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Sec.138 N.I.Act – Sec.147 of N.I.Act – compromise before Lokadalat – in compromises court has got jurisdiction to relax the guidelines mentioned in Damodar S. Prabhu case in suitable cases – rejected as 15% costs not deposited as per Apex court judgement held in Damodar S. Prabhu v. Sayed Babalal H., (2010) 5 SCC 663 – High court confirmed the same – Apex court held that since Section 147 of the Act did not carry any guidance on how to proceed with compounding of the offences under the Act and Section 320 of the Code of Criminal Procedure, 1973 could not be followed in strict sense in respect of offences pertaining to Section 138 of the Act, there was a legislative vacuum which prompted the Court to frame those guidelines to achieve the following objectives: (i) to discourage litigants from unduly delaying the composition of offences in cases involving Section 138 of the Act; (ii) it would result in encouraging compounding at an early stage of litigation saving valuable time of the Court which is spent on the trial of such cases; and (iii) even though imposition of costs by the competent Court is a matter of discretion, the scale of cost had been suggested to attain uniformity. At the same time, the Court also made it abundantly clear that the concerned Court would be at liberty to reduce the costs with regard to specific facts and circumstances of a case, while recording reasons in writing for such variance.What follows from the above is that normally costs as specified in the guidelines laid down in the said judgment has to be imposed on the accused persons while permitting compounding. There can be departure therefrom in a particular case, for good reasons to be recorded in writing by the concerned Court. It is for this reason that the Court mentioned three objectives which were sought to be achieved by framing those guidelines, as taken note of above. It is thus manifestly the framing of “Guidelines” in this judgment was also to achieve a particular public purpose. Here comes the issue for consideration as to whether these guidelines are to be given a go by when a case is decided/settled in the Lok Adalat? Our answer is that it may not be necessarily so and a proper balance can be struck taking care of both the situations. Having regard thereto, we are of the opinion that even when a case is decided in Lok Adalat, the requirement of following the guidelines contained in Damodar S. Prabhu (supra) should normally not be dispensed with. However, if there is a special/specific reason to deviate therefrom, the Court is not remediless as Damodar S. Prabhu (supra) itself has given discretion to the concerned Court 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 concerned Court about the same. This course ofaction, according to us, would strike a balance between the two competing but equally important interests, namely, achieving the objectives delineated in Damodar S. Prabhu (supra) on the one hand and the public interest which is sought to be achieved by encouraging settlements/resolution of case through Lok Adalats. = CIVIL APPEAL NO. 8614 OF 2014 (arising out of Special Leave Petition (Civil) No. 38519 of 2012) |MADHYA PRADESH STATE LEGAL | | |SERVICES AUTHORITY |…..APPELLANT(S) | |VERSUS | | |PRATEEK JAIN & ANR. |…..RESPONDENT(S) = 2014 – Sept. Month – http://judis.nic.in/supremecourt/filename=41902

Sec.138 N.I.Act – Sec.147 of N.I.Act – compromise before Lokadalat – in compromises court has got jurisdiction to relax the guidelines mentioned in Damodar S. Prabhu case in suitable cases –  rejected as 15% costs not deposited as per Apex court judgement held in Damodar S. Prabhu v. Sayed Babalal H., (2010) 5 SCC  663 – High court confirmed the same – Apex court held that since Section 147 of the Act  did not carry any guidance on how to proceed with compounding  of  the  offences under the Act and  Section 320 of the Code of Criminal Procedure, 1973  could not be followed in strict  sense  in  respect  of  offences   pertaining  to Section 138 of the Act, there was a legislative vacuum  which  prompted  the Court to frame those guidelines to achieve the following objectives:

(i)   to discourage  litigants  from  unduly  delaying  the  composition  of

offences in cases involving Section 138 of the Act;

(ii)  it would result in  encouraging  compounding  at  an  early  stage  of

litigation saving valuable time of the Court which is spent on the trial  of

such cases; and

(iii) even though imposition of costs by the competent Court is a matter  of

discretion, the scale of cost had been suggested to attain uniformity.

