Case Name – M/s. MD Foods and Anr vs. Small Farmers Agri-Business Consortium
Date of Order – 13.02.2025
Introduction
The Hon’ble Delhi High Court in the above captioned case had dismissed a petition filed under Section 482 of the CrPC seeking quashing of complaint filed under section 138 N.I. Act. The case categorically deals with the quashing of the Complaint on the ground that a demand draft was presented by the Petitioner/Accused to the Respondent/Complainant subsequent to the institution of the complaint case before the trial court. Placing reliance on the aforementioned ground, the Petitioner/Accused person filed an application under Section 147 of the NI Act, 1881 for the compounding of the offence , which was dismissed by the trial court on merits.
The application for compounding of offence is ordinarily filed under Section 147 of the Negotiable Instruments Act, 1881. The Hon’ble Trial Court while dismissing the compounding application placed reliance on the landmark judgement passed in the case of JIK Industries Limited and Ors. Vs. Amar Lal V. Jumani and Anr. 3535 (2021) (07) SC , wherein the Hon’ble Supreme Court had observed that the main purpose of Section 147 of the NI Act is compounding of the offence in order to get the said charges dropped, but it should not be done against the consent of the person aggrieved or injured by the said offence. Basically, the Complainant’s consent should not be washed away nor could be substituted by the virtue of Section 147 of the Negotiable Instruments Act.
The Hon’ble Delhi High Court with due regard to the order of the Ld. Trial Court, further clarified that the court cannot compel the Respondent/Complainant to settle the matter unless it is arrived at with mutual consent of the parties concerned. Further the court also reaffirmed that as the demand draft for the principal amount was presented after the institution of complaint, therefore there are no grounds for quashing the present complaint without the consent of the Complainant.
Background of the Case
The case of M/s. MD Foods and Anr. vs. Small Farmers Agri- Business Consortium revolves around the quashing of a criminal complaint filed under Section 138 r/w Section 139, 141 and 142 of the Negotiable Instruments Act, 1881 before Saket District Court, New Delhi. Post the cognizance was taken, summons were issued and the appearance of the Accused Person was marked before the Ld court, the matter was referred to the Mediation Cell which remained unsettled as parties could not reach a mutual consensus. Thereafter petitioner/accused party filed an application under Section 147 NI Act for the compounding of the offence, which was opposed and argued on merits by the Complainant. Based upon the submissions of the Complainant/Respondent, the Trial court was pleased to dismiss the application filed by the Accused Person under Section 147 NI Act. Being aggrieved by the Order of the Ld. Trial Court, the Accused Person approached the Hon’ble High Court seeking quashing of the Complaint under Section 482 CrPC.
Issues Raised by the Court
1. Whether the Complaint case under Section 138 of the NI Act, 1881 is liable to be quashed on the ground that the accused party has presented a demand draft of the Principal amount to the complainant after the institution of the complaint ?
2. Whether the court can compel the parties to settle the matter amicably if the consent of the complainant is not sought?
Legal Provisions-
- Section 138 NI Act, 1881 – Deals with the Dishonour of cheque for insufficiency , etc., of funds in the account.
- Section 143 of NI Act, 1881 – Deals with power of power of court to try cases summarily.
- Section 147 of the NI Act, 1881- Deals with the offences which are compoundable.
- Section 258 of the CrPC – Power of the Court to stop proceedings in certain cases.
- Section 482 of the CrPC – Provides the inherent power of the High Court.
Analysis of the case
The Hon’ble Delhi High Court reaffirming the order passed by the trial court , held that it cannot compel the parties to settle the Complaint as the settlement has to be arrived on with mutual satisfaction of the parties concerned. The court further contended that since the petitioner did not pay the cheque amount upon the receipt of legal notice within the prescribed time period, therefore the offence under Section 138 of NI Act prima facie stands committed. The Court accordingly rejected the ground of the Petitioner/Accused person and stated that payment of cheque after institution of Complaint cannot be a ground to quash the proceedings under Section 138 NI Act, 1881.
The Hon’ble Court has further held that the compounding of the offence cannot be done as the Complainant/Respondent is not willing to settle the same and the consent of the Complainant/Respondent cannot be bypassed just so that the Section 147 of the NI Act, 1881 can be made applicable. The Learned Counsel for the Petitioner/Accused Person also submitted that as per the guidelines laid down in the case of Damodar S. Prabhu v. Sayed Babalal H., AIR 2010 SC 1907 , wherein the court had stated that an “Accused can make an application for compounding of the offence at the first and second hearing of the case and if such an application is made, compounding may be allowed by the Court without imposing any costs on the accused.” However, this contention was opposed by the counsel for the Complainant/Respondent, who argued that the judgment in Damodar S. Prabhu (supra) could not be relied upon in the present case, as in that case, both parties had consented to the compounding of the offence. Thus, being satisfied with the submissions of the counsel for the Complainant/Respondent, the Hon’ble Delhi High Court rejected the Petitioner’s arguments and dismissed the quashing petition filed by the Accused persons.
Conclusion
The dismissal order of the Hon’ble High Court passed in the favour of the aggrieved person outlines that the Defaulting party should not escape its legal liability merely by making or presenting the payment of the dishonoured cheque when the claims are over and above the cheque amount. It further safeguards the right of the aggrieved party and ensures that their consent is obtained while compounding the offence under Section 147 of the NI Act, 1881.
The decision further outlines that the cheque dishonour cases must be adjudicated with legal principles and fair proceedings rather than allowing post-facto attempts by the accused person to make delayed payments to invalidate the proceedings. The court also clarified the nexus between the CRPC and NI act to prevent any loopholes that the accused might exploit to misuse statutory provisions designed to uphold legal integrity.
Overall, the judgement strengthens the legal framework governing the Negotiable Instruments Act by placing the interests of the Aggrieved/Complainant at the forefront. The ruling clearly sets out that no person should evade his/her legal liability by misusing the legal procedures set out in the CrPC or the NI Act.