# JIK INDUSTRIES LIMITED & ORS v. AMARLAL V. JUMANI AND ANOTHER

- **Citation:** [2012] 3 S.C.R. 114
- **Court:** Supreme Court of India
- **Decided:** 2012-02-01
- **Case number:** Criminal Appeal No. 263 of 2012
- **Bench:** Asok Kumar Ganguly, Jagdish Singh Khehar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/jik-industries-limited-ors-v-amarlal-v-jumani-and-another-28078
- **Pages:** 33

## Headnote

Code of Criminal Procedure, 1973:
s.320- Compounding of offence - Whether sanction of a
scheme u/s.391 of the Companies Act, 1956 amounts to
compounding of an offence u/s. 138 read with s. 141 of the N. I.
Act and whether such sanction has the effect of termination or
D dismissal of complaint proceedings under N. I. Act - Held: The
effect of approval of a scheme of compromise and arrangement
uls.391 of the Companies Act is that it binds the dissenting
minority, the company as also the liquidator if the company is
under winding up - A scheme u/s.391 of the Companies Act
E does not have the effect of creating new debt - The scheme
simply makes the original debt payable in a manner and to the
extent provided for in the scheme - The offence under the N.I.
Act which has already been committed prior to the scheme
does not get automatically compounded only as a result of the
F said scheme - There are various features in the compounding
of an .offence and those features must be satisfied before it can
be claimed by the offender that the offence has been
compounded - Compounding of an offence cannot be
achieved indirectly by sanctioning of a scheme by the
G Company Court- Negotiable Instruments Act, 1881- s.138 rl
w s.141- Companies Act, 1956- s.391.
s.320 - Compounding of offence - Historical background
- Discu$sed - Code of Criminal Procedure, 1861 - Code of
Criminal Procedure, 1872 - Code of Criminal Procedure, 1898.
H
114
JIK INDUSTRIES LIMITED & ORS. v. AMARLAL V.
115
JUMANI AND ANR.
Negotiable Instruments Act, 1881:
A
s. 141 - Mode and manner of compounding offences
under N. I. Act - Held: Compounding of an offence is statutorily
provided uls.320, Cr.P.C. - The act of compounding involves
an element of mutuality and it has to be bilateral and not
unilateral -Thus, representation of the person compounding
8
is essential u/s. 320, Cr. P. C. - s. 4(2), Cr. P. C. deals with
offences under any other law which include offences under the
N./. Act - In view of s.4(2), Cr.P.C., the basic procedure of
compounding an offence laid down in s.320, Cr.P.C. will apply
to compounding of an offence under N. r Act - Thus, in view of C
clear mandate of sub-section (2) of s. 4, Cr. P. C., in the absence
of special procedure relating to compounding under the N. I.
Act, the procedure relating to compounding u/s.320 shall
automatically apply.
s.147 - Effect of non-obstante clause contained in s.147
- Held: The non-obstante clause used in s.147 does not refer
to any particular section of the Code of Criminal Procedure but
refers to the entire Code - When non-obstante clause is used
D
in the said fashion the extent of its impact has to be found out E
on the basis of consideration of the intent and purpose of
insertion of such a clause - s. 147 came by way of amendment
- The amendment introduced was "to make offences under the
Act compoundable"- The offence under the N.I. Act, which was
previously non-compoundable, in view of s.320(9), Cr.P.C.
became compoundable - That would not mean that the effect
F
of s. 147 is to obliterate all statutory provisions of s. 320, Cr.P. C.
relating to the mode and manner of compounding of an offence
- s.147 will only override s.320(9), Cr.P.C. in so far as offence
u/s. 147 of N.I. Act is concerned.
G
INTERPRETATION OF STATUTES: Non-obstante
clause- Significance of- Held: The insertion of a non-obstante
. clause is a well known legislative device and in olden times it
had the effect of non obstante aliquo statuto in contrarium
(notwithstanding any statute to the contrary) ~ Under the
H
116
SUPREME COURT REPORTS
[2012] 3 S.C.R.
A Scheme of modern legislation, non-obstante clause has a
contextual and limited application - The impact of a 'nonobstante clause' has to be limited to the extent it is intended '
by the Parliament and not beyond that.
