THE HON’BLE SRI JUSTICE D.S.R.VARMA AND THE HON’BLE SRI JUSTICE NOOTY RAMAMOHANA RAO Writ Appeal No. 54 OF 2005 And Crl. Petition Nos. 6774, 6776, 6777, 6778 and 6779 of 2008 JUDGMENT: (PER NRR,J) Writ Appeal No. 54 of 2005 arises out of an order passed by our learned brother Justice G.Raghuram on 29.12.2004 dismissing the interlocutory application, duly observing as under: “The writ petition is filed, in substance, to declare the compromise entered into between the first and second petitioner on behalf of the third respondent as constituting a compounding of the offence, for which, the third respondent was convicted in Criminal Appeal No. 32 of 1997, under Section 147 of the Act. Prima facie, as this Court has become functus officio in view of the disposal of the Criminal Appeal No. 32 of 1997 and recording of the said conviction and sentence therein, no compounding of the offence under the provisions of the Act qua the provisions of Section 147 of the Act could be recorded by this Court. On this aspect, however, the learned counsel for the petitioner seeks time to make further submissions at the time of final hearing of the writ petition. In the light of the prima facie view of this Court recorded hereinabove, no case is made out for grant of any interim order as sought herein. This application is accordingly dismissed.” Thereafter, when several criminal petitions have been moved by the accused in terms of Section 482 of the Code of Criminal Procedure (for short hereinafter referred to as `Code’), our learned brother Justice P.Swaroop Reddy has observed as under: “Now the parties wanted to compound the case. But, as the Criminal Revisions are finally disposed of by this Court, prima facie I am of the view that these petitions for compounding cannot be entertained by this Court.” However, a Division Bench while entertaining Writ Appeal No. 54 of 2005 passed an interim order suspending the sentence imposed in Criminal Appeal No. 32 of 1997, dated 17.12.1998. In view of this order passed by the Division Bench entertaining Writ Appeal No. 54 of 2005, our learned Brother Justice P.Swaroop Reddy directed all the criminal petitions to be heard along with the said WA No. 54 of 2005 and thus all these cases are heard by us. The crucial questions that require to be answered by us are: (1) at what stage, an offence said to have been committed under the Negotiable Instruments Act, 1881 (for short hereinafter referred to as `N.I. Act’) can be allowed or permitted to be compounded? (2) Can any such application/petition be entertained even after the appeal/revision has ended or not? Heard Sri J.Ugranarasimha, learned counsel for the appellant in the writ appeal, Sri Sitaram Chaparla, learned counsel for the petitioners in the criminal petitions and Sri C.Padmanabha Reddy, learned Senior Counsel, appointed as Amicus Curiae and the learned Public Prosecutor for the respondents. N.I. Act is an Act intended to define and codify the law relating to Promissory Notes, Bills of Exchange and Cheques. It has been amended on several occasions. But, however, the significant amendment for the present purposes is the Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988, Amending Act 66 of 1988, through which Chapter XVII has been introduced into the N.I. Act. The amending provisions have been brought into force with effect from 1.4.1989. Chapter XVII of the N.I. Act begins with Section 138, recognising the act of dishonour of a cheque drawn by any person for payment of any amount of money to another person for the discharge, in whole or in part of any debt or other enforceable liability, when returned unpaid by the banker, either because the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account, to have committed an offence, and the same may be punished with imprisonment, or with fine which may extend to twice the amount of the cheque or with both. Initially, the term of imprisonment was contemplated to be period of one year which was subsequently substituted by the term of two years through the amending Act No. 55 of 2002 with effect from 6.2.2003. Section 138 of the N.I. Act has also set out in detail the conditions precedent for constituting the offence. Section 142 of the N.I. Act has specified that no court shall take cognizance of any offences punishable under Section 138 except upon a written complaint made by the payee or the holder in due course of the cheque, as the case may be, and such complaint has been lodged within one month from the date on which the cause of action arises in accordance with clause (c) of the proviso to Section 138 of the N.I. Act. Chapter XVII has been essentially introduced in the N.I. Act for purposes of securing increased utilization of cheques in commercial transactions. Therefore, the offence under Section 138 has been rendered cognizable, providing for a redressal mechanism which entails graver consequences than those that might normally arise out of an ordinary civil commercial dispute. A sense of credibility is sought to be ascribed to the transactions which are witnessed by drawing out of cheques towards liquidating the whole or part of legally enforceable debts. The offence, therefore, is essentially a regulatory offence. Introduction of Chapter XVII in the N.I. Act with effect from 1.4.1989 has witnessed an avalanche of prosecutions launched against the drawers of cheques, whenever such cheques have been dishonoured by the bankers. This unprecedented quantum leap of prosecutions has necessitated a working group to be constituted by the government for studying and recommending the necessary changes to be made to the N.I. Act to achieve the main thrust that is