Holding

Section 147 of the Negotiable Instruments Act permits compounding of an offence under Section 138 even at the appellate stage, and the conviction must be set aside upon such compounding.

Summary

The appellant issued a cheque of Rs.95,000 to discharge a lawful debt, which was later dishonoured for insufficient funds. He was convicted under Section 138 of the Negotiable Instruments Act and sentenced, with the conviction affirmed by the High Court. The parties subsequently settled their dispute and sought to compound the offence under Section 147 of the same Act, raising the question of whether compounding is permissible at the appellate stage despite the prior conviction. The Supreme Court held that Section 147, supported by the analogy to Section 320(8) of the CrPC and the Court's power under Article 142 of the Constitution, allows compounding even after conviction, and that the non‑obstante clause gives it overriding effect over the CrPC. Consequently, the Court set aside the conviction and acquitted the appellant. The appeal was therefore allowed.

Issues considered

Whether an offence under Section 138 of the Negotiable Instruments Act can be compounded under Section 147 of the Act read with Section 320 of the CrPC after a conviction has been recorded.
Whether the non‑obstante clause in Section 147 overrides the provisions of the CrPC relating to compounding of offences.
Whether the Supreme Court, under Article 142, can order acquittal of a convict when the parties have settled the dispute.

Legislation cited

Code of Criminal Procedure, 1973s. 320
Constitution of Indias. Article 136, s. Article 142
Negotiable Instruments Act, 1881s. 138, s. 147

Subjects

Negotiable Instruments ActSection 138Section 147compounding of offencesCheque dishonourCrPC Section 320Article 142Appellate jurisdictionSettlement

Judgment

[2009] 15 (ADDL.) S.C.R. 1300

K.M. IBRAHIM
v.
K.P. MOHAMMED AND ANR. ~ -
(Criminal Appeal No. 2281 of 2009)
DECEMBER 02, 2009
B ..,.,
[ALTAMAS KABIR AND CYRIAC JOSEPH, JJ.]
~

Negotiable Instruments Act, 1881 - ss.138 and 147: '.

..,,
c Dishonour of cheque - Conviction of appellant u/s. 138
- Affirmed by High Court - Compromise between rarties -
Application u/s. 147 for compounding of the offence u/s. 138
- Held: S. 147 does not bar the parties from compounding
offence uls. 138 even at the appellate stage of proceedings -
Analogy as to intention of Legislature as expressed in s.320(8)
D
CrPC - Power under Article 142 of the Constitution to pass
appropriate orders in line with s.320(8) CrPC in application
under s. 147, in order to do justice to the parties - On facts,
parties allowed to compound the offence since they had
settled their disputes - Appellant consequently acquitted -
E Code of Criminal Procedure, 1973 - s. 320 - Constitution of
mdia, 1950 - Articles 136 and 142.

Appellant issued cheque to first respondent in
discharge of a legally enforceable debt. The cheque was 't.
F dishonoured on account of insufficiency of funds. The
Trial Court convicted the appellant uls.138 of the
Negotiable Instruments Act, 1881. The conviction was
affirmed by the High Court.
Dispute arose as to whether compounding of the
G
offence under s.138 of the Act could be permitted under
s.147 of the Act read with s.320 CrPC.

It was contended by the appellant that since a ~-

H 1300
K.M. IBRAHIM v. K.P. MOHAMMED AND ANR. 1-301

specific power had been given to the parties to a A
proceeding under the Negotiable Instruments Act under
s.147 to compound the offence, there could be no reason
as to why the same cannot be permitted even after
conviction, which had been affirmed upto the High Court.
It was urged that in order to facilitate settlement of B
disputes, the legislature thought it fit to insert s.147 by
Amending Act 55 of 2002 which provided that
notwithstanding anything contained in the CrPC, every
offence punishable under the Act would be
compoundable. The appellant urged that in view of the c
non-obstante clause, the provisions of s.147 were given
an overriding effect over the CrPC and in view of the clear

-
1
mandate given to the parties to compound an offence
under the Act, reference to s.320 CrPC can be made for
purposes of comparison in order to understand the D
scope of s.147 of the Act.