JUDGMENT/ORDER: Interpretation of - Held: It is well '
B settled that a judgment is always an authority for what it decides
- It is equally well settled that a judgment cannot be read

## Text

_Characters 0–39,771 of 66,576. This is a partial read: ask again with offset=39771 for what follows._

A
B
c
[2012] 3 S.C.R. 114
JIK INDUSTRIES LIMITED & ORS.
v.
AMARLAL V. JUMANI AND ANOTHER
(Criminal Appeal No. 263 of 2012)
FEBRUARY 1, 2012
[ASOK KUMAR GANGULY AND
JAGDISH SINGH KHEHAR, JJ.]
Code of Criminal Procedure, 1973:
s.320- Compounding of offence - Whether sanction of a
scheme u/s.391 of the Companies Act, 1956 amounts to
compounding of an offence u/s. 138 read with s. 141 of the N. I.
Act and whether such sanction has the effect of termination or
D dismissal of complaint proceedings under N. I. Act - Held: The
effect of approval of a scheme of compromise and arrangement
uls.391 of the Companies Act is that it binds the dissenting
minority, the company as also the liquidator if the company is
under winding up - A scheme u/s.391 of the Companies Act
E does not have the effect of creating new debt - The scheme
simply makes the original debt payable in a manner and to the
extent provided for in the scheme - The offence under the N.I.
Act which has already been committed prior to the scheme
does not get automatically compounded only as a result of the
F said scheme - There are various features in the compounding
of an .offence and those features must be satisfied before it can
be claimed by the offender that the offence has been
compounded - Compounding of an offence cannot be
achieved indirectly by sanctioning of a scheme by the
G Company Court- Negotiable Instruments Act, 1881- s.138 rl
w s.141- Companies Act, 1956- s.391.
s.320 - Compounding of offence - Historical background
- Discu$sed - Code of Criminal Procedure, 1861 - Code of
Criminal Procedure, 1872 - Code of Criminal Procedure, 1898.
H
114
JIK INDUSTRIES LIMITED & ORS. v. AMARLAL V.
115
JUMANI AND ANR.
Negotiable Instruments Act, 1881:
A
s. 141 - Mode and manner of compounding offences
under N. I. Act - Held: Compounding of an offence is statutorily
provided uls.320, Cr.P.C. - The act of compounding involves
an element of mutuality and it has to be bilateral and not
unilateral -Thus, representation of the person compounding
8
is essential u/s. 320, Cr. P. C. - s. 4(2), Cr. P. C. deals with
offences under any other law which include offences under the
N./. Act - In view of s.4(2), Cr.P.C., the basic procedure of
compounding an offence laid down in s.320, Cr.P.C. will apply
to compounding of an offence under N. r Act - Thus, in view of C
clear mandate of sub-section (2) of s. 4, Cr. P. C., in the absence
of special procedure relating to compounding under the N. I.
Act, the procedure relating to compounding u/s.320 shall
automatically apply.
s.147 - Effect of non-obstante clause contained in s.147
- Held: The non-obstante clause used in s.147 does not refer
to any particular section of the Code of Criminal Procedure but
refers to the entire Code - When non-obstante clause is used
D
in the said fashion the extent of its impact has to be found out E
on the basis of consideration of the intent and purpose of
insertion of such a clause - s. 147 came by way of amendment
- The amendment introduced was "to make offences under the
Act compoundable"- The offence under the N.I. Act, which was
previously non-compoundable, in view of s.320(9), Cr.P.C.
became compoundable - That would not mean that the effect
F
of s. 147 is to obliterate all statutory provisions of s. 320, Cr.P. C.
relating to the mode and manner of compounding of an offence
- s.147 will only override s.320(9), Cr.P.C. in so far as offence
u/s. 147 of N.I. Act is concerned.
G
INTERPRETATION OF STATUTES: Non-obstante
clause- Significance of- Held: The insertion of a non-obstante
. clause is a well known legislative device and in olden times it
had the effect of non obstante aliquo statuto in contrarium
(notwithstanding any statute to the contrary) ~ Under the
H
116
SUPREME COURT REPORTS
[2012] 3 S.C.R.
A Scheme of modern legislation, non-obstante clause has a
contextual and limited application - The impact of a 'nonobstante clause' has to be limited to the extent it is intended '
by the Parliament and not beyond that.
