TMI Blog2017 (10) TMI 1063X X X X Extracts X X X X X X X X Extracts X X X X ..... Cr.P.C. does permit and recognize settlement without stipulating or restricting the process by which it may be reached. There is thus no bar to utilizing the alternate dispute mechanisms including arbitration, mediation, conciliation (recognized under Section 89 of CPC) for the purposes of settling disputes which are the subject matter of offences covered under Section 320 of the Cr.P.C. It is quite apparent that proceedings under Section 138 of the NI Act have a special character. They arise from a civil dispute relating to dishonouring to a cheque but may result in a criminal consequence. Even though the statute is punitive in nature, however, its spirit, intendment and object is to provide compensation and ensure restitution as well which aspects must received priority over punishment. The proceedings under Section 138 of the NI Act are therefore, distinct from other criminal cases. It is well settled that they are really in the nature of a civil wrong which has been given criminal overtones. There is no legal prohibition upon a criminal court seized of such complaint, to whom a mediated settlement is reported, from adopting the above procedure. Application of the above en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P.C. Upon breach of such order and nonpayment of the agreed amounts, the same may be recoverable in terms of Section 431 read with Section 421 Cr.P.C. In addition, if the party has tendered an undertaking to abide by the terms of the agreement, which stands accepted by the court, in the event of breach of the undertaking, action and consequences under the Contempt of Courts Act could also follow. - CRL.REF.No.1/2016 - - - Dated:- 17-10-2017 - MS. ANU MALHOTRA J. Petitioner Through: Mr. Gautam Pal, Adv. for the complainant Respondent Through: Mr. Ajay Digpaul, Adv. for the respondent Mr. J.P. Sengh, Sr. Adv., Ms. Veena Ralli alongwith Mr. Ravin Kapur and Mr. Siddharth Aggarwal, Advs. as Amici Curiae. JUDGMENT GITA MITTAL, ACTING CHIEF JUSTICE 1. The legal permissibility of referring a complaint cases under Section 138 of the NI Act for amicable settlement through mediation; procedure to be followed upon settlement and the legal implications of breach of the mediation settlement is the subject matter of this judgment. Shri Bharat Chugh, as the concerned Metropolitan Magistrate (NI Act) Central - 01/THC/ Delhi, when seized of Complaint Case Nos.5196 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Organizing Committee of Samadhan - Delhi High Court Mediation and Conciliation Centre), both senior and experienced mediators, as amici curiae in the matter. 3. Court notice was also issued to the counsel for the parties in both CC Nos.2429/2015 2430/2015, Dayawati v. Yogesh Kumar Gosain pending in the court of the Metropolitan Magistrate for appearance before us and they stand represented through counsel before us. 4. Written submissions stand filed by learned amici curiae to assist this court. We have had the benefit of hearing Mr. J.P. Sengh, Senior Advocate, Ms. Veena Ralli, Advocate and Mr. Siddharth Aggarwal, Advocate as amici curiae as well as Mr. Gautam Pal, ld. counsel for the complainant and Mr. Ajay Digpaul, ld. counsel for the respondent in the complaints under Section 138 of the NI Act. 5. We set down hereunder the headings under which we have considered the matter : I. Factual matrix (paras 6 to 16) II. Alternate dispute resolution mechanisms statutorily recognized (paras 17 to 20) III. Statutory provisions (paras 21 to 31) IV. Scope of Section 89 of the Code of Civil Procedure, 1908 (paras 32 to 41) V. Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led to the filing of two complaint cases under Section 138 of the NI Act before the Patiala House Courts, New Delhi being CC Nos.89/1/15 and 266/1/15. In these proceedings, both parties had expressed the intention to amicably settle their disputes. Consequently, by a common order dated 1st April, 2015 recorded in both the complaint cases, the matter was referred for mediation to the Delhi High Court Mediation and Conciliation Centre. 8. We extract hereunder the operative part of the order dated 1st April, 2015 which reads as follows : Ld. Counsel for accused submits that accused is willing to explore the possibilities of compromise. Ld. Counsel for complainant is also interested (sic) in compromise talk. Let the matter be referred to Mediation Cell, High Court Delhi, Delhi. Parties are directed to appear before the Mediation Cell, Hon ble High Court, Delhi on 15.04.2015 at 2:30 p.m. 9. It appears that after negotiations at the Delhi High Court Mediation and Conciliation Centre, the parties settled their disputes under a common settlement agreement dated 14th May, 2015 under which the accused agreed to pay a total sum of ₹ 55,54,600/- to the complainant as full ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 30th June of 2015, the Metropolitan Magistrate consequently recorded thus: Ld. Counsel for complainant submits that the accused has not made the payment of first installment in terms of mediation settlement dated 14.05.2015. Ld. Counsel for complainant further submits that accused was to pay first installment of ₹ 11,00,000/- on or before the 25.06.2015 however he has paid only ₹ 5,00,000/- through RTGS. No reasonable explanation for the non-payment of full amount of first installment is given by the accused. Further, no assurance is given by the accused for making of the due installments within the stipulated time. Considering the facts of the case and submissions on behalf of both the parties, it is apparent that the accused is not willing to comply with the terms and conditions of the mediation settlement. Hence, mediation settlement failed. Let the matter be proceeded on merit, put up on 14.08.2015 (Emphasis by us) 12. Thereafter, two more opportunities were given by the Metropolitan Magistrate on 14th August, 2015 and 21st August, 2015 to the accused to comply with the settlement. Finally, in view of the continued non-complian ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at these questions had arisen, not just in this case, but a plethora of other cases as well. Consequently, the order dated 13th of January 2016 was passed making the aforestated