sought to be supplied. The recommendations of this working group and other related representative bodies have been examined by the Central Government in consultation with the Reserve Bank of India, the regulator in the field and thereafter the Standing Committee on Finance have proposed to introduce certain changes. A far more simplified procedure including conferring discretion upon the court to waive the period of one month, is sought to be introduced in this statutory scheme and simultaneously the offences under the Act are sought to be made compoundable. Hence, among other things, Section 147 came to be introduced through the Negotiable Instruments (Amendment and Misc. Provisions) Act, 2002 (Act 55 of 2002). Section 147 reads as under: “147. Offences to be compoundable:- Notwithstanding anything contained in the Code of Criminal Procedure, 1973, (2 of 1974), every offence punishable under this Act shall be compoundable.” Thus, in the post 6th February 2003 period, the offence under the N.I. Act became compoundable. What is meant by `compounding of an offence’ is therefore required to be noticed at the outset. The verb `compound’ has been defined as under by the Black’s Law Dictionary: “To settle (a matter, esp. a debt) by a money payment, in lieu of other liability; to adjust by agreement. To agree for consideration not to prosecute (a crime). Compounding a felony in this way is itself a felony.” Merriam-Webster’s Dictionary of Law defined the verb `compound’ in the following terms: “to agree for a consideration not to prosecute (an offense).” West’s Legal Thesaurus/Dictionary dealt with `compounding crime’ as under: “(a) the agreement not to prosecute or not to inform against someone who has committed a crime, (b) the knowledge of the actual commission of a crime, and (c) the receipt of property or other consideration in exchange for the agreement. Words and Phrases – Permanent Edition – has explained the word `compound’ as under: The word `compound’ is defined as “to compromise”; Similarly, Encyclopaedic Law Lexicon has set out the following about the word `compound’. “Compounding.- Arranging, coming to terms; compounding a felony is where the party robbed not only knows the felon, but also takes his goods again, or other amends, upon an agreement not to prosecute; this offence was denominated theftbote. It is a mesdemeanour…. …… unless the offence is virtually an offence against the public, for the party injured may maintain an action to recover compensation in damages. Stroud’s Judicial Dictionary of Words and Phrases has explained the word `compound’ as under: To “compound” a debt is ;to abate a part on receiving the residue….. …. Which neither party can recede and with which the creditor is satisfied, it is a compounding, though something still remains to be done. We can therefore, gather that compounding of an offence is essentially an act of a compromise between the prosecutor and the person proceeded against by entering into a settlement for a consideration not to prosecute the person concerned. While a compromise between the parties essentially being a private arrangement can bring home some solace to the accused person from the civil liability arising out of his own act of default, but, however, when once the same act also is recognized as an offence, no further liability can be avoided by such a person unless the statute recognizes the offence as a compoundable one. In other words, by entering into a negotiated settlement, a civil liability can be annulled completely to the satisfaction of the persons entering into the compromise but, insofar as criminal culpability is concerned, it would persist so long as the statute does not recognize the offence committed as a compoundable one. Our Parliament therefore, after a careful assessment of all the relevant circumstances and factors felt it expedient to recognize the offences committed under the N.I. Act as compoundable offences. But, at the same time, no specific procedure has been set out as to how to achieve the said objective. Section 320 of the Code of Criminal Procedure (henceforth referred to as `Code’) has set out the various offences specified in the table annexed thereto as compoundable offences, with or without obtaining the leave of the Court. Sub-section (1) thereof dealt with the offences that can be compounded without the necessity for obtaining any leave, while sub-section (2) listed out various other offences which can be compounded only after obtaining the leave of the Court. Sub-section (9) of Section 320 of the Code renders no other offence to be compounded except those provided in the Section. Sub-section (8) of Section 320 brings out the effect of composition of an offence under the said Section, by declaring that it will have the same effect of acquittal of the accused. In other words, once an offence compounded, the accused person shall be deemed to have been acquitted of the offence alleged against him. Section 320 of the Code, in the context of sub-section (9) thereof, makes it abundantly clear that no other offence other than those offences specified in the said section can be compounded and all the offences that have been provided there in the said section are those set out by the Indian Penal Code only. Though, Section 320 of the Code is not attracted automatically to an offence under the N.I. Act, but, nonetheless, in view of the non obstante clause set out in Section 147 of the N.I. Act, it renders the said provision to have an overriding effect and consequently every offence under the N.I. Act becomes compoundable. N.I. Act being a special piece of legislation and in view of the fact that the