JUDGMENT/ORDER: Interpretation of - Held: It is well '
B settled that a judgment is always an authority for what it decides
- It is equally well settled that a judgment cannot be read as a
statute - It has to be read in the context of the facts discussed
in it- Negotiable Instruments Act, 1881 - s.147.
c
COMPANIES ACT, 1956: s.391 - Sanction of scheme -
Held: The proposed scheme cannot be violative of any
provision of law, nor can it be contrary to public policy.
The question which arose for consideration in the
instant appeals was whether the High Court was justified
D in holding that sanction of a scheme under Section 391 of
the Companies Act, 1956 does not amount to
compounding of an offence under Section 138 read with
Section 141 of the N.I. Act and that the sanction do not
have the effect of termination or dismissal of complaint
E proceedings under N.I. Act.
Dismissing the appeals, the Court
HELD: 1. Section 391 of the Companies Act gives very
wide discretion to the Court to approve any set of
F arrangement between the company and its shareholders.
The effect of approval of a scheme of compromise and
arrangement under Section 391 of the Companies Act is
that it binds the dissenting minority, the company as also
the liquidator if the company is under winding up. A
G scheme under Section 391 of the Companies Act does not
have the effect of creating new debt. The scheme simply
makes the original debt payable in a manner and to the
extent provided for in the scheme. In the instant appeal in
most of the cases, the offence under the N.I. Act was
committed prior to the scheme. Therefore, the offence
H
JIK INDUSTRIES LIMITED & ORS. v. AMARLAL V.
117
JUMANI AND ANR.
which has already been committed prior to the scheme
A
does not get automatically compounded only as a result
of the said scheme. [Paras 11, 13] [128-D-H; 129-A-C]
Mis. J.K. (Bombay) Private Ltd. vs. Mis. New Kaiser-I-Hind
Spinning and Weaving Co., Ltd., and others AIR 1970 SC
1041: 1970 SCR 866 - referred to.
B
2. The proposed scheme cannot be violative of any
provision of law, nor can it be contrary to public policy. A
scheme under Section 391 of the Companies Act cannot
have the effect of overriding the requirement of any law.
C
The compounding of an offence is always controlled by
statutory provision. There are various features in the
compounding of an offence and those features must be
satisfied before it can be claimed by the offender that the
offence has been compounded. Thus, compounding of an
offence cannot be achieved indirectly by the sanctioning
D
of a scheme by the Company Court. [Paras 15, 18] [129G; 130-G-H; 131-A-C]
3. It is no doubt true that Section 147 of the N.I. Act
makes an offence under N.1. Act a compoundable one. But
E
in order to make the offence compoundable the mode and
manner of compounding such offences must be followed.
The impugned judgment of the High Court correctly
formulated the principle of compounding by holding that
the act of compounding involves an element of mutuality
F
and it has to be bilateral and not unilateral. Compounding
of an offence is statutorily provided under Section 320 of
the Code. It is clear from the list of offences which are
specified in the Table attached to Section 320 of the Code
that there are basically two categories of offences under G
the provisions of Indian Penal Code which have been
made compoundable. There is a category of offence for
the compounding of which leave of the Court is required
and there is another category of offences where for
compounding the leave of the Court is not required. But H
all cases of compounding can take place at the instance
118
SUPREME COURT REPORTS
[2012) 3 S.C.R.
A of persons mentioned in the Third Column of the Table.
The said Table shows that compounding can only be
possible at the instance of the person who is either a
complainant or who has been injured or is aggrieved. Subsections 4(a) and 4(b) of Section 320 also reiterate the
B same principle that in case of compounding, the person
competent to compound, must be represented in a
manner known to law. If the person compounding is a
minor or an idiot or a lunatic, the person competent to
contract on his behalf may, with the permission of the
c Court, compound the offence. Legislature has, therefore,
provided that if the said category of person was suffering
from some disability, a person to represent the said
category of persons is only competent to compound the
offence and in such cases the permission of the Court is
0 statutory required. Section 320(4)(b) also reiterates the
same principle by providing that when a person who is
otherwise competent to compound an offence is dead, his
legal representatives, as defined under the Code of Civil
Procedure may, with the consent of the Court, compound
E such offence. Therefore, representation of the person
compounding has been statutorily provided in all
situations. [Paras 24, 38, 40-44] [133-C; 138-F-H; 139-A-F]
Balmer Lawrie Workers' Union, Bombay and another vs.