Allowing the appeal, the Court

HELD: 1.1. The object of Section 320 CrPC, which
would not in the strict sense of the term apply to a E
proceeding under the Negotiable Instruments Act, 1881,
gives the parties to the proceedings an opportunity to
compound offences mentioned in the table contained in
the said section, with or without the leave of the court,
and also vests the court with jurisdiction to allow such F
compromise. By virtue of Sub-Section (8), the Legislature
has taken one step further in vesting jurisdiction in the
Court to also acquit the accused/convict of the offence
on the same being allowed to be compounded. Inasmuch
as, it is with a similar object in mind that s.147 has been G
inserted into the Negotiable Instruments Act, 1881, by
amendment, an ana!ogy may be drawn as to the intention
of the Legislature as expressed in s.320(8) CrPC,
a_lthough, the same has not been expressly mentioned in
the amended section to a proceeding under Section 147
H
1302 SUPREME COURT REPORTS [2009] 15 (ADDL.) S.C.R.

A of the Act. [Para 9) [1307-A-D]

1.2. The Supreme Court is further empowered under
Article 142 of the Constitution to pass appropriate orders
in line with Sub-Section (8) of s.320 CrPC in an
application under s.147 of the Act, in order to do justice
8
to the parties. ·[Para 1OJ [1307 -EJ

1.3. As far as the non-obstante clause included in
s.147 of the Act is concerned, the Act being a special
statute, the provisions of s.147 will have an overriding
C effect over the provisions of the Code relating to
compounding of offences. [Para 11) [1307-F]

1.4. Once a person is allowed to compound a case
as provided for under s.147 of the Negotiable ·•'
0 Instruments Act, 1881, the conviction under s.138 of the
said Act should also be set aside. [Para 8] [1306-F]

0.P. Dholakia v. State of Haryana & Anr. (2000) 1 SCC
762; Ani/ Kumar Haritwal & Anr. v. Alka Gupta & Anr. (2004)
4 SCC 366; B.C. Seshadri v. B.N. Suryanarayana Rao 2004
E (11) SCC 51 O; G. Sivarajan v. Little Flower Kuries &
Enterprises Ltd. & Anr. (2004) 11 SCC 400; Kishore Kumar
v. J.K. Corporation Ltd. (2004) 13 SCC 494; Sailesh Shyam
Parsekar v. Baban 2005 (4) SCC 162; K. Gyansagar v.
Ganesh Gupta & Anr. (2005) 7 SCC 54; K.J.B.L. Rama
F Reddy v. Annapurna Seeds & Anr. (2005) 10 SCC 632;
Sayeed lshaque Menon v. Ansari Naseer Ahmed (2005) 12
SCC 140 and Vinay Devanna Nayak v. Ryot Sewa Sahakari
Bank Ltd. (2008) 2 sec 305, relied on.

G Sudheer Kumar v. Manakkandi M.K. Kunhiraman & Anr.
(2008) 1 KLJ 203, approved.

2. In the present case, the application under s.147 of
the Negotiable Instruments Act, 1881 was made by tl1e
parties after the proceedings had been concluded before
H
K.M. IBRAHIM v. K.P. MOHAMMED AND ANR. 1303

the Appellate Forum. However, s.147 of the Act does nQt A
bar the parties from compounding an offence under s.138
even at the appellate stage of the proceedings.
Accordingly, no reason is found to reject the application
under s.147 of the Act even in a proceeding under Article
136 of the Constitution. Since the parties have settled a
their disputes, in keeping with the spirit of s.147 of the
Act, the parties are allowed to compound the offence, the
judgment of the courts below are set aside and the
appellant is acquitted of the charges against him. [Para~
12 and 13) [1307-G-H; 1308-A-B] C
Case Law Reference:
(2000) 1 sec 762 relied on Para 7
(2004) 4 sec 366 relied on Para 7A
D
(2004 (11) sec 510 relied on Para 7A
(2004) 11 sec 400 relied on Para 7A
(2004) 13 sec 494 relied on Para 7A
(2005 (4) sec 162 relied on Para 7A E

(2005) 1 sec 54 relied on Para 7A
(2005)10 sec 632 relied on Para 7A
c2oos)12 sec 140 relied on Para 7A F
c2oos)2 sec 305 relied on Para 7A
(2008)(1) KLJ 203 approved Para 7A

CRIMINAL APPELLATE JURISDICTION: Criminal Appeal G
No. 2281 of 2009. ,

From the Judgment & Order dated 1.1.2009 of the High
Court of Kerala at Ernakulam in Criminal Revision Petition No.
387 of 2005.
H
1304 SUPREME COURT REPORTS [2009] 15 (ADDL.) S.C.R.
;..
A Jayanth Muthraj, Sindhu T.P., Malavika G., Nishe Rajen
.. J
Shonker for the Appellants. .

