In 2014, the Appellant supplied certain fire-fighting goods and equipment to the Respondent. The Respondent issued two cheques of INR 11,00,000/- (Rupees Eleven Lakhs Only) and INR 16,00,000/- (Rupees Sixteen Lakhs Only), in favor of Appellant. Subsequently, the Appellant presented the cheques to the Respondent’s bank; both the cheques were dishonoured on the ground of ‘insufficiency of funds’. The Appellant made repeated requests for payment but the Respondent failed to respond. Thus, the Appellant filed two complaints under section 138 of the Negotiable Instruments Act, 1881.
Since the parties expressed their intention to settle the matter, the Court referred cases for mediation. After participating in the mediation process, the parties concluded a settlement agreement on 14 May 2015, whereby the Respondent agreed to pay an amount of INR 55,54,600/- (Rupees Fifty Five Lakhs Fifty Four Thousand and Six Hundred Only) in installments. However, the Respondent frustrated the settlement agreement and the lower Court referred the case to the Delhi High Court.
- Whether it is permissible to refer a criminal matter such as under section 138, for settlement through mediation?
- What would be the consequences of the breach of such settlement accepted by the Court?
Ratio of the Court
- Negotiable Instruments Act, 1881
- It is legal to refer a criminal compoundable case as one under Section 138 of the NT Act to mediation.
- The Criminal Procedure Code does permit and recognize settlement without stipulating or restricting the process by which it may be reached. There is no bar to utilizing the alternate dispute mechanisms including arbitration, mediation, conciliation for the purposes of settling disputes which are the subject matter of offences covered under Section 320 of the Cr.P.C
- Civil Procedure Code, 1908
- Mediation and Conciliation Rules, 2004 formulated in exercise of powers under the CPC will be imported in criminal cases will apply to mediation arising out of civil as well as criminal cases.
- Criminal Procedure Code, 1973
- Mediated settlement and settlement before “another Judge”, would have the same efficacy and binding status as an award of the Lok Adalat which is deemed to be a decree.
- Breach of order on the settlement by High Court is recoverable under CrPC. Upon breach of such order and non-payment of the agreed amounts, the same may be recoverable in terms of Section 431 read with Section 421 Cr.P.C. Further, Contempt proceedings may be initiated.
- If mediation settlement is accepted by the court and is not complied with, then Magistrate would pass an order under Section 431 read with Section 421 of the Cr.P.C. to recover the amount agreed to be paid by the accused in the same manner as a fine would be recovered. Proceeding under Section 2(b) of the Contempt of Courts Act, 1971 can be initiated for violation.
- The settlement reached in mediation arising out of a criminal case does not tantamount to a decree by a civil court and cannot be executed in a civil court.
- In complaint cases if there is amicable settlement through mediation, the breach of the mediation settlement will result in complaint case being returned to the trial court. Trial Court shall proceed in the matter, in accordance with the law.
- Though neither the CrPC nor the NI Act provide for any particular provision which gives power to a criminal court to refer a case for mediation, the Court can still refer a criminal case for mediation as compounding of criminal cases is permissible under section 320 of CrPC.
- The cases under Section 138, tough labeled ‘criminal’ by law, can be considered ‘civil cases masquerading as criminal cases.’ Criminal case of cheque bounce can be referred for the mediation even by lower courts.
- Even if a settlement agreement is concluded after the mediation and confirmed by the magistrate, the possibility of a breach cannot be avoided. Thus, the Court also provided a safeguard mechanism and held that in cases of default by the accused, ‘the magistrate would pass an order under Section 431 read with Section 421 of the CrPC. to recover the amount agreed to be paid by the accused in the same manner as a fine would be recovered.’ The accused will also be punished for ‘civil contempt’.