Balmer Lawrie & Co. Ltd. and others 1984 (Supp.) SCC 663;
F Shivanand Gaurishankar Baswanti vs. Laxmi Vishnu Textile
Mills and others (2008) 13 SCC 323: 2008 (10) SCR 782;
Mandvi Cooperative Bank Limited vs. Nimesh B. Thakore
(2010) 3 SCC 83: 2010 (1) SCR 219 - held inapplicable.
Central Bureau of Investigation, SPE, SIU (X), New Delhi
G vs. Duncans Agro Industries Ltd., Calcutta (1996) 5 SCC 591:
1996 (3) Suppl. SCR 360; Hira Lal Hari Lal Bhagwati vs. CBI,
New Delhi (2003) 5 SCC 257: 2003 (3) SCR 1118; Nikhil
Merchant vs. Central Bureau of Investigation and another
(2008) 9 SCC 677: 08 (12) SCR 236 - Distinguished.
H
JIK INDUSTRIES LIMITED & ORS. v. AMARLAL Y.
119
JUMANI AND ANR.
4.1. The insertion of a non-obstante clause is a well
A
known legislative device and in olden times it had the
effect of non obstante aliquo statute in contrarium
(notwithstanding any statute to the contrary). Under the
Stuart reign in England the Judges then sitting in
Westminster Hall accepted that the statutes were
B
overridden by the process but this device of judicial
surrender did not last long. Under the Scheme of modern
legislation, non-obstante clause has a contextual and
limited application. The impact of a 'non-obstante clause'
on the concerned act was considered by this Court in c
many cases and it was held that the same must be kept
measured by the legislative policy and it has to be limited
to the extent it is intended by the Parliament and not
beyond that. [Paras 48-51] [140-D-G]
4.2. The non-obstante clause used in Section 147 of D
N.I. Act does not refer to any particular section of the Code
of Criminal Procedure but refers to the entire Code. When
non-obstante clause is used in the said fashion, the extent
of its impact has to be found out on the basis of
consideration of the intent and purpose of insertion of E
such a clause. Section 147 in N.I. Act came by way of
amendment. From the Statement of Objects and Reasons
of Negotiable Instrument (Amendment) Bill 2001, which
ultimately became Act 55 of 2002, these amendments were
introduced to deal with large number of cases which were
F
pending under the N.I. Act in various Courts in the
country. Considering the said pendency, a Working Group
was constituted to review Section 138 of the N.I. Act and
make recommendations about changes to deal with such
pendency. Pursuant to the recommendations of the G
Working Group, the said Bill was introduced in Parliament
and one of the amendments introduced was "to make
offences under the Act compoundable". Pursuant thereto
Section 147 was inserted after Section 142 of the old Act
under Chapter II of Act 55 of 2002. It is clear from a perusal
H
120
SUPREME COURT REPORTS
[2012] 3 S.C.R.
A of the said Statement of Objects and Reasons that offence
under the N.I. Act, which was previously noncompoundable, in view of Section 320 sub-Section 9 of the
Code became compoundable. That does not mean that the
effect of Section 147 is to obliterate all statutory provisions
B of Section 320 of the Code relating to the mode and
manner of compounding of an offence. Section 147 will
only override Section 320 (9) of the Code in so far as
offence under Section 147 of N.I. Act is concerned. (Paras
52, 55-58) (141-A-B-G-H; 142-A-D]
C
Damodar S. Prabhu vs. Sayed Baba/a/ H. (2010) 5 SCC
663: 2010 (5) SCR 678 - relied on.
5. Section 4 of the Code, which is the governing
statute in India for investigation, inquiry and trial of
offences has two parts. Section 4 sub-section (1) deals
D with offences under the Indian Penal Code. Section 4 subsection {2) deals with offences under any other law which
would obviously include offences under the N.I. Act. In the
instant case, no special procedure has been prescribed
E under the N.1. Act relating to compounding of an offence.
In the absence of special procedure relating to
compounding, the procedure relating to compounding
under Section 320 shall automatically apply in view of clear
mandate of sub-section (2) of Section 4 of the Code. In
view of Section 4(2) of the Code, the basic procedure of
F compounding an offence laid down in Section 320 of the
Code will apply to compounding of an offence under N.I.
