M/s. New Win Export vs. A. Subramaniam [July 11, 2024]
Citation: 2024 INSC 535; Criminal Appeal No. 2948 of 2024; (2024) ibclaw.in 167 SC
Background and Facts
The case arose from a loan transaction in 2006, where appellant no.2 (partner in M/s New Win Export) borrowed ₹5,25,000 from A. Subramaniam (respondent/complainant). To discharge this debt, a cheque for ₹5,25,000 was issued in the name of the partnership firm, M/s New Win Export. The cheque was dishonoured for insufficient funds, prompting the respondent to file a complaint under Section 138 of the Negotiable Instruments Act, 1881 (NI Act).
The Trial Court convicted the appellants and sentenced them to one year of simple imprisonment each. On appeal, the Appellate Court acquitted the appellants. The High Court, however, set aside the acquittal and restored the conviction and sentence. Before the Supreme Court, the appellants and respondent entered into a settlement agreement dated 27.01.2024, wherein the appellants paid the full sum of ₹5,25,000 to the respondent, who agreed to settle the matter and raised no objection to setting aside the conviction.
Key Legal Issues
Whether the conviction under Section 138 NI Act should be set aside in light of the post-conviction settlement and full payment to the complainant.
The scope of compounding offences under Section 147 of the NI Act, especially after conviction and during appeal.
Supreme Court’s Analysis and Findings
The Court emphasized that Section 147 of the NI Act makes all offences under the Act compoundable. Compounding after conviction is permissible, but only with the leave of the court where the appeal is pending, as per Section 320(5) CrPC.
The Court noted that the offence of cheque dishonour is regulatory, aimed at ensuring reliability of negotiable instruments in public interest, and that the compensatory aspect should take precedence over the punitive aspect. The judiciary should encourage compounding in such cases if parties are willing, to reduce the burden of pending cheque bounce cases.
The Court was satisfied with the genuineness of the settlement, as the respondent had received the full settlement amount and expressly consented to the setting aside of the conviction. The Court cited Raj Reddy Kallem v. State of Haryana & Anr. (2024) and Gimpex Private Limited v. Manoj Goel (2022) as precedents where convictions under the NI Act were quashed in view of settlements, even invoking Article 142 of the Constitution to do complete justice.
Considering the totality of the circumstances and the compromise, the Court set aside both the High Court and Trial Court orders, acquitted the appellants, and discharged their sureties. Any pending applications were also disposed of.
Conclusion and Significance
The Supreme Court allowed the appeal, set aside the conviction and sentence under Section 138 NI Act, and acquitted the appellants due to the full and final settlement between the parties.
The judgment reinforces that courts should prioritize the compensatory aspect and encourage compounding of cheque dishonour cases, especially when the complainant is fully compensated.
This ruling highlights the regulatory nature of Section 138 NI Act offences and the importance of judicial efficiency in resolving such matters through settlement.
In summary: The Supreme Court quashed the conviction of M/s New Win Export and its partner under Section 138 NI Act, following a genuine settlement and full payment to the complainant, reaffirming the principle that such offences are compoundable and settlements should be encouraged by the courts.
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