Order XXIII Rule 3 CPC Cannot Be Imported To Deal With Complaints U/S 138 Negotiable Instruments Act: Jammu & Kashmir High Court

The said provision of CPC prescribes that when the parties have made an arrangement to settle a dispute entirely or in part, the court if it is satisfied shall pass the decree to such effect and record the same.

A bench of Justice Javed Iqbal Wani observed that Section 138 of the Act is quasi-criminal and,

"The Magistrate could not have relied upon the aforesaid provisions of CPC while dealing with the case of a criminal offence under Section 138 of the Act which proceedings are regulated by the Code of Criminal Procedure".

The observations were made while hearing a plea in terms of which the petitioner had sought quashing of an order passed by the court of Chief Judicial Magistrate, Sopore.

In the instant case the respondent had filed three complaints under the Negotiable Instrument Act against the petitioner on account of bouncing of three cheques claimed to have been issued by the petitioner herein to the respondent covering an amount of Rs. 35.50 lakhs in total. During the proceedings, the petitioner entered into a compromise with the respondent, agreeing to pay the amount by the end of June 2015 and executed a settlement deed.

Based on the compromise, two complaints were dismissed, but the third complaint was retained for further proceedings and since the petitioner failed to follow the settlement by not paying the agreed amount, and the respondent approached the Magistrate for revival of the two dismissed complaints, which was challenged by the petitioner in a writ petition.

The writ petition was disposed of by the court, quashing the revival application filed by the respondent and providing an opportunity to the respondent to take appropriate remedies against the dismissal of the complaints.

Consequently the Magistrate proceeded with the third complaint and disposed of it as compromised, directing the petitioner to pay the entire amount of Rs 35 lakhs to the respondent. The Magistrate accordingly had acquitted the petitioner of the offences under section 138 of the NI Act by relying on the provisions of Order XXIII Rule 3 CPC and directed that in case of breach of the order and non-payment of the agreed amount, the same would be recoverable under section 547 read with section 386 Cr.P.C.

The moot question that fell for adjudication before the bench was as to whether the Magistrate had the jurisdiction for having in essence revived the compromise in respect of earlier dismissed complaints while undertaking proceedings in the third complaint.

Adjudicating upon the matter Justice Wani noted that the compromise had come to be entered into between the petitioner and the respondent, but before the same could be administered in all the three complaints, the said compromise failed, and hence it was incumbent upon the Magistrate to have proceeded with the third complaint in accordance with law without taking recourse to the compromise in question.

In order to fortify the position of law the bench placed reliance on “M/S Gimpex Private Limited vs. Manjo Goel reported in 2021 (4) Crimes 196” wherein it has been held that once a settlement agreement has been entered into between the parties, the parties are bound by the terms of the agreement and any violation of the same may result in consequential action in civil and criminal law.

Expounding on the import of Order XXIII Rule 3 of CPC to deal with the proceedings under Section 138 of NI Act Justice Wani observed that the nature of offence under Section 138 of the Act is quasi-criminal, in that, while in arises out of a civil wrong, the law however, imposes a criminal penalty in the form of imprisonment or fine.

"Magistrate could not have relied upon the aforesaid provisions of CPC while dealing with the case of a criminal offence under Section 138 of the Act which proceedings are regulated by the Code of Criminal Procedure" , the bench underscored.

In view of the said legal position the bench allowed the petition and the impugned order was set aside.

Case Title: Mohammad Ashraf Wani Vs Muzamil Bashir.

Citation: 2023 LiveLaw (JKL) 89

Coram : Justice Javed Iqbal Wani

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