Roy Abraham, Himinder Lal for the Respondents.

The Judgment of the Court was delivered by '*~
B
ALTAMAS KABIR, J. 1. Delay condoned.

2. Leave granted.

3. The appellant issued a cheque to the first respondent ....
c for an amount of Rs.95,000/- in discharge of a legally
~

r

enforceable debt. However, when the cheque was presented r
by the first respondent to his bank, the same was dishonoured
on account of insufficiency of funds in the account of the
appellant. The respondent thereupon issued statutory notice to
D the appellant within the prescribed time limit informing the
appellant about the dishonor of the cheque and calling upon him t,~
to pay the amount due. Since the appellant failed to pay the J
amount in time, the respondent filed a complaint before the
Chief Judicial Magistrate, Kasargode. Considering the
E evidence on record, the Trial Court found the accused guilty of
the offence with which he had been charged and sentenced him
to undergo rigorous imprisonment for a period of one year and
to pay a fine of Rs.1,05,.000/-. In default of payment of fine, it
.._
was ordered that the appellant would undergo rigorous
F imprisonment for a further period of three months. If, however,
the fine was realized, directions were given that a sum of
Rs.1,00,000/- should be given to the respondent by way of
compensation.
""'
4. Aggrieved by the said judgment, the appellant filed
G Criminal Appeal No.74 of 2003. While affirming the conviction,
the Appellate Court reduced the sentence to a period of one
-~
month and a fine of Rs.95,000/-. In default of said payment, the
appe\\ant was directed to undergo imprisonment for a further
period of two months.
H
K.M. IBRAHIM v. K.P. MOHAMMED AND ANR. 1305
[ALTAMAS KABIR, J.]'
5. The said order was challenged before the High Court, A
'" which decided the matter in the light of Section 357(3) Cr.P.C.
The High Court dismissed the revision against which the
present appeal has been filed.

6. At the very initial stage of hearing, a question was
8
raised on behalf of the appellant as to whether an offence under
Section 138 of the Negotiable Instruments Act, 1881, could be
compounded under Section 147 of the said Act read with
Section 320 Cr.P.C.

7. Appearing for the appellant, Mr. Mukul Rohtagi, learned C
Senior Advocate, contended that since a specific power had
been given to the parties to a proceeding under the Negotiable
Instruments Act under Section 147 to compound the offence,
there could be no reason as to why the same cannot be
permitted even after conviction, which had been affirmed upto D
the High Court. It was urged that in order to facilitate settlement
of disputes, the legislature thought it fit to insert Section 147
by Amending Act 55 of 2002. Such amendment came into
effect from 6th February, 2003, and provided that
notwithstanding anything contained in the Code of Criminal E
Procedure, 1973, every offence punishable under the Act would
be compoundable. Mr. Rohtagi urged that in view of the non-
obstante clause, the provisions of Section 147. wer~ given an
overriding effect over the Code and in view of the clear
mandate given to the parties to compound an offence under F
the Act, reference to Section 320 Cr.P.C. can be made for
purposes of comparison only in order to understand the scope
of Section 147 of the Negotiable Instruments Act. Mr. Rohtagi
submitted that the said position had been accepted by this
Court in various decisions, such as in the case of O.P.
Dholakia vs. State of Haryana & Anr. [(2000) 1 SCC 762], G
wherein it was held that since the petitioner had already entered
into a compromise with the complainant and the complainant
had appeared through counsel and stated that the entire money
had been received by him and he had no objection if the
H
1306 SUPREME COURT REPORTS [2009] 15 (ADDL.) S.C.R.

A conviction already recorded under Section 138 of the
Negotiable Instruments Act is set aside, the Hon'ble Judges
thought it appropriate to grant permission, in the peculiar facts
and circumstances of the case, to compound the offence. While
doing so, this Court also indicated that necessarily the
B conviction and sentence under Seetion 138 of the Act stood
annulled.