Act. [Paras 59-61, 64) [142-F-H 143-A-D, E]
6. The observations made in paragraph 24 of
G Damodar, that the scheme contemplated under Section
320 of the Code cannot be followed 'in the strict sense'
does not and cannot mean that the fundamental
provisions of compounding under Section 320 of the Code
stand obliterated by a side wind, as it were. It is well settled
H that a judgment is always an authority for what it decides.
JIK INDUSTRIES LIMITED & ORS. v. AMARLAL V.
121
JUMANI AND ANR.
It is equally well settled that a judgment cannot be read as
A
a statute. It has to be read in the context of the facts
discussed in it. Following the said well settled principles,
the basic mode and manner of effecting the compounding
of an offence under Section 320 of the Code cannot be said
to be not attracted in case of compounding of an offence
B
under N.I. Act in view of Section 147 of the same. [paras
68-69] [144-D-G]
7. Compounding as codified in Section 320 of the
Code has a historical background. In common law,
compounding was considered a misdemeanour. Later on,
C
compounding was permitted in certain categories of cases
where the rights of the public in general are not affected
but in all cases such compounding is permissible with the
consent of the injured party. In our country also when the
Criminal Procedure Code, 1861 was enacted it was silent D
about the compounding of offence. Subsequently, when
the next Code of 1872 was introduced it mentioned about
compounding in Section 188 by providing the mode of
compounding. However, it did not contain any provision
declaring what offences were compoundable. The
E
decision as to what offences were compoundable was
governed by reference to the exception to Section 214 of
the Indian Penal Code. The subsequent Code of 1898
provided Section 345 indicating the offences which were
compoundable but the said Section was only made
applicable to compounding of offences defined and
permissible under Indian Penal code. The present Code,
which repealed the 1898 Code, contains Section 320
containing comprehensive provisions for compounding.
F
A perusal of Section 320 makes it clear that the provisions
G
contained in Section 320 and the various sub-sections is
a Code by itself relating to compounding of offence. It
provides for the various parameters and procedures and
guidelines in the matter of compounding. If the contention
of the appellant is accepted that as a result of incorporation
H
122
SUPREME COURT REPORTS
[2012] 3 S.C.R.
A ofSection 147 in the N.I. Act, the entire gamut of procedure
of Section 320 of the Code are made inapplicable to
compounding of an offence under the N.I. Act, then the
compounding of offence under N.I. Act will be left totally
unguided or uncontrolled. Such an interpretation apart
B from being an absurd or unreasonable one will also be
contrary to the provisions of Section 4(2) of the Code.
There is no other statutory procedure for compounding
of offence under N.I. Act. Therefore, Section 147 of the N.I.
Act must be reasonably construed to mean that as a result
c of the said Section the offences under N.I. Act are made
compoundable, but the main principle of such
compounding, namely, the consent of the person
aggrieved or the person injured or the complainant cannot
be wished away nor can the same be substituted by virtue
0 of Section 147 of N.I. Act. [paras 70, 72-74] [144-G-H; 145E-G; 146-A-F]
Raghubar Dayal vs. The Bank of Upper India Ltd. AIR
1919 P.C. 9; S.K. Gupta and another vs. K.P. Jain and another
1979 (3) SCC 54: 1979 (2) SCR 1184; Miheer H. Mafat/al vs.
E Mafatla/ Industries Ltd. AIR 1997 SC 506: 1996 (6) Suppl. SCR
1; Hindustan Lever and another vs. State of Maharashtra and
another (2004) 9 sec 438: 2003 (5) Suppl. SCR 685;
Administrator of the Specified Undertaking of the Unit Trust of
India and another vs. Garware Polyester Ltd. (2005) 10 SCC
F 682: 2005 (1) Suppl. SCR 192; Kausha/ya Devi Massand vs.
Roopkishore Khore (2011) 4 SCC 593: 2011 (3) SCR 879;
/CIC/ Bank Ltd. vs. Sidco Leathers Ltd. and Ors. (2006) 10 SCC
452: 2006 (1) Suppl. SCR 528; Madhav Rao Scindia Bahadur,
etc. vs. Union of India and Another(1971) 1 sec 85: 1971 (3)
G SCR 9; Central Bank of India vs. State of Kera/a and others
(2009) 4 SCC 94: 2009 (3) SCR 735; Khatri and Ors. etc. Vs.
State ofBiharand Ors. AIR 1981SC1068: 1981 (3) SCR 145;
Vinay Devanna Nayak vs. Ryot Sewa Sahakari Bank Limited
(2008) 2 SCC 305: 2007 (12) SCR 1134; R. Rajeshwari vs.