reference under Section 395 of the Cr.P.C. to this court. At the same time, so far as the complaints under Section 138 of the NI Act are concerned, the ld. MM additionally directed thus : In view of the question of law that has arose in the present case, the decision on which is necessary for further proceedings and a proper adjudication of the present case a reference has been made u/s 395 of the CrPC for consideration and guidance of the Hon ble High Court of Delhi. The office attached to this court is directed to send this Reference Order to the Ld. Registrar General, Hon ble High Court of Delhi in appropriate manner and through proper channel. List the matter now on 06.06.2016 awaiting the outcome of the reference and clarity on the legal issue. II. Alternate dispute resolution mechanisms statutorily recognized 17. Let us, first and foremost, briefly examine the genesis, modes and methods of dispute resolution available to disputants. It is common knowledge that other t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without prejudice to any other provisions of this Act, be punished with imprisonment for a term which may be extended to two years, or with fine which may extend to twice the amount of the cheque, or with both: Provided that nothing contained in this section shall apply unless- (a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier; (b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and (c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice. Explanation .- For the purposes of this section, debt or other liability means a legally enforceable debt or other liability.] xxx ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or other disabilities, and also postulates alternate dispute resolution mechanism as lok adalats. The relevant statutory provisions of Legal Services Authorities Act, 1987 regarding dispute resolution are reproduced hereafter : 19. Organisation of Lok Adalats.- (1) Every State Authority or District Authority or the Supreme Court Legal Services Committee or every High Court Legal Services Committee or, as the case may be, Taluk Legal Services Committee may organise Lok Adalats at such intervals and places and for exercising such jurisdiction and for such areas as it thinks fit. xxx xxx xxx (5) A Lok Adalat shall have jurisdiction to determine and to arrive at a compromise or settlement between the parties to a dispute in respect of- (i) any case pending before; or (ii) any matter which is falling within the jurisdiction of, and is not brought before, any court for which the Lok Adalat is organised: Provided that the Lok Adalat shall have no jurisdiction in respect of any case or matter relating to an offence not compoundable under any law. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in a court. (7) Where the record of the case is returned under subsection (5) to the court, such court shall proceed to deal with such case from the stage which was reached before such reference under sub-section (1). 21. Award of Lok Adalat.- (1) Every award of the Lok Adalat shall be deemed to be a decree of a civil court or, as the case may be, an order of any other court and where a compromise or settlement has been arrived at, by a Lok Adalat in a case referred to it under sub-section (1) of section 20, the court-free paid in such case shall be refunded in the manner provided under the Court Fees Act, 1870 (7 of 1870).] (2) Every award made by a Lok Adalat shall be final and binding on all the parties to the dispute, and no appeal shall lie to any court against the award. (Emphasis by us) 24. Let us also examine Section 89 of the Code of Civil Procedure, 1908 ( CPC hereafter), relevant statutory provisions whereof also prescribe alternate dispute resolution mechanisms, which are as under: 89. Settlement of disputes outside the Court (1) Where it appears to the court that there exist elements of a settlement which may be acceptable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liation forum or authority is satisfied that it would not be proper in the interest of justice to proceed with the matter further, then, it shall refer the matter again to the court and direct the parties to appear before the Court on the date fixed by it. (Emphasis by us) 26. We may also usefully extract the provisions of Rule 3 of Order XXIII of the CPC which provide the manner in which a civil court will proceed upon adjustment of a suit, wholly or in part, by an agreement or compromise. This provision reads thus : 3. Compromise of suit.- Where it is proved to the satisfaction of the court that a suit has been adjusted wholly or in part by any lawful agreement or compromise in writing and signed by the parties, or where the defendant satisfies the plaintiff in respect of the whole or any part of the subject matter of the suit, the court shall order such agreement, compromise or satisfaction to be recorded, and shall pass a decree in accordance therewith so far as it relates to the parties to the suit, whether or not the subject matter of the agreement, compromise or satisfaction is the same as the subject matter of the suit: - Provided that where it is al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the Court before which any prosecution for such offence is pending, be compounded by the persons mentioned in the third column of that Table:- xxx xxx xxx (Emphasis supplied) 29. The provisions of Sections 357, 421, 431 of the Cr.P.C. which enable the court to direct payments of monetary amounts and enable recovery thereof, by the trial courts also may be extracted and read as follows : 357. Order to pay compensation (1) When a Court imposes a sentence of fine or a sentence (including a sentence of death) of which fine forms a part, the Court may, when passing judgment, order the whole or any part of the fine recovered to be applied- (a) in defraying the expenses properly incurred in the prosecution; (b) in the payment to any person of compensation for any loss or injury caused by the offence, when compensation is, in the opinion of the Court, recoverable by such person in a Civil Court; (c) when any person is convicted of any offence for having caused the death of another person or of having abetted the commission of such an offence, in paying compensation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corded in writing, it considers it necessary so to do, or unless it has made an order for the payment of expenses or compensation out of the fine under section 357. (2) The State Government may make rules regulating the manner In which warrants under clause (a) of sub- section (1) are to be executed, and for the summary determination of any claims made by any person other than the offender in respect of any property attached in execution of such warrant. (3) Where the Court issues a warrant to the Collector under clause (b) of sub- section (1), the Collector shall realise the amount in accordance with the law relating to recovery of arrears of land revenue, as if such warrant were a certificate issued under such law: Provided that no such warrant shall be executed by the arrest or detention in prison of the offender. 