7A. The said view has been consistently followed in the
case of (1) Anil Kumar Haritwal & Anr. vs. Alka Gupta & Anr.
[(2004) 4 SCC 366]; (2). B.C. Seshadri vs. B.N.
C Suryanarayana Rao [2004 ( 11) SCC 51 O] decided by a three
Judge Bench; (3) G. Sivarajan vs. Little Flower Kuries &
Enterprises Ltd. & Anr. [(2004 11 SCC 400]; (4) Kishore Kumar
vs. J.K. Corporation Ltd. [(2004 13 SCC 494]; (5) Sailesh
Shyam Parsekar vs. Baban [(2005 (4) SCC 162]; (6) K.
D Gyansagar vs. Ganesh Gupta & Anr.. [(2005) 7 SCC 54]; (7)
K.J.B.L. Rama Reddy vs. Annapurna Seeds & Anr. [(2005)
..
10 SCC 632]; (8) Sayeed lshaque Menon vs. Ansari Naseer
Ahmed [(2005) 12 SCC 140]; '(9) Vinay Devanna Nayak vs.
Ryot Sewa Sahakari Bank Ltd. [(2008) 2 SCC 305], wherein
E some of the earlier decisions have been noticed; and (10)
Sudheer Kumar vs. Manakkandi M.K. Kunhiraman & Anr.
[2008 (1) KLJ 203], which was a decision of a Division Bench
of the Kerala High Court, wherein also the issue has been gone -
into in great detail.
F
8. The golden thread in all these decisions is that once a
person is allowed to compound a case as provided for undPr
Section 147 of the Negotiable Instruments Act, the convi~i1on
under Section 138 of the said Act should also be set ::-~ide. In
the case of Vinay Devanna Nayak (supra), the issue was
G raised and after taking note of the provisions of Section 320
Cr.P.C., this Court held that since the matter had been
compromised between the parties and payments had been -i
made in full and final settlement of the dues of the Bank, the
appeal deserved to be allowed and the appellant was entitled
H
K.M. IBRAHIM v. K.P. MOHAMMED AND ANR. 1307
[ALTAMAS KABIR, J.]
-I'

• ...
to acquittal. Consequently, the order of conviction and sentence
recorded by all the courts were set aside and the appellant was
acquitted of the charge leveled against him.
A

9. The object of Section 320 Cr.P.C., which would not in
the strict sense of the term apply to a proceeding under the
B
Negotiable Instruments Act, 1881, gives the parties to the
· proceedings an opportunity to compound offences mentioned
in the Jable contained in the said section, with or without the
leave of the court, and also vests the court with jurisdiction to
)
allow such compromise. By virtue of Sub-Section (8), the
Legislature has taken one step further in vesting jurisdiction in c
the Court to also acquit the accused/convict of the offence on
the same being allowed to be compounded. Inasmuch as, it is
with a similar object in mind that Section 147 has been inserted
into the Negotiable Instruments Act, 1881, by amendment, an
analogy may be drawn as to the intentipn of the Legislature as D
, expressed in Section 320(8) Cr.P.C., although, the same has
not been expressly mentioned in the amended section to a
proceeding under Section 147 of the aforesaid Act.

10. Apart from the above, this Court is further empowered E
under Article 142 of the Constitution to pass appropriate orders
in line with Sub-Section (8) of Section 320 Cr.P.C. in an
.( application under Section 147 of the aforesaid Act, in order to
I
·' do justice to the parties.

11 . As far as the non-obstante clause included in Section F
147 of the 1881 Act is concerned, the 1881 Act being a special
statute, the provisions of Section 147 will have an overriding
effect over the provisions of the Code relating to compounding
of offences. The various decisions cited by Mr. Rohtagi on this
issue does not add to the above position. G

12. It is true that the application under Section 147 of the
Negotiable Instruments Act was made by the parties after the
proceedings had been concluded before the Appellate Forum.
However, Section 147 of the aforesaid Act does not bar the H
1308 SUPREME COURT REPORTS [2009] 15 (ADDL)::s.c.R.
;-.:·.·
•
. >
A parties from compounding an offence. under $ectic::ir:(1'~·~ even
at the appellate stage of the proceedings. Accorqir19i~<Wefind ...
no reason to reject the application under 'Section ;14T:\olthe ·
aforesaid Act even in a proceeding under Article: f36;iibf the
Constitution.
B
13. Since the parties have settled their disputes, in.keeping
with the spirit of Section 147 of the Act, we allow the pa,rties to
compound the offence, set aside the judgnient ofthE;fcourts
below and acquit the appellant of the charges agciirnst '~im:

C 14. The appeal is, accordingly, allowed in the aforesaid
terms.

R.P. Appeal··· aHpwed. ·

·· .. ;

··.·,

... )