            At the same time, the Court also made it abundantly  clear  that the concerned Court would be at liberty to reduce the costs with  regard  to specific facts and circumstances of  a  case,  while  recording  reasons  in writing for such variance.What follows from the above is that  normally  costs  as  specified  in  the guidelines laid down in the said judgment has to be imposed on  the  accused persons while permitting compounding.   There can be departure  therefrom  in

a particular case, for good  reasons  to  be  recorded  in  writing  by  the concerned Court.  

It is for this  reason  that  the  Court  mentioned  three objectives which were sought to be achieved by framing those guidelines,  as taken note of above.   It is thus manifestly the framing of  “Guidelines”  in this judgment was also to achieve a particular public purpose.   

Here  comes the issue for consideration as to whether these guidelines are to  be  given

a go by when a case is decided/settled in the  Lok  Adalat?  Our  answer  is that it may not be necessarily so and a proper balance can be struck  taking care of both the situations. Having regard thereto, we are of the  opinion  that  even  when  a  case  is decided  in  Lok  Adalat,  the  requirement  of  following  the   guidelines contained in Damodar S. Prabhu (supra)  should  normally  not  be  dispensed with.  However, if there is a special/specific reason to deviate  therefrom, the Court is not remediless as Damodar S. Prabhu (supra)  itself  has  given discretion to the concerned  Court  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 concerned Court about the same.   This  course  ofaction, according to us, would strike a balance between  the  two  competing but  equally  important  interests,   namely,   achieving   the   objectives delineated in Damodar S. Prabhu (supra) on  the  one  hand  and  the  public interest   which   is    sought    to    be    achieved    by    encouraging settlements/resolution of case through Lok Adalats. =

Essentially the lis  was  between  respondent  Nos.  1  and  2.

Respondent No.1 had filed a complaint under Section 138  of  the  Negotiable

Instruments Act,  1881  (hereinafter  referred  to  as  the  ‘Act’)  against

respondent No.2.

Matter reached before the Additional Sessions  Judge  in

the form of criminal appeal.  During the pendency of the  said  appeal,  the

matter was settled between the parties.

On their  application,  the  matter was referred to Mega Lok Adalat.

However, the concerned  Presiding  Officer

in the Lok Adalat did not give his imprimatur to the said settlement in  the

absence of deposit made as per the direction given in the  judgment of  this

Court in Damodar S. Prabhu v. Sayed Babalal H., (2010) 5 SCC  663.

Against

the order of Additional  Sessions  Judge,  a  writ  petition  was  filed  by

respondent No.2 but the same is also dismissed by the High Court,  accepting

the view taken by the Additional Sessions Judge.=

When the matter was placed before the  Lok  Adalat,  the  Presiding  Officer

refused to act upon the settlement  recorded  between  the  parties  on  the

ground that the accused person had not deposited 15% amount  of  the  cheque

for compounding of matter at  the  appeal  stage  as  per  “The  Guidelines”

contained in the judgment of this Court in the case  of  Damodar  S.  Prabhu

(supra).  

The exact order passed is reproduced below:

“30.07.2011

The matter produced before the bench of Lok Adalat No.1.

Appellant along with Shri N.S. Yadav, Advocate.

Non-Applicant along with Shri Mohan Babu Mangal Advocate.

The instant matter is related to the appeal  filed  against  the  conviction

order passed under Section 138  of  Negotiation  (sic)  of  Instrument  Act,

wherein, both parties, being  appeared  along  with  their  counsels,  while

filing application for compromise, have requested to  mitigate  the  matter.

But, the defendant/accused has not deposited 15  percent  amount  of  cheque

for mitigation of matter at the appeal stage according to  the  guide  lines

of judgment dated 3.5.2010 passed in Criminal Appeal  No.  963/2010  in  the

matter of Damodar M. Prabhu Vs.  Sayyad  Baba  Lal  passed  by  the  Hon’ble

Supreme Court, in  the  District  Legal  Services  Authority,  due  to  said

reason, it is not lawful to grant permission of mitigation of the matter  to

both sides.  Hence, the compromise application is hereby dismissed.