431. Money ordered to be paid recoverable as fine Any money (other than a fine) payable by virtue of any order made under this Code, and the method of recovery of which is not otherwise expressly provided for, shall be recoverable as if it were a fine: Provided that section 421 shall, in its application to an order under section 359, by vir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference being made to Delhi High Court Mediation and Conciliation Centre, the same will be governed by the Charter of the Delhi High Court Mediation and Conciliation Centre and to those mediation proceedings, the present Rules will apply mutatis mutandi. These Rules shall be called the Mediation and Conciliation Rules, 2004. Rule 2: Appointment of Mediator/Conciliator (a) Parties to a suit or other proceeding may agree on the name of the sole mediator/conciliator for mediating between them. xxx xxx xxx Rule 3 : Panel of mediators/conciliators xxx xxx xxx (b)(i) The District Sessions Judge shall, for the purpose of appointing the mediator/conciliator to mediate between the parties in the suits or proceedings prepare a panel of the mediators/conciliators within a period of thirty days of the commencement of these rules and shall submit the same to the High Court for approval. On approval of the said panel by the High Court, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 34. Extensive amendments were effected to the Code of Civil Procedure by the Legislature by Act 46 of 1999. Amongst the provisions inserted, was Section 89 which provided for settlement of disputes outside the court through use of alternate dispute redressal mechanisms. Several writ petitions came to be filed before the Supreme Court of India challenging the amendments effected to the Code of Civil Procedure by the Amendment Act 46 of 1999 and Amendment Act 22 of 2002. Amongst these was W.P.(C)No.496/2000 titled Salem Advocate Bar Assn. v. Union of India . This writ petition came to be decided, along with connected writ petitions, by way of the judgment dated 25th October, 2002 reported at (2003) 1 SCC 49, Salem Advocate Bar Assn. v. Union of India (commonly known as Salem Bar I). So far as the amendments and insertion of Section 89 of the Code of Civil Procedure was concerned, the Supreme Court observed that Section 89 was a new provision and even through arbitration or conciliation had been in place as modes of settling the disputes, this had not really reduced the burden of the courts. The court was of the view that modalities had to be formulated for the manner in which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o first record the settlement and pass a decree in terms thereof and if necessary proceed to execute it in accordance with law. It cannot be accepted that such a procedure would be unnecessary. If the settlement is not filed in the court for the purpose of passing of a decree, there will be no public record of the settlement. It is, however, a different matter if the parties do not want the court to record a settlement and pass a decree and feel that the settlement can be implemented even without a decree. In such eventuality, nothing prevents them in informing the court that the suit may be dismissed as a dispute has been settled between the parties outside the court. (Emphasis by us) 36. In (2010) 8 SCC 24, Afcons Infrastructure Ltd. Anr. v. Cherian Varkey Constructions Co. Pvt. Ltd., the Supreme Court was called upon to consider the scope of Section 89 of the CPC. Certain errors by the draftsman were noted in Section 89 of the CPC. In this judgment, the court further interpreted the statute to implement the spirit, object and intendment of the provisions. We may usefully refer to para 25 of the judgment in this regard, which reads as follows: 25. In view of the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be placed before the court for recording the settlement and disposal. Where the matter is referred to another Judge and settlement is arrived at before him, such settlement agreement will also have to be placed before the court which referred the matter and that court will make a decree in terms of it. (Emphasis supplied) As a result of the pronouncement in Afcons, Section 89 of the C.P.C. thus stands modified to the extent noted above. 39. So far as the procedure to be adopted by a court upon reference of the disputes in a civil case to an ADR mechanism is concerned, the same stands further considered in Afcons. The relevant portion of the judgment is reproduced as under: 43 We may summarise the procedure to be adopted by a court under Section 89 of the Code as under: (a) When the pleadings are complete, before framing issues, the court shall fix a preliminary hearing for appearance of parties. The court should acquaint itself with the facts of the case and the nature of the dispute between the parties. (b) The court should first consider whether the case falls under any of the category of the cases which are required to be tried by courts and not fit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a settlement, the court may refer the matter to another Judge for attempting settlement. (h) If the reference to the ADR process fails, on receipt of the report of the ADR forum, the court shall proceed with hearing of the suit. If there is a settlement, the court shall examine the settlement and make a decree in terms of it, keeping the principles of Order 23 Rule 3 of the Code in mind. (i) If the settlement includes disputes which are