Parliament introduced Section 147 in the said Act through Amending Act No. 55 of 2002 specifying that notwithstanding anything contained in the Code of Criminal Procedure, 1973, every offence under the N.I. Act has also became compoundable. It is only required to be noticed that Section 147 will have predominance over what is contained under sub-section (9) of Section 320. But, however, the spirit behind sub-section (8) of Section 320 pervades the act of compounding the offences under N.I. Act also. Sri C.Padmanabha Reddy, learned Senior Counsel has submitted that when once the Parliament has introduced Section 147 into the N.I. Act rendering an offence committed thereunder as compoundable, it shall be perfectly lawful for such an offence to be compounded at any stage of the proceedings. The learned Senior Counsel would submit that it is not necessary that the parties should settle for an early exercise of a compromise. But, freedom should be left for them to sort out the issue even at any later stage. Learned Senior Counsel therefore submits that the fact that the criminal appeal or the criminal revision as provided for under Section 378 or Section 401 of the Code are already exhausted before such a settlement has been worked out, need not be a deterrent for exercising the inherent power available to the High Court under Section 482 of the Code for allowing the offence under the N.I. Act to be compounded even after the appeal or revision is decided. Learned Senior Counsel would submit that Section 482 conferred very wide powers on the High Court to make such orders as may be necessary to prevent abuse of the process of any court or for securing the ends of justice. Therefore, the learned Senior Counsel submits that it is perfectly open to this court to entertain any request from any party even after the criminal appeal/criminal revision has already ended, to enter into a settlement and secure compounding of an offence committed under the N.I. Act. The learned Senior Counsel has placed reliance upon the judgment rendered by the Gujarat High Court in Kirpalsingh Pratapsingh Ori v. B.K.H.Lobana[1] and the judgment rendered by the Kerala High Court in Sabu George v. The Home Secretary, Department of Home Affairs, New Delhi and another[2] as well as the judgments rendered by the Supreme Court in K.M.Ibrahim v. K.P.Mohammed[3] and in Damodar S.Prabhu v. Sayed Babalal H[4] as well as in Simrikhia v. Dolley Mukherjee[5] and a judgment of the Division Bench of this Court in Itineni Linganna v. Superintendent, Central Jail, Warangal[6]. It is true that in Kirpalsingh Pratapsingh Ori’s case (supra 1), the Gujarat High Court had held that that the power available to the High Court under Section 482 of the Code can be exercised to avoid miscarriage of justice and also for the purpose of securing substantial justice to the parties keeping in view the spirit of compromise arrived at by them and similarly, the Kerala High Court in Sabu George’s case (supra 2) has held that that the matter need not be pending before any court, for an offence under the N.I. Act to be compounded in terms of Section 147 and hence, the power can be exercised by the High Court at any stage of the proceedings and even in the post revision or appellate stages also. Further, a Division Bench of our High court, to which one of us (Justice D.S.R.Varma) is a party in Itineni Linganna v. Superintendent, Central Jail, Warangal’s case (supra 6) had considered the contours of the power available to the High Court under Section 482 of the Code and held that to subserve the ends of justice, wide power has been conferred on the High Court in terms of Section 482 of the Code. It will be appropriate to notice that the Supreme Court in O.P.Dholakia v. State of Haryana[7] has allowed the offence under Section 138 of the N.I. Act to be compounded, however, in the peculiar facts and circumstances of that case. Subsequently, the principle in O.P.Dholakia’s case (supra 7) has been followed in a long catena of cases starting with Anil Kumar haritwal v. Alka Gupta[8] to Vinay Devanna Nayak v. Ryot Sewa Sahakari Bank Limited[9]. But, specifically the question as to whether a proceeding under Section 147 of the N.I. Act can be allowed to take place after the appeal has failed, has engaged the attention of the Supreme Court i n K.M.Ibrahim’s case (supra 3). The Supreme Court has noticed that since the appellant before it failed to pay the money in time, he was convicted by the Chief Judicial Magistrate, Kasargod, and sentenced to undergo rigorous imprisonment for a period of one year and to pay a fine of Rs.1,05,000.00. Criminal Appeal No. 74 of 2003 preferred there against has failed and the Kerala High Court has further dismissed the revision preferred thereafter. Thereafter, the provision for getting the offence compounded in terms of Section 147 of the N.I. Act was invoked. Dealing with that question it was held as under in paragraphs 10, 11, 13, 14 and 15: “10. The object of Section 320 Cr.P.C., which would not in the strict sense of the term apply to a 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 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. 11. 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 intention of the Legislature as 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. 12. xxxxxxx 13. As far as the non-obstante clause included in Section 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………… 14. 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 parties from compounding an offence under Section 138 even at the appellate stage of the proceedings. Accordingly, we find no reason to reject the application under Section 147 of the aforesaid Act even in a proceeding under Article 136 of the Constitution. 