The matter  be  returned  back  to  the  Regular  Court  for  abrogation  in

accordance with law.”

=

In the opinion of the Court,

since Section 147 of the Act  did

not carry any guidance on how to proceed with compounding  of  the  offences

under the Act and

Section 320 of the Code of Criminal Procedure, 1973  could

not be followed in strict  sense  in  respect  of  offences   pertaining  to

Section 138 of the Act,

there was a legislative vacuum  which  prompted  the

Court to frame those guidelines to achieve the following objectives:

(i)   to discourage  litigants  from  unduly  delaying  the  composition  of

offences in cases involving Section 138 of the Act;

(ii)  it would result in  encouraging  compounding  at  an  early  stage  of

litigation saving valuable time of the Court which is spent on the trial  of

such cases; and

(iii) even though imposition of costs by the competent Court is a matter  of

discretion, the scale of cost had been suggested to attain uniformity.

At the same time, the Court also made it abundantly  clear  that

the concerned Court would be at liberty to reduce the costs with  regard  to

specific facts and circumstances of  a  case,  while  recording  reasons  in

writing for such variance.

What follows from the above is that  normally  costs  as  specified  in  the

guidelines laid down in the said judgment has to be imposed on  the  accused

persons while permitting compounding.

There can be departure  therefrom  in

a particular case, for good  reasons  to  be  recorded  in  writing  by  the

concerned Court.

It is for this  reason  that  the  Court  mentioned  three

objectives which were sought to be achieved by framing those guidelines,  as

taken note of above.

It is thus manifestly the framing of  “Guidelines”  in

this judgment was also to achieve a particular public purpose.  

Here  comes

the issue for consideration as to

whether these guidelines are to  be  given

a go by when a case is decided/settled in the  Lok  Adalat?  

Our  answer  is

that it may not be necessarily so and a proper balance can be struck  taking

care of both the situations.

Having regard thereto, we are of the  opinion  that  even  when  a  case  is

decided  in  Lok  Adalat,  the  requirement  of  following  the   guidelines

contained in Damodar S. Prabhu (supra)  should  normally  not  be  dispensed

with.  However, if there is a special/specific reason to deviate  therefrom,

the Court is not remediless as Damodar S. Prabhu (supra)  itself  has  given

discretion to the concerned  Court  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 concerned Court 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 (supra) on  the  one  hand  and  the  public

interest   which   is    sought    to    be    achieved    by    encouraging

settlements/resolution of case through Lok Adalats.

Having straightened the  position  in  the  manner  above,  insofar  as  the

present case is concerned, as we find that the parties had  already  settled

the matter and the purpose of going to the Lok Adalat was  only  to  have  a

rubber stamp of the Lok Adalat in the form of its imprimatur thereto, we  do

not find any error in the impugned judgment, though we are  giving  our  own

reasons in support of the  conclusion  arrived  at  by  the  High  Court  in

dismissing the writ petition filed by respondent No.2,  while  straightening

the approach that should be  followed  henceforth  in  such  matters  coming

before the Lok Adalats.

2014 – Sept. Month – http://judis.nic.in/supremecourt/filename=41902

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 8614 OF 2014
(arising out of Special Leave Petition (Civil) No. 38519 of 2012)
|MADHYA PRADESH STATE LEGAL | |
|SERVICES AUTHORITY |…..APPELLANT(S) |
|VERSUS | |
|PRATEEK JAIN & ANR. |…..RESPONDENT(S) |
J U D G M E N T
A.K. SIKRI, J.
Leave granted.

