invoked Section 258 of the Code of Criminal Procedure, granting it the authority to close proceedings and discharge the accused if the complainant has been duly compensated.

While Smt. Rani Gaur had argued against compounding the case after a prolonged legal battle, the court held that the trial court had not lost its power of discretion in such matters and thus found no grounds for interference.

This judgment, which reconciles the compensatory and punitive aspects of Section 138 cases, serves as a significant reference point for future cases in this domain. Legal experts believe it strikes a balance between the interests of justice and the need to facilitate the resolution of such cases, particularly when substantial compensation is offered.

The judgment also references other relevant cases, including Damodar S Prabhu vs. Sayed Babalal and Nidhi Knitwears Pvt. Ltd. And Another vs. Honey Hosiery Mills, demonstrating the court's comprehensive examination of the legal landscape.

The counsel for the revisionist, Abhitab Kumar Tiwari, and the counsel for the opposite party, G.A., Archana Tyagi, and Pankaj Kumar Tyagi, played pivotal roles in presenting their respective arguments, contributing to the comprehensive discussion on the matter.

Decided on: 24.05.2023

Smt. Rani Gaur  vs State of U.P. And 4 Others