H H. N. Jagadish 2008) 4 SCC 82: 2008 (3) SCR 1065- referred
to.
JIK INDUSTRIES LIMITED & ORS. v. AMARLAL V.
123
JUMANI AND ANR.
Kenny's 'Outlines of Criminal Law' (Nineteenth Edition,
1966); Russell on Crime (Twelfth Edition}, Russell on Crime
(Twelfth Edition) - referred to.
Case Law Reference:
A
AIR 1919 P.C. 9
referred to
Para 8
-
B
1970 SCR 866
referred to
Para12,14
1979 (2) SCR 1184
referred to
Para 14
1996 (6) Suppl. SCR 1
referred to
Para 15,16,17 c
2003 (5) Suppl. SCR 685
referred to
Para 16
2005 (1) Suppl. SCR 192
referred to
Para 17
1984 (Supp.) sec 663
referred to
Para 19
2008 (10) SCR 782
· held inapplicable Para 20
D
2011 (3) SCR 879
referred to
Para 22
2010 (1) SCR 219
held inapplicable Para 23,24
2010 (5) SCR 678
relied on
Para 25,26,
E
27,47,58,68
1996 (3) Suppl. SCR 360
Distinguished Para 28, 31,32
2003 (3) SCR 1118
referred to
Para 32,33
2008 (12) SCR 236
referred to
Para 34,35
F
2006 (1) Suppl. SCR 528
referred to
Para 51
1971 (3) SCR 9
referred to
Para 53, 54
2009 (3) SCR 735
referred to
Para 54
G
1981 (3) SCR 145
referred to
·Para 63
2007 (12) SCR 1134
referred to
Para 65
2008 (3) SCR 1065
referred to
Para 67
H
124
SUPREME COURT REPORTS
[2012) 3 S.C.R.
A
CRIMINAL APPELLATE JURISDICTION: Criminal Appeal
B
No. 263 of 2012.
From the Judgment & Order dated 14, 21, 22, 25 &
26.08.2008 of the High Court of Judicature of Mombay in
Criminal Writ Petition No. 2781 of 2006.
WITH
Crl. A. Nos. 264, 265, 266, 267, 268, 269, 270, 271, 272, 273,
274, 275-294, 295-303 of 2012.
c
Mili Thakkar, Jatin Zaveri, Gaurav Aarwal, K.N. Rai for the
D
Appellants.
K. Parameshwar, Anish Shah (for Shivaji M. Jadhav), Asha
Gopalan Nair, C.N. Sree Kumar, Resmitha R. Chandran, Uday
B. Dube, Nikhil Nayyar for the Respondents.
The Judgment of the Court was delivered by
GANGULY, J. 1. Leave granted.
2. This group of appeals were heard together as they
involve common questions of law. There are some factual
E differences but the main argument by the appellant(s) in this
matter was advanced by Mr. Chander Uday Singh, Senior
Advocate on behalf of the Sharp Industries Limited in SLP (Crl.)
No.6643-6651 of 2010 and the facts are taken mostly from the
F
said case.
3. The learned counsel assailed the judgment of the High
Court wherein by a detailed judgment High Court dismissed
several criminal writ petitions which were filed challenging the
processes which were issued by the learned Trial Judge on the
G complaint filed by the respondents in proceedings under Section
138 read with Section 141 of Negotiable Instruments Act, 1881
(hereinafter 'N.I. Act'). By way of a detailed judgment, the Hig~
Court after dismissing the writ petitions held that sanction of a
scheme under Section 391 of the Companies Act, 1956
H (hereinafter 'Companies Act') does not amount to compounding
JIK INDUSTRIES LIMITED & ORS. v. AMARLAL V.
125
JUMANI AND ANR. [ASOK KUMAR GANGULY, J.]
of an offence under Section 138 read with Section 141 of the
A
N.I. Act. The High Court also held that sanction of a scheme under
Section 391 of the Companies Act will not have the effect of
termination or dismissal of complaint proceedings under N.I. Act.
However, the learned Judge made it clear that the judgment of
B
the High Court will not prevent the petitioners from filing separate
application invoking the provisions of Section 482 Criminal
Procedure Code, if they are so advised. Assailing the said
judgment the learned counsel submitted that an unsecured
creditor who