Madhya Pradesh State Legal Services Authority, the appellant herein, has
filed the instant appeal challenging the propriety of orders dated February
27, 2012 passed by the High Court of Madhya Pradesh in Writ Petition No.
1519 of 2012, which was filed by one Rakesh Kumar Jain (respondent No.2
herein) impleading Prateek Jain (respondent No.1 herein) as the sole
respondent. Essentially the lis was between respondent Nos. 1 and 2.
Respondent No.1 had filed a complaint under Section 138 of the Negotiable
Instruments Act, 1881 (hereinafter referred to as the ‘Act’) against
respondent No.2. Matter reached before the Additional Sessions Judge in
the form of criminal appeal. During the pendency of the said appeal, the
matter was settled between the parties. On their application, the matter
was referred to Mega Lok Adalat. However, the concerned Presiding Officer
in the Lok Adalat did not give his imprimatur to the said settlement in the
absence of deposit made as per the direction given in the judgment of this
Court in Damodar S. Prabhu v. Sayed Babalal H., (2010) 5 SCC 663. Against
the order of Additional Sessions Judge, a writ petition was filed by
respondent No.2 but the same is also dismissed by the High Court, accepting
the view taken by the Additional Sessions Judge.

From the aforesaid, it would be clear that the matter in issue was between
respondent Nos. 1 and 2. The appellant comes in picture only because the
parties had approached the Mega Lok Adalat organised by the appellant. The
reason for filing the present appeal is the apprehension of the appellant
that if the settlement arrived at in the Lok Adalats are not accepted by
the Courts, one of the essential function and duty of Legal Services
Authority cast upon by the Legal Services Authorities Act, 1987
(hereinafter referred to as the ‘1987 Act’) would be greatly prejudiced
and, therefore, it is necessary to straighten the law on the subject
matter. Acknowledging the significance of the issue involved, permission
was granted to the appellant to file the special leave petition and notice
was issued in the special leave petition on December 06, 2012. Operation
of the impugned order of the High Court was also stayed in the following
words:
“In the meantime, having regard to the objects to be achieved by the
provisions of the Legal Services Authorities Act, 1987, the operation of
the order passed by the Lok Adalat-I, Gwalior, Madhya Pradesh, on 30th
July, 2011, and that of the High Court impugned in this petition, shall
remain stayed.”

Notice has been duly served upon both the respondents, but neither of them
have put in appearance. Be that as it may, since we are concerned with the
larger question raised in this appeal, we hard the learned counsel for the
appellant in the absence of any representation on the part of the
respondents.

With the aforesaid gist of the controversy involved, we now proceed to take
note of the relevant facts in some detail.

As pointed out above, there was some dispute between respondent Nos. 1 and
2. Nature of the dispute is not reflected from the papers filed by the
appellant. However, since it pertains to a complaint filed under Section
138 of the Act, one can safely infer that the complaint was filed because
of dishonour of the cheque. It also appears from the record that this
complaint was filed by respondent No.1 against respondent No.2 and had
resulted in some conviction/adverse order against respondent No.2, though
exact nature of the orders passed by the learned Magistrate is not on
record. Be that as it may, respondent No.2 had filed the appeal against
the order of the Magistrate in the Court of Additional Sessions Judge.

During the pendency of this appeal, a joint application was filed by both
the parties stating that a compromise had taken place between them with
mutual consent and they have reestablished their relationship and wanted to
maintain the same cordial relation in future as well. On that basis it was
stated in the application that respondent No.1 herein did not want to
proceed against respondent No.2 and wanted the appeal to be disposed of on
the basis of compromise by filing a compromise deed in the appeal. This
application was filed under Section 147 of the Act which permits
compounding of such offences. We would like to point out at this stage
that on what terms the parties had settled the matter is not on record as
compromise deed has not been filed.

When this application came up for hearing on July 30, 2011 before the
learned appellate Court, counsel for both the parties requested that the
matter be forwarded to the Mega Lok Adalat which was being organized on the
same date. On this application, following order was passed by the learned
Additional Sessions Judge:
“30.07.2011

xx xx xx

An application under section 147 Negotiation (sic) Instrument Act filed on
behalf of both sides for compromise and request is made to direct the
matter be taken up before the Lok Adalat organized today’s date.

In view of the facts mentioned in the application, for abrogation of the
compromise application, the matter be taken up today before the concerned
bench of Lok-Adalat.”

When the matter was placed before the Lok Adalat, the Presiding Officer
refused to act upon the settlement recorded between the parties on the
ground that the accused person had not deposited 15% amount of the cheque
for compounding of matter at the appeal stage as per “The Guidelines”
contained in the judgment of this Court in the case of Damodar S. Prabhu
(supra). The exact order passed is reproduced below:
“30.07.2011

The matter produced before the bench of Lok Adalat No.1.