not the subject-matter of the suit, the court may direct that the same will be governed by Section 74 of the AC Act (if it is a conciliation settlement) or Section 21 of the Legal Services Authorities Act, 1987 (if it is a settlement by a Lok Adalat or by mediation which is a deemed Lok Adalat). If the settlement is through mediation and it relates not only to disputes which are the subject-matter of the suit, but also other disputes involving persons other than the parties to the suit, the court may adopt the principle underlying Order 23 Rule 3 of the Code. This will be necessary as many settlement agreements deal with not only the disputes which are the subject-matter of the suit or proceeding in which the reference is made, but also o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e filed the court may insist upon filing of an extra copy). However if the case is referred to a court annexed mediation centre which is under the exclusive control and supervision of a judicial officer, the original file may be made available wherever necessary. (Emphasis by us) 41. In para 45, the court had clarified that these were guidelines subject to such changes as the concerned court may deem fit with reference to the special circumstances of the case. There is thus complete clarity on the manner in which a court must proceed when making a reference to mediation. V. Statutory power to refer matters for dispute resolution and effect of a settlement 42. We have extracted above Section 19 of the Legal Services Act, 1987 providing for the organization of Lok Adalats. The Lok Adalats have the jurisdiction under sub-section 5 of Section 19 to determine and to arrive at a compromise or settlement between the parties to a dispute in respect of : (i) any case pending before, or (ii) any matter which is falling within the jurisdiction of, and is not brought before, any court for which the Lok Adalat is organized. Provided that the Lok Adalat sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reference of matters to alternate dispute redressal, however, so far as criminal cases are concerned, it is amply clear that the Code of Criminal Procedure does not contain any express statutory provision enabling the criminal court to refer the parties to a forum for alternate dispute resolution including mediation. The same is the position regarding cases under the NI Act. Therefore, the question which first begs an answer is whether the criminal court can in any manner refer parties before it to dispute resolution by mediation. 51. In para 18 of Afcons, the Supreme Court has given illustrations of certain categories of cases that were normally not considered suitable for alternate dispute resolution processes. Prosecution for criminal offences has been mentioned as not suitable. The judgment also notes that the categorization enumerated is merely illustrative and not inflexible. As the legal validity of mediation in criminal compoundable cases was not specifically in question, there is thus no authoritative judicial pronouncement prohibiting the same. 52. Out of the alternate dispute redressal mechanisms adopted by this country s legal system, the mediation movement as a r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re-litigation mediation or the manner of its enforceability, we do not propose to dwell on it in this judgment. 55. Mr. J.P. Sengh, Senior Advocate would emphasize before us that it is the parties who are referred to the mediation, and, not the lis before the court. It is contended that the power to refer parties to mediation is irrespective of the nature of the case before the court, and that it could be civil or criminal. We find that inasmuch as it is the parties who are referred to mediation, this would be the correct legal position. 56. We have extracted above the provisions of Section 320 of the Cr.P.C. Section 320 of the Cr.P.C. enumerates and draws a distinction between offences as compoundable, either between the parties or with the leave of the court. This provision clearly permits and recognizes the settlement of specified criminal offences. Settlement of the issue(s) is inherent in this provision envisaging compounding. The settlement can obviously be only by a voluntary process inter se the parties. To facilitate this process, there can be no possible exclusion of external third party assistance to the parties, say that of neutral mediators or conciliators. 57 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... footing for the purposes of quashing, particularly the offences arising from commercial, financial, mercantile, civil, partnership or such like transactions or the offences arising out of matrimony relating to dowry, etc. or the family disputes where the wrong is basically private or personal in nature and the parties have resolved their entire dispute. In this category of cases, the High Court may quash the criminal proceedings if in its view, because of the compromise between the offender and the victim, the possibility of conviction is remote and bleak and continuation of the criminal case would put the accused to great oppression and prejudice and extreme injustice would be caused to him by not quashing the criminal case despite full and complete settlement and compromise with the victim. In other words, the High Court must consider whether it would be unfair or contrary to the interest of justice to continue with the criminal proceeding or continuation of the criminal proceeding would tantamount to abuse of process of law despite settlement and compromise between the victim and the wrongdoer and whether to secure the ends of justice, it is appropriate that the criminal case i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case and no exhaustive elaboration of principles can be formulated; (vi) In the exercise of the power under Section 482 and while dealing with a plea that the dispute has been settled, the High Court must have due regard to the nature and gravity of the offence. Heinous and serious offences involving mental depravity or offences such as murder, rape and dacoity cannot appropriately be quashed though the victim or the family of the victim have settled the dispute. Such offences are, truly speaking, not private in nature but have a serious impact upon society. The decision to continue