M/S NEW WIN EXPORT & ANR.versusA. SUBRAMANIAM

          [2024] 7 S.C.R. 1225 : 2024 INSC 535

                M/s New Win Export & Anr.
                            v.
                     A. Subramaniam
              (Criminal Appeal No. 2948 of 2024)
                           11 July 2024
[Sudhanshu Dhulia and Ahsanuddin Amanullah, JJ.]

                     Issue for Consideration
Whether in the instant case, conviction under Section 138 of the
Negotiable Instruments Act, 1881 could be quashed by the Supreme
Court as the parties had settled the dispute among themselves by
entering into a settlement agreement.

                            Headnotes†
Negotiable Instruments Act, 1881 – s.138 – Offence under –
Compounding of – Settlement treated to be compounding of
the offence:

Held: Appellants and respondent-complainant had entered into
a settlement agreement dated 27.01.2024 – It is clear that the
parties have settled the dispute among themselves – As per the
agreement, the appellants have paid Rs.5,25,000 to the respondent-
complainant, who has agreed to settle the present matter for the
said amount – The complainant does not have any objection if
the conviction of the appellants is set aside – This settlement
agreement can be treated to be compounding of the offence –
When the accused and complainant have reached a settlement
permissible by law and this Court has also satisfied itself regarding
the genuineness of the settlement, the conviction of the appellants
would not serve any purpose and thus, it is required to be set
aside. [Paras 3, 4, 5]
Negotiable Instruments Act, 1881 – s.147 – Compounding of
offences in context of the Act – Dishonour of cheques is a
regulatory offence – ‘compensatory aspect’ of remedy has
priority over ‘punitive aspect’ – Code of Criminal Procedure,
1973 – s.320(5):
Held: Dishonour of cheques is a regulatory offence which was
made an offence only in view of public interest so that the reliability
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    of these instruments can be ensured – s.147 of Negotiable
    Instruments Act, 1881 makes all offences under NI Act
    compoundable offences – All the same, s.320(5) CrPC provides
    that if compounding has to be done after conviction, then it can
    only be done with the leave of the Court where appeal against such
    conviction is pending – Keeping in mind that the ‘compensatory
    aspect’ of remedy shall have priority over the ‘punitive aspect’,
    courts should encourage compounding of offences under the NI
    Act if parties are willing to do so. [Paras 4, 6]

                            Case Law Cited
    Raj Reddy Kallem v. The State of Haryana & Anr. [2024] 5 SCR
    203; Damodar S. Prabhu v. Sayed Babalal H. [2010] 5 SCR 678 :
    (2010) 5 SCC 663; Gimpex Private Limited v. Manoj Goel [2021]
    11 SCR 432 : (2022) 11 SCC 705; Meters and Instruments Private
    Limited and Anr. v. Kanchan Mehta [2017] 10 SCR 66 : (2018) 1
    SCC 560 – referred to.

                              List of Acts
    Negotiable Instruments Act, 1881; Code of Criminal Procedure,
    1973.

                           List of Keywords
    Section 138 Negotiable Instruments Act, 1881; Insufficient funds;
    Settlement agreement; Compoundable offences; Compounding of
    the offence; Compounding after conviction; Compensatory aspect
    of remedy.

                          Case Arising From

    CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No. 2948
    of 2024
    From the Judgment and Order dated 01.04.2019 of the High Court
    of Judicature at Madras in CRLA No. 45 of 2014

                       Appearances for Parties

    M Yogesh Kanna, K. Paari Vendhan, Manoj Kumar A, Advs. for the
    Appellants.
    Sudhakar Rajendran, Vairawan A.S, Advs. for the Respondent.
[2024] 7 S.C.R.                                                        1227