Appellant along with Shri N.S. Yadav, Advocate.

Non-Applicant along with Shri Mohan Babu Mangal Advocate.

The instant matter is related to the appeal filed against the conviction
order passed under Section 138 of Negotiation (sic) of Instrument Act,
wherein, both parties, being appeared along with their counsels, while
filing application for compromise, have requested to mitigate the matter.
But, the defendant/accused has not deposited 15 percent amount of cheque
for mitigation of matter at the appeal stage according to the guide lines
of judgment dated 3.5.2010 passed in Criminal Appeal No. 963/2010 in the
matter of Damodar M. Prabhu Vs. Sayyad Baba Lal passed by the Hon’ble
Supreme Court, in the District Legal Services Authority, due to said
reason, it is not lawful to grant permission of mitigation of the matter to
both sides. Hence, the compromise application is hereby dismissed.

The matter be returned back to the Regular Court for abrogation in
accordance with law.”
It is this order which was challenged by respondent No.2 by filing a writ
petition under Article 227 of the Constitution of India. The High Court
has dismissed the said writ petition stating that the judgment of this
Court in Damodar S. Prabhu (supra) is binding on the subordinate Courts
under Article 141 of the Constitution and, therefore, the subordinate Court
had not committed any legal error.

“The Guidelines” in the form of directions given in the aforesaid judgment
read as under:
“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 the 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.”

The question of consideration in the aforesaid backdrop is as to whether
directions/guidelines given by this Court in the aforesaid judgment are
inapplicable in cases which are resolved/settled in Lok Adalats.

What was argued before us by the learned counsel for the appellant was that
these guidelines containing the schedule of costs should not be made
applicable to the settlements which are arrived at in the Lok Adalats
inasmuch as provision for imposition of such costs would run contrary to
the very purpose of Lok Adalats constituted under Section 19 of the 1987
Act. It was emphasized that Lok Adalats were constituted to promote the
resolution of disputes pending before Court by amicable settlement between
the parties and in order to reduce the pendency of cases before the Courts,
including appellate Courts. Learned counsel also referred to the judgment
of this Court in K.N. Govindan Kutty Menon v. C.D. Shaji, (2012) 2 SCC 51,
wherein it is held that a compromise or settlement arrived at before the
Lok Adalat and award passed pursuant thereto is to be treated as decree of
civil Court by virtue of deeming provision contained in Section 21 and
Section 2(aaa) and (c) of the 1987 Act. The Court held that even a
settlement of a case under Setion 138 of the Act and Lok Adalat award
passed pursuant thereto would be a decree executable under the Code of
Civil Procedure, 1908. The position in this behalf is summed up in para 26
of the said judgment, which reads as under:
“26. From the above discussion, the following propositions emerge:

(1) In view of the unambiguous language of Section 21 of the Act, every
award of the Lok Adalat shall be deemed to be a decree of a civil court and
as such it is executable by that court.

(2) The Act does not make out any such distinction between the reference
made by a civil court and a criminal court.

(3) There is no restriction on the power of the Lok Adalat to pass an
award based on the compromise arrived at between the parties in respect of
cases referred to by various courts (both civil and criminal), tribunals,
Family Court, Rent Control Court, Consumer Redressal Forum, Motor Accidents
Claims Tribunal and other forums of similar nature.

(4) Even if a matter is referred by a criminal court under Section 138 of
the Negotiable Instruments Act, 1881 and by virtue of the deeming
provisions, the award passed by the Lok Adalat based on a compromise has to
be treated as a decree capable of execution by a civil court.”

Taking sustenance from the aforesaid dicta, the submission of learned
counsel for the appellant was that even the proceedings under Section 138
of the Act were governed by the Code of Criminal Procedure, 1973, such an
award was executable as a decree of the civil Court under the Code of Civil
Procedure, 1908. The submission, therefore, was that once award of the Lok
Adalat is given the effect of the decree and attaches this kind of sanctity
behind it, it should be carved out as an exception to ‘The Guidelines’
framed by this Court in Damodar S. Prabhu’s case (supra).