with the trial in such cases is founded on the overriding element of public interest in punishing persons for serious offences; (vii) As distinguished from serious offences, there may be criminal cases which have an overwhelming or predominant element of a civil dispute. They stand on a distinct footing in so far as the exercise of the inherent power to quash is concerned; (viii) Criminal cases involving offences which arise from commercial, financial, mercantile, partnership or similar transactions with an essentially civil flavour may in appropriate situations fall for quashing where p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the possibility of settlement through mediation. This is, obviously, not to dilute the rigour, efficacy and purport of Section 498-A IPC, but to locate cases where the matrimonial dispute can be nipped in bud in an equitable manner. The Judges, with their expertise, must ensure that this exercise does not lead to the erring spouse using mediation process to get out of clutches of the law. During mediation, the parties can either decide to part company on mutually agreed terms or they may decide to patch up and stay together. In either case for the settlement to come through, the complaint will have to be quashed. In that event, they can approach the High Court and get the complaint quashed. If, however, they choose not to settle, they can proceed with the complaint. In this exercise, there is no loss to anyone. If there is settlement, the parties will be saved from the trials and tribulations of a criminal case and that will reduce the burden on the courts which will be in the larger public interest. Obviously, the High Court will quash the complaint only if after considering all circumstances it finds the settlement to be equitable and genuine. Such a course, in our opinion, will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ange and cheques . It is therefore, evident that Section 138 of the NI Act was introduced to inculcate faith in the efficacy of banking operations and credibility in transacting business of negotiable instruments ( Ref.: (2003) 3 SCC 232, Goaplast P. Ltd. V. Chico Ursula D Souza Anr.). 64. In (2011) 4 SCC 593, Kaushalya Devi Massand v. Roopkishore Khore, the Supreme Court drew the following distinction between the traditional criminal offences and the offence under Section 138 of the NI Act observing thus : 11. Having considered the submissions made on behalf of the parties, we are of the view that the gravity of a complaint under the Negotiable Instruments Act cannot be equated with an offence under the provisions of the Penal Code, 1860 or other criminal offences. An offence under Section 138 of the Negotiable Instruments Act, 1881, is almost in the nature of a civil wrong which has been given criminal overtones. (Emphasis supplied) 65. We also find useful the observations of the Supreme Court in (2012) 1 SCC 260, R. Vijayan v. Baby wherein the court was determining an issue in respect of compensation when fine is imposed as the sentence or it forms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts to belatedly choose compounding as a means to resolve their dispute. Furthermore, the written submissions filed on behalf of the learned Attorney General have stressed on the fact that unlike Section 320 CrPC, Section 147 of the Negotiable Instruments Act provides no explicit guidance as to what stage compounding can or cannot be done and whether compounding can be done at the instance of the complainant or with the leave of the court. (Emphasis by us) 67. It is quite apparent that proceedings under Section 138 of the NI Act have a special character. They arise from a civil dispute relating to dishonouring to a cheque but may result in a criminal consequence. Even though the statute is punitive in nature, however, its spirit, intendment and object is to provide compensation and ensure restitution as well which aspects must received priority over punishment. The proceedings under Section 138 of the NI Act are therefore, distinct from other criminal cases. It is well settled that they are really in the nature of a civil wrong which has been given criminal overtones. X. Permissibility of settlement of offence under Section 138 of the NI Act 68. So far as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant provision. Section 320 of CrPC divides compoundable offences in two different parts by Sub-section (1). and Sub-section (2). Subsequent subsections deal with other contingencies, qualifications or embargoes. But Section 147 of the N.I. Act says that offence shall be compoundable and it does not provide for any other or further qualification or embargo like Subsection (2) of Section 320 of CrPC. The parties can compound the offence as if the offence is otherwise compoundable. Thus, the offence is made straightaway compoundable like the case described under Sub-section (1) of Section 320 of CrPC. Subsection (9) of Section 320 of CrPC has no room to play because of non obstante clause in Section 147 of the N.I. Act. . 10. The declaration placed before the Court and the presence of the original complainant respondent No. 1 today before the Court takes me to a conclusion that the say of the complainant should be accepted that he has withdrawn from prosecution because he has compounded the offence out of the Court. As per the settled legal position, the effect of compounding of the offence is that of acquittal. (Emphasis by us) 70. On this aspect, valuable light ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve vacuum that the graded scheme was provided to give some guidance and to save valuable time of the courts. 