FACTS- In 2012 Respondent No.2-complainant placed a purchase order for the supply of “Promotec Fiber Laser Cutting Machine” to the company (M/s Farmax) of the appellant. For the said purchase, an advance amount of Rs.1,55,00,000 was paid to the company of the appellant. All the same, for some reasons, M/s Farmax failed to procure and supply this machine to respondent No.2-complainant. Thereafter, the appellant issued 5 cheques to the complainant towards return of the advance money. Admittedly, some of these cheques were dishonoured and in Nov-Dec 2013 the complainant-initiated proceedings under section 138 of the Negotiable Instruments Act. In January 2014 complainant filed a complaint under Section 156(3) of Criminal Procedure Code in which an FIR No.35 of 2014, under Sections 406, 420 and 120B of Indian Penal Code was lodged. In NI Act case, the trial court convicted the appellant under Section 138 of the NI Act and sentenced him to 2 years of rigorous imprisonment along with direction to pay the amount of cheques.

ISSUE- Whether Courts Can't Compel Complainant To Give Consent For Compounding, Mere Repayment Won't Absolve Accused?

OBSEVATION- In the appeal filed by appellant before the Additional Sessions Judge, both sides made an effort to settle the dispute. As per settlement where the appellant agreed to pay back the entire amount of Rs.1.55 crore, which was to be paid within a period of about 16 months. Once the entire amount was paid, the entire proceedings under Section 138 of NI Act as well as offences under Section 406, 420 read with 120B of IPC arising out of the FIR had to be compounded. Additional Session Judge, Pre-Lok Adalat, Amabala passed the settlement order. However, the appellant could not discharge his liability in terms of the settlement and the Additional Sessions Judge passed an order dated 11.07.2016 holding that the settlement dated 05.12.2015 stood frustrated. On 14.03.2023, this Court passed an interim order directing the appellant to deposit Rs.20 lacs before the trial court and sought a compliance report from the trial court.

Supreme Court observed that the Courts cannot compel the complainant in a cheque dishonour case to give consent for the compounding of the complaint merely because the accused has compensated the complainant. The Court also observed that mere repayment of the amount cannot mean that the appellant is absolved from the criminal liabilities under Section 138 of the Negotiable Instruments Act. At the same time, the Court said that it could quash the criminal proceedings by taking note of the peculiar facts of a case. In this regard, the Court distinguished the compounding of a complaint and the quashing of a complaint. Taking note of the special circumstances of the case, the Court quashed the criminal proceedings by exercising the powers under Article 142 of the Constitution. The Court also reiterated that in cases of section 138 of NI Act, the accused must try for compounding at the initial stages instead of the later stage; however, there is no bar to seek the compounding of the offence at later stages of criminal proceedings including after conviction, like the present case Accordingly, the appeal was allowed.