We have considered the aforesaid submission of the learned counsel with
utmost intensity of thought. It appears to be of substance in the first
blush when this submission is to be considered in the context of the
purpose and objective with which Lok Adalats have been constituted under
Section 19 of the 1987 Act. No doubt, the manifest objective is to have
speedy resolution of the disputes through these Lok Adalats, with added
advantage of cutting the cost of litigation and avoiding further appeals.
The advent of the 1987 Act gave a statutory status to Lok Adalats, pursuant
to the constitutional mandate in Article 39-A of the Constitution of India,
contains various provisions of settlement of disputes through Lok Adalat.
It is an Act to constitute legal services authorities to provide free and
competent legal services to the weaker sections of the society to ensure
that opportunities for securing justice are not denied to any citizen by
reason of economic or other disabilities, and to organize Lok Adalats to
secure that the operation of the legal system promotes justice on a basis
of equal opportunity. In fact, the concept of Lok Adalat is an innovative
Indian contribution to the world jurisprudence. It is a new form of the
justice dispensation system and has largely succeeded in providing a
supplementary forum to the victims for settlement of their disputes. This
system is based on Gandhian principles. It is one of the components of
Alternate Dispute Resolution systems specifically provided in Section 89 of
the Code of Civil Procedure, 1908 as well. It has proved to be a very
effective alternative to litigation. Lok Adalats have been created to
restore access to remedies and protections and alleviate the institutional
burden of the millions of petty cases clogging the regular courts. It
offers the aggrieved claimant whose case would otherwise sit in the regular
courts for decades, at least some compensation now. The Presiding Judge of
a Lok Adalat is an experienced adjudicator with a documented record of
public service and has legal acumen. Experience has shown that not only
huge number of cases are settled through Lok Adalats, this system has
definite advantages, some of which are listed below:
(a) speedy justice and saving from the lengthy court procedures;
(b) justice at no cost;
(c) solving problems of backlog cases; and
(d) maintenance of cordial relations.
Thus, it cannot be doubted that Lok Adalats are serving an
important public purpose.

Having said so, it needs to be examined as to whether in the given case it
becomes derogatory to the movement of the Lok Adalats if the costs
amounting to 15% of the cheque amount, as per the guidelines contained in
Damodar S. Prabhu (supra), is insisted? However, before discussing this
central issue, we would like to analyse the events of the present case, as
that would be of help to answer the pivotal issue raised before us.

As pointed out above while taking note of the factual details of the case,
it was not a situation where the Court persuaded the parties to use the
medium of Lok Adalat for the settlement of their dispute. On the contrary,
the parties had already settled the matter between themselves before hand
and filed the application in this behalf before the learned Additional
Sessions Judge on July 30, 2011 with a request which the matter be taken up
before the Lok Adalat that was being organized on the same date. It is
clear from the order passed by the learned Additional Sessions Judge on
July 30, 2011, which is already extracted above.

In the first instance, we do not understand as to why the matter was sent
to Lok Adalat when the parties had settled the matter between themselves
and application to this effect was filed in the Court. In such a
situation, the Court could have passed the order itself, instead of
relegating the matter to the Lok Adalat. We have ourselves highlighted the
importance and significance of the Institution of Lok Adalat. We would be
failing in our duty if we do not mention that, of late, there is some
criticism as well which, inter alia, relates to the manner in which cases
are posted before the Lok Adalats. We have to devise the methods to ensure
that faith in the system is maintained as in the holistic terms access to
justice is achieved through this system. We, therefore, deprecate this
tendency of referring even those matters to the Lok Adalat which have
already been settled. This tendency of sending settled matters to the Lok
Adalats just to inflate the figures of decision/settlement therein for
statistical purposes is not a healthy practice. We are also not oblivious
of the criticism from the lawyers, intelligentsia and general public in
adopting this kind of methodology for window dressing and showing lucrative
outcome of particular Lok Adalats.