72. In this regard, reference may also usefully be made to the pronouncement of the Supreme Court reported at (2014) 5 SCC 590, Indian Banks Association Ors. v. Union of India wherein the court observed thus : 21. This Court in Damodar S. Prabhu v. Sayed Babalal H. [(2010) 5 SCC 663 : (2010) 2 SCC (Civ) 520 : (2010) 2 SCC (Cri) 1328] laid down certain guidelines while interpreting Sections 138 and 147 of the Negotiable Instruments Act to encourage litigants in cheque dishonour cases to opt for compounding during early stages of litigation to ease choking of criminal justice system; for graded scheme of imposing costs on parties who unduly delay compounding of offence; and for controlling of filing of complaints in multiple jurisdictions relatable to same transaction, which have also to be borne in mind by the Magistrate while dealing with cases under Section 138 of the Negotiable Instruments Act. (Emphasis by us) 73. The above further reinforces the position that there is no legal prohibition upon a court, seized of a complaint under NI Act, to enco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd passed by it has to be treated only as an order of the criminal court and that it cannot be executed as a decree of the civil court. This finding was overturned by the Supreme Court. We extract hereunder the observations of the Supreme Court in paras 12, 13 and 26 : 12. Unfortunately, the said argument was not acceptable to the High Court. On the other hand, the High Court has concluded that when a criminal case is referred to the Lok Adalat and it is settled at the Lok Adalat, the award passed has to be treated only as an order of that criminal court and it cannot be executed as a decree of the civil court. After saying so, the High Court finally concluded that an award passed by the Lok Adalat on reference of a criminal case by the criminal court as already concluded can only be construed as an order by the criminal court and it is not a decree passed by a civil court and confirmed the order of the Principal Munsif who declined the request of the petitioner therein to execute the award passed by the Lok Adalat on reference of a complaint by the criminal court. 13. On going through the Statement of Objects and Reasons, definition of court , legal service as well ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C (Cri) 1328] itself has given discretion to the court concerned to reduce the costs with regard to specific facts and circumstances of the case, while recording reasons in writing about such variance. Therefore, in those matters where the case has to be decided/settled in the Lok Adalat, if the court finds that it is a result of positive attitude of the parties, in such appropriate cases, the court can always reduce the costs by imposing minimal costs or even waive the same. For that, it would be for the parties, particularly the accused person, to make out a plausible case for the waiver/reduction of costs and to convince the court concerned about the same. This course of action, according to us, would strike a balance between the two competing but equally important interests, namely, achieving the objectives delineated in Damodar S. Prabhu [Damodar S. Prabhu v. Sayed Babalal H., (2010) 5 SCC 663 : (2010) 2 SCC (Civ) 520 : (2010) 2 SCC (Cri) 1328] on the one hand and the public interest which is sought to be achieved by encouraging settlements/resolution of case through the Lok Adalats on the other hand. (Emphasis by us) 80. The Supreme Court has thus declared the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... light of the decision of the Apex Court in the matter of P. Venkateswarlu v. Motor General Traders reported in AIR 1975 Supreme Court 1409 holding that the parties have right to amend the pleadings on the basis of the subsequent event which has come into existence during pendency of the suit, then the aforesaid application of amendment deserves to be allowed by allowing this revision. (Emphasis by us) Thus the court permitted application of the principles which bind a civil court regarding amendment of pleadings, to proceedings under Section 125 of the Cr.P.C. treated as quasi civil in nature and permitted its amendment. 84. In a decision dated 3rd February, 2010 in Crl.R.C.No.780/2006 entitled Chinnappaiyan v. Chinnathayee , a Single Judge of the Madras High Court held that: though a petition under Section 125 (1) of the Code is made before the criminal court - as defined under Section 6 of the Code essentially, the right that is decided by the said Court is purely civil in nature. Therefore, undoubtedly, the order made by the Magistrate under Section 125 (1) of the Code for maintenance is the culmination of such a civil right of an individual. But, Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that criminal proceedings are really quasi-civil in nature, so far as matters of procedure is concerned, consistently expanded the limits of specific statutory prescription in order to do complete justice between the parties, keeping in mind the elements of public interest as well as the spirit, object and intendment of the legislation. 87. In the present case, other than the settlement agreement, there is no judicial order of any court that binds the respondent to honour the settlement arrived at during mediation. 88. It is reported that even if a mediated settlement agreement is reached, generally criminal complaints under Section 138 of the NI Act are withdrawn/compounded by the complainants only after receipt of the entire amount(s) agreed as part of the settlement. The criminal courts thus necessarily have to keep the complaint pending, awaiting the implementation of the negotiated settlement. 89. The present reference manifests that in the event of breach of the settlement, the courts have to recommence proceedings on merits and the evidentiary/legal value of the mediated settlement remains undetermined. This has enabled many accused to divert the complaint to medi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arding the subject matter of the complaint under Section 138 of the NI Act was reached before the Court annexed mediation centre in the Rohini District Courts which was placed before the magistrate in the pending proceedings. The court recorded the statement of the respondent no.2 admitting the claim of the complainant and seeking an adjournment to pay the agreed amount. Two years were sought by the respondent no.2 from the the 25th November, 2013 being the date of making of the statement before the ld. Metropolitan Magistrate. Vide order dated 16th February, 2015, the ld. Metropolitan Magistrate returned the complaints for want of territorial jurisdiction, in view of the ratio of the Supreme Court in the pronouncement of Dashrath Rupsingh Rathore v. State. The ld. Single Judge held that the order dated 16th February, 2015 was illegal and contrary to law, in view of the fact that the matter stood settled before the Mediation Centre as also that the decision in Dashrath Rupsingh Rathore was inapplicable, the complaint cases having gone to the stage of Section 145(2) of the Cr.P.C. In para 7, the learned Single Judge had observed that it is settled law and even otherwise the settlem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent, it has no legal effect in the eye of law. So, even if a mediation agreement reaches the criminal court, agreeing to settle the issue on certain terms, the criminal court cannot rely on that agreement and pass a civil decree, relegating the parties to get the amount realized by filing execution petition before the Civil Court and it can only on the basis of the evidence either convict or acquit the accused and if the case is compounded, if it is a compoundable offence, then it can record compounding and that compounding will have the effect of an acquittal under S. 320(8) of Code of Criminal Procedure. 