             M/s New Win Export & Anr. v. A. Subramaniam


                Judgment / Order of the Supreme Court

                                  Order
     Leave granted.
2.   This case arises from a complaint under Section 138 Negotiable
     Instruments Act filed by the respondent/complainant. In the year
     2006, appellant no.2 had borrowed a loan of Rs.5,25,000 from the
     respondent but did not repay as promised. To discharge the said debt,
     the appellant no.2 gave a cheque of Rs.5,25,000 which was issued
     in the name of his partnership firm i.e., appellant no.1 (M/s New
     Win Export). Since the cheque was dishonoured due to ‘insufficient
     funds’, respondent filed a complaint under Section 138 NI Act against
     the appellants where the Trial Court vide order dated 16.10.2012
     convicted the appellants and imposed a sentence of 1 year of simple
     imprisonment each. The appellants challenged their conviction before
     the Appellate Court, which reversed the findings of the Trial Court
     and acquitted the appellants. Finally, when the matter was taken to
     the High Court at the instance of the respondent/complainant, the
     High Court in its order dated 01.04.2019 set-aside the order of the
     Appellate Court and restored the order of the Trial Court, convicting
     the appellants. Now, the appellants are before this Court.
3.   We have been apprised at the bar that before filing the present
     appeal, appellants and respondent-complainant had entered into
     a settlement agreement dated 27.01.2024. We have perused the
     settlement document and from the terms of the agreement, it is
     clear that the parties have settled the dispute among themselves.
     As per the agreement, the appellants have paid Rs.5,25,000 to
     the respondent-complainant, who has agreed to settle the present
     matter for the said amount. Also, the complainant does not have any
     objection if the conviction of the appellants is set aside. The relevant
     portion of the said settlement agreement is reproduced below where
     the expression ‘First Party’ is used for the respondent-complainant
     and accused-appellant has been called as the ‘Second Party’:
           “…..The First Party and the second Party had agreed to
           settle their dispute between them at a final settlement of
           Rs.5,25,000/ - (Five Lakhs and twenty five thousand only)
           and the First party had. received a sum of Rs.5,25,000/
           (Five Lakhs and. twenty five thousand only) by way of
           Demand draft dated 08.12.2023 bearing No.135744 drawn
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          on Union Bank, Perunthozhuvu Branch received from the
          second party.
          5. The First Party agrees to accept the final settlement
          amount of Rs.5,25, 000/ - (Five Lakhs and twenty five
          thousand only) and the First Party had received the sum
          of Rs.5,25,000/- (Five Lakhs and twenty five thousand
          only) from the Second party as mentioned above.
          6. After the execution of the present Settlement Agreement,
          the Second Party is intending to file a Special Leave Petition
          before the Honourable Supreme Court of India and the
          First Party agrees to support the Special Leave Petition
          filed by the Second Party, in order to enable the Hon’ble
          Supreme Court of India to pass appropriate order as the
          Hon’ble supreme Court may deem it fit and proper in the
          facts and circumstances of the present.
          7. The First Party will have no objection if the conviction
          of the Second Party is set aside by the Hon’ble Supreme
          Court of India.”
4.   Section 147 of the Negotiable Instruments Act, 1881 makes all offences
     under NI Act compoundable offences. In our opinion, this settlement
     agreement can be treated to be compounding of the offence. All the
     same, Section 320 (5) of CrPC provides that if compounding has to
     be done after conviction, then it can only be done with the leave of
     the Court where appeal against such conviction is pending.
5.   In cases where the accused relies upon some document for
     compounding the offence at the appellate stage, courts shall try
     to check the veracity of such document, which can be done in
     multiple ways. For the same, in the present matter, this Court vide
     order dated 18.03.2024 had asked the respondent-complainant to
     file an affidavit to bring on record whether or not any compromise
     has been reached between the parties. In compliance with the said
     order, the respondent-complainant has filed before us an affidavit
     dated 27.03.2024 supporting the case of the appellants wherein it is
     admitted that the accused have paid the amount to the satisfaction
     of the complainant and further it is said that he has no objection if
     conviction of the appellants is set aside. Now, when the accused
     and complainant have reached a settlement permissible by law and
     this Court has also satisfied itself regarding the genuineness of the
[2024] 7 S.C.R.                                                            1229

                 M/s New Win Export & Anr. v. A. Subramaniam


      settlement, we think that the conviction of the appellants would not
      serve any purpose and thus, it is required to be set aside.
6.    At this juncture, we would also like to reiterate a few words regarding
      the principles of compounding of offences in the context of NI Act. It is
      to be remembered that dishonour of cheques is a regulatory offence
      which was made an offence only in view of public interest so that
      the reliability of these instruments can be ensured. A large number
      of cases involving dishonour of cheques are pending before courts
      which is a serious concern for our judicial system. Keeping in mind
      that the ‘compensatory aspect’ of remedy shall have priority over the
      ‘punitive aspect’, courts should encourage compounding of offences
      under the NI Act if parties are willing to do so. (See: Damodar S.
      Prabhu v. Sayed Babalal H. (2010) 5 SCC 663,1 Gimpex Private
      Limited v. Manoj Goel (2022) 11 SCC 705,2 Meters And Instruments
      Private Limited And Anr. v. Kanchan Mehta (2018) 1 SCC 560 3)
7.    In Raj Reddy Kallem v. The State of Haryana & Anr. [2024] 5
      SCR 203, this Court followed the same principles and quashed a
      conviction under the NI Act, by invoking its powers under Article
      142, even though the complainant therein declined to give consent
      for compounding, observing that the accused has sufficiently
      compensated the complainant.
8.    Considering the totality of the circumstances and compromise
      between the parties, we allow this appeal and acquit the appellants by
      setting aside the impugned order dated 01.04.2019 as well the Trial
      Court’s order dated 16.10.2012. Appellant no.2, who was exempted
      from surrendering by this Court, need not surrender and his sureties
      are hereby discharged.
      Pending application(s), if any, are disposed of.

      Result of the case: Appeal allowed



      †
          Headnotes prepared by: Bibhuti Bhushan Bose
                                  (With assistance from: Sanyam Mishra, LCRA)


1    Para 18
2    Para 29
3    Para 18.2