Be that as it may, reverting to the facts of the present case, we find that
when the case had been settled between the parties and application in this
behalf was made before the Court, it cannot be denied that had the Court
passed the compouding order on this application under Section 147 of the
Act, as per the rigours of Damodar S. Prabhu (supra), 15% f the cheque
amount had to be necessarily deposited by the accused person (respondent
No.2). If we hold that such a cost is not to be paid when the matter is
sent to the Lok Adalat, this route would be generally resorted to, to
bypass the applicability of the directions contained in Damodar S. Prabhu
(supra). Such a situation cannot be countenanced.

The purpose of laying down the guidelines in Damodar S. Prabhu (supra) is
explained in the said judgment itself. The Court in that case was
concerned with the stage of the case when compounding of offence under
Section 147 of the Act is to be permitted. To put it otherwise, the
question was as to whether such a compounding can be only at the trial
Court stage or it is permissible even at the appellate stage. It was noted
that even before the insertion of Section 147 of the Act, by way of
amendment in the year 2002, some High Courts had permitted the compounding
of offence contemplated by Section 138 of the Act during the later stages
of litigation. This was so done by this Court also in O.P. Dholakia v.
State of Haryana, (2000) 1 SCC 672 and in some other cases which were
noticed by the Bench. From these judgments the Court concluded that the
compounding of offence at later stages of litigation in cheque bounding
cases was held to be permissible.

While holding so, the Court also took note of the phenomena which was
widely prevalent in the manner in which cases under Section 138 of the Act
proceed in this country. It noticed that there was a tendency on the part
of the accused persons to drag on these proceedings and resort to
settlement process only at a stage when the accused persons were driven to
wall. It is for this reason that most of the complaints filed result in
compromise or settlement before the final judgment on the one side and even
in those cases where judgment is pronounced and conviction is recorded,
such cases are settled at appellate stage. This was so noted in para 13 of
the judgment, which reads as under:

“13. It is quite obvious that with respect to the offence of dishonour of
cheques, it is the compensatory aspect of the remedy which should be given
priority over the punitive aspect. There is also some support for the
apprehensions raised by the learned Attorney General that a majority of
cheque bounce cases are indeed being compromised or settled by way of
compounding, albeit during the later stages of litigation thereby
contributing to undue delay in justice-delivery. The problem herein is
with the tendency of litigants to belatedly choose compounding as a means
to resolve their dispute. Further more, the writen submissions filed on
behalf of the learned Attorney General have stressed on the fact that
unlike Section 320 of the 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. As mentioned earlier, the
learned Attorney General’s submission is that in the absence of statutory
guidance, parties are choosing compounding as a method of last resort
instead of opting for it as soon as the Magistrates take cognizance of the
complaints. One explanation for such behaviour could be that the accused
persons are willing to take the chance of progressing through the various
stages of litigation and then choose the route of settlement only when no
other route remains. While such behaviour may be viewed as rational from
the viewpoint of litigants, the hard facts are that the undue delay in
opting for compounding contributes to the arrears pending before the courts
at various levels. If the accused is willing to settle or compromise by
way of compounding of the offence at a later stage of litigation, it is
generally indicative of some merit in the complainant’s case. In such
cases it would be desirable if parties choose compounding during the
earlier stages of litigation. If however, the accused has a valid defence
such as a mistake, forgery or coercion among other grounds, then the matter
can be litigated through the specified forums.”

This particular tendency had prompted the Court to accept the submission of
the Attorney General to frame guidelines for a graded scheme of imposing
costs on parties who unduly delay compounding of the offence inasmuch as
such a requirement of deposit of the costs will act as a deterrent for
delayed composition since free and easy compounding of offences at any
stage, however belated, was given incentive to the drawer of the cheque to
delay settling of cases for years. For this reason, the Court framed the
guidelines permitting compounding with the imposition of varying costs
depending upon the stage at which the settlement took place in a particular
case.