13. Further, the counsel for the respondent relied on the decision reported in Govindankutty Metion v. Shaji (2011 (4) KLT 857 (SC)) and argued that since the matter is referred for mediation and the parties have settled the dispute in the mediation, then it will have the effect of a civil decree and the complainant cannot proceed with the criminal case and he can only execute the award as though it is a civil decree. It is true that in the decision relied on by the counsel for the respondent namely, Govindankutty Menon's case (supra), the Hon'ble Supreme Court has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be said that the actual amount due is the amount agreed in the mediation. Para 14 of the judgment reads as follows : 14. Then, the question is whether the agreement entered into between the parties in a mediation can be treated as evidence in a criminal matter. It may be mentioned here, unless the agreement is accepted by the court and a decree is passed under S. 89 of the Code of Criminal Procedure r/w O. 23 R. 3 of Code of Civil Procedure, that will have no effect, unless that has been converted into a conciliation agreement based on which an award is passed by the Conciliator under the provisions of the Arbitration and Conciliation Act. Further, it is the cardinal principle in the mediation that whatever transpired in the mediation cannot be disclosed even before the court of law and that cannot be called upon to be produced as evidence as well as it will affect the confidentiality of the things transpired in the process of mediation. So the party who did not honour the settlement which was effected in the process of mediation, then, is not entitled to use the same as evidence before the court and agreement also cannot be marked in evidence as it has no legal effect un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diator shall be held liable for anything bona fide or omitted to be done by him during the mediation proceedings for civil or criminal action nor shall he be summoned by any party to the suit to appear in a court of law to testify in regard to information received by him or action taken by him or in respect of drafts or records prepared by him or shown to him during the mediation proceedings. 95. It was held by the court that the agreement arrived at in the mediation cannot be used as the evidence to contend that the amount mentioned in the cheque was not the real amount. In these circumstances, the party violating the mediation agreement, cannot use the same as evidence before the court and that the agreement has no legal effect unless it has been accepted by the court and a decree is passed under Section 89 r/w Order 23 Rule 3 of the Code of Civil Procedure. which was not possible in a criminal court. 96. So far as mediation in Delhi is concerned, in the Mediation and Conciliation Rules, 2004 , Rule 20 is concerned with confidentiality, disclosure and inadmissibility of information , Rule 21 mandates privacy in the mediation sessions while Rule 22 prescribes immunity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner in which a settlement agreement required to be placed or considered by the court has been provided. 101. Reference can usefully be made to certain pronouncements under the Code of Civil Procedure, wherein the Legislature has provided Rule 3 of Order XXIII, which specifically provides for Compromise of suits . The Legislature has prescripted that if it is proved to the satisfaction of the court that a suit has been adjusted wholly or in part by any lawful agreement or compromise in writing and signed by the parties , the court shall order such agreement or compromise to be recorded and shall pass a decree in accordance thereof, so far as it relates to the parties in the suit. It is important to note that Order XXIII Rule 3 of the CPC permits the consideration of the agreement, whether or not the subject matter of the agreement or compromise is the same as the subject matter of the suit. While the Code of Civil Procedure would have no application to the proceedings which are guided by the Criminal Procedure Code, however, given the legislative vacuum, there appears to be no reason as to why the principles which apply to consideration of a settlement under Order XXIII Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passing a decree in terms thereof. 103. In the pronouncement of the Allahabad High Court reported at AIR 1930 All 409 : 1929 SCC OnLine All 140, Emperor v. Jhangtoo Barai Anr., the court was considering whether there was in fact a composition of the offence or not? It was observed that the best possible evidence was that of the document signed by the parties which was in the handwriting of the complainant himself that the composition was correct. In para 6, it was also observed that if all the parties were present in court, it was entirely unnecessary for any verification of such composition. The court noted that The complainant was literate. He signed the document in his own writing. It must presumed, unless it is proved to the contrary, that the complainant well understood the one small paragraph that appeared in the document. In any case, the only verification that was required was a simple question to the parties whether they signed the document and whether they understood its contents. There can be no doubt that on that day there was a valid composition within the meaning of section 345 of the Code of Criminal Procedure before the court. It was therefore the duty of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sequently, the amount payable under the settlement, would become an amount payable under an order of the criminal court. 