15. Since the parties have settled their disputes, in keeping with the spirit of Section 147 of the Act, we allow the parties to compound the offence, set aside the judgment of the courts below and acquit the appellant of the charges against him.” Subsequent thereto in Damodar S.Prabhu’s case (supra 4), the Supreme Court was called upon to consider whether the parties can be permitted to compound the offence even at a later stage. After noticing the march of law in post O.P.Dholakia’s case (supra) period, including K.M.Ibrahim’s case (supra), the Supreme Court in paragraph (15) of the judgment considered it appropriate to frame the following guidelines, obviously with a view to encourage parties to enter into a compromise that too in quick time: THE GUIDELINES (i) In the circumstances, it is proposed as follows: (a) That directions can be given that the Writ of Summons be suitably modified making it clear to the accused that he could make an application for compounding of the offences at the first or second hearing of the case and that if such an application is made, compounding may be allowed by the court without imposing any costs on the accused. (b) If the accused does not make an application for compounding as aforesaid, then if an application for compounding is made before the Magistrate at a subsequent stage, compounding can be allowed subject to the condition that the accused will be required to pay 10% of the cheque amount to be deposited as a condition for compounding with the Legal Services Authority, or such authority as the Court deems fit. (c) Similarly, if the application for compounding is made before the Sessions Court or a High Court in revision or appeal, such compounding may be allowed on the condition that the accused pays 15% of the cheque amount by way of costs. (d) Finally, if the application for compounding is made before the Supreme Court, the figure would increase to 20% of the cheque amount. Let it also be clarified that any costs imposed in accordance with these guidelines should be deposited with the Legal Services Authority operating at the level of the Court before which compounding takes place. For instance, in case of compounding during the pendency of proceedings before a Magistrate's Court or a Court of Sessions, such costs should be deposited with the District Legal Services Authority. Likewise, costs imposed in connection with composition before the High Court should be deposited with the State Legal Services Authority and those imposed in connection with composition before the Supreme Court should be deposited with the National Legal Services Authority.” In view of the dictum laid down by the Supreme Court in K.M.Ibrahim a n d Damodar S.Prabhu’s cases (supra), it is absolutely clear, that parties can be allowed to enter into a negotiated settlement or compromise and get the offence compounded in terms of Section 147 of the N.I. Act at any stage. Section 482 of the Code confers very wide powers on the High Court for securing the ends of justice, and the said power can be utilized for allowing an offence to be compounded. If, the parties to a dispute arising out of a commercial nature of a transaction wish to enter into a compromise for a consideration and thus avoid the rigor of the penal consequences that flow therefrom, the High Court can allow the compounding of offence to take place even after the appeal/revision provided in the Code is already exhausted, by such parties. Similarly, if the parties have not entered into a compromise before the appeal is decided by any other court, but have preferred thereafter, to enter into a compromise and have the offence compounded in terms of Section 147 of the N.I. Act, the only remedy available to such parties is to approach the High Court and seek the jurisdiction of it in terms of Section 482 of the Act. Once the court of first instance viz., the Judicial First Class Magistrate or the appellate court, which is subordinate to the High court has completed the proceedings pending before it, such courts cannot permit or allow the parties to enter into a compromise and record the same in terms of Section 147. Once the proceedings at the first instance or the proceedings at the appellate stage are over and they are no longer pending, those respective courts cannot reopen the proceedings for the sake of allowing the parties to enter into a compromise. An offence under the N.I. Act can be allowed by such courts to be compounded in terms of Section 147 so long as proceedings are pending before them, but not after such proceedings have been terminated. Thereafter the power is available only with the High Court for enabling the parties to compromise the liability and get the offence compounded in terms of Section 147. As long as proceedings are pending, the guidelines framed by the Supreme Court in Damodar S.Prabhu’s case (supra) would be followed by the courts concerned and appropriate costs would be imposed by those respective courts. Since the revision petitions preferred by the appellants/petitioners to this court have already been exhausted, we consider it appropriate to impose costs and direct the accused persons to pay 15% of the cheque amount by way of costs. We grant 30 days time to the respective accused persons to deposit costs with the State Legal Services Authority and upon such deposit being made the accused persons shall be deemed and treated to have been acquitted of the offence under Section 138 of the N.I. Act for which they were convicted, but not otherwise. Writ Appeal No. 54 of 2005 therefore stands allowed