After formulating “The Guidelines”, which are already extracted above, the
Court made very pertinent observations in para 17 of the said judgment
which would have bearing in the present case. Thus, we reproduce the same
below:
“17. We are also conscious of the view that the judicial endorsement of
the above quoted guidelines could be seen as an act of judicial law-making
and therefore an intrusion into the legislative domain. It must be kept in
mind that Section 147 of the Act does not carry any guidance on how to
proceed with the compounding of offences under the Act. We have already
explained that the scheme contemplated under Section 320 of the CrPC cannot
be followed in the strict sense. In view of the legislative vacuum, we see
no hurdle to the endorsement of some suggestions which have been designed
to discourage litigants from unduly delaying the composition of the offence
in cases involving Section 138 of the Act. The graded scheme for imposing
costs is a means to encourage compounding at an early stage of litigation.
In the status quo, valuable time of the Court is spent on the trial of
these cases and the parties are not liable to pay any Court fee since the
proceedings are governed by the Code of Criminal Procedure, even though the
impact of the offence is largely confined to the private parties. Even
though the imposition of costs by the competent court is a matter of
discretion, the scale of costs has been suggested in the interest of
uniformity. The competent Court can of course reduce the costs with regard
to the specific facts and circumstances of a case, while recording reasons
in writing for such variance. Bona fide litigants should of course contest
the proceedings to their logical end. Even in the past, this Court has
used its power to do complete justice under Article 142 of the Constitution
to frame guidelines in relation to subject-matter where there was a
legislative vacuum.”

It is clear from the reading of the aforesaid para that the Court made it
clear that framing of the said guidelines did not amount to judicial
legislation. In the opinion of the Court, since Section 147 of the Act did
not carry any guidance on how to proceed with compounding of the offences
under the Act and Section 320 of the Code of Criminal Procedure, 1973 could
not be followed in strict sense in respect of offences pertaining to
Section 138 of the Act, there was a legislative vacuum which prompted the
Court to frame those guidelines to achieve the following objectives:
(i) to discourage litigants from unduly delaying the composition of
offences in cases involving Section 138 of the Act;
(ii) it would result in encouraging compounding at an early stage of
litigation saving valuable time of the Court which is spent on the trial of
such cases; and
(iii) even though imposition of costs by the competent Court is a matter of
discretion, the scale of cost had been suggested to attain uniformity.
At the same time, the Court also made it abundantly clear that
the concerned Court would be at liberty to reduce the costs with regard to
specific facts and circumstances of a case, while recording reasons in
writing for such variance.

What follows from the above is that normally costs as specified in the
guidelines laid down in the said judgment has to be imposed on the accused
persons while permitting compounding. There can be departure therefrom in
a particular case, for good reasons to be recorded in writing by the
concerned Court. It is for this reason that the Court mentioned three
objectives which were sought to be achieved by framing those guidelines, as
taken note of above. It is thus manifestly the framing of “Guidelines” in
this judgment was also to achieve a particular public purpose. Here comes
the issue for consideration as to whether these guidelines are to be given
a go by when a case is decided/settled in the Lok Adalat? Our answer is
that it may not be necessarily so and a proper balance can be struck taking
care of both the situations.

Having regard thereto, we are of the opinion that even when a case is
decided in Lok Adalat, the requirement of following the guidelines
contained in Damodar S. Prabhu (supra) should normally not be dispensed
with. However, if there is a special/specific reason to deviate therefrom,
the Court is not remediless as Damodar S. Prabhu (supra) itself has given
discretion to the concerned Court 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 concerned Court 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 (supra) on the one hand and the public
interest which is sought to be achieved by encouraging
settlements/resolution of case through Lok Adalats.

Having straightened the position in the manner above, insofar as the
present case is concerned, as we find that the parties had already settled
the matter and the purpose of going to the Lok Adalat was only to have a
rubber stamp of the Lok Adalat in the form of its imprimatur thereto, we do
not find any error in the impugned judgment, though we are giving our own
reasons in support of the conclusion arrived at by the High Court in
dismissing the writ petition filed by respondent No.2, while straightening
the approach that should be followed henceforth in such matters coming
before the Lok Adalats.

The appeal stands disposed of in the aforesaid terms.
………………………………………J.
(J. CHELAMESWAR)

………………………………………J.
(A.K. SIKRI)

NEW DELHI;
SEPTEMBER 10, 2014.

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