107. So far as the disputes beyond the subject matter of the litigation is concerned, upon the settlement receiving imprimatur of the court, such settlement would remain binding upon the parties and if so ordered, would be subject to the orders of the court. XIV. Breach of such settlement accepted by the court consequences? 108. The instant reference has resulted because of the failure of the court to have recorded the settlement and undertakings binding the accused person in the complaint under Section 138 of the NI Act to abide by the settlement arrived at during mediation. There can be no manner of doubt that once a settlement is reported to the court and made the basis of seeking the court s indulgence, the parties ought not to be able to resile from such a position. So what is the remedy available to a complainant if the respondent commits breach of the mediation settlement and defaults in making the agreed payments? 109. Let us examine as to whether the legislature has provided any mechanism in the Cr.P.C. for recovery of monetary amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order dated 13th January, 2016 (extracted in para 1 above) is answered thus: Question I : What is the legality of referral of a criminal compoundable case (such as on u/s 138 of the NI Act) to mediation? It is legal to refer a criminal compoundable case as one under Section 138 of the NI Act to mediation. Question II : Can the Mediation and Conciliation Rules, 2004 formulated in exercise of powers under the CPC, be imported and applied in criminal cases? If not, how to fill the legal vacuum? Is there a need for separate rules framed in this regard (possibly u/s 477 of the CrPC)? The Delhi Mediation and Conciliation Rules, 2004 issued in exercise of the rule making power under Part-10 and Clause (d) of sub-section (ii) of Section 89 as well as all other powers enabling the High Court of Delhi to make such rules, applies to mediation arising out of civil as well as criminal cases. Question III : In cases where the dispute has already been referred to mediation What is the procedure to be followed thereafter? Is the matter to be disposed of taking the very mediated settlement agreement to be evidence of compounding of the case and dispose of the case, or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions/proposals with each other as well and facilitate as many interactions necessary for efficient resolution within the period granted by the court. The parties shall be directed to appear before the mediator in a time bound manner keeping in view the time period fixed by the magistrate. III (vii) In the event that all parties seek extension of time beyond the initial six week period, the magistrate may, after considering the progress of the mediation proceedings, in the interest of justice, grant extension of time to the parties for facilitating the settlement. For the purposes of such extension, the magistrate may call for an interim report from the mediator, however keeping in mind the confidentiality attached to the mediation process. Upon being satisfied that bona fide and sincere efforts for settlement were being made by the parties, the magistrate may fix a reasonable time period for the parties to appear before the mediator appointing a next date of hearing for a report on the progress in the mediation. Such time period would depend on the facts and circumstances and is best left to the discretion of the magistrate who would appoint the same keeping in view the best ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uitable, lawful, not opposed to public policy, voluntary and that there is no legal impediment in accepting the same. III (xiv) Pursuant to recording of the statement of the parties, the magistrate should specifically accept the statement of the parties as well as their undertakings and hold them bound by the terms of the settlement terms entered into by and between them. This order should clearly stipulate that in the event of default by either party, the amount agreed to be paid in the settlement agreement will be recoverable in terms of Section 431 read with Section 421 of the Cr.P.C. III (xv) Upon receiving a request from the complainant, that on account of the compromise vide the settlement agreement, it is withdrawing himself from prosecution, the matter has to be compounded. Such prayer of the complainant has to be accepted in keeping with the scheme of Section 147 of the NI Act. (Ref.:(2005) CriLJ 431, Rameshbhai Somabhai Patel v. Dineshbhai Achalanand Rathi) At this point, the trial court should discharge/acquit the accused person, depending on the stage of the case. This procedure should be followed even where the settlement terms require implementation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion permissible in law to enforce compliance with the undertaking as well as the orders of the court based thereon, including proceeding under Section 2(b) of the Contempt of Courts Act, 1971 for violation thereof. Question V : If the Mediated Settlement Agreement, by itself, is taken to be tantamount to a decree, then, how the same is to be executed? Is the complainant to be relegated to file an application for execution in a civil court? And if yes, what should be the appropriate orders with respect to the criminal complaint case at hand. What would be the effect of such a mediated settlement vis- vis the complaint case? V (i) The settlement reached in mediation arising out of a criminal case does not tantamount to a decree by a civil court and cannot be executed in a civil court. However, a settlement in mediation arising out of referral in a civil case by a civil court, can result in a decree upon compliance with the procedure under Order XXIII of the C.P.C. This can never be so in a mediation settlement arising out of a criminal case. XVI. Result 119. The present reference, under Section 395(2) of the CrPC, is answered in the above terms. 120. We ..... X X X X Extracts X X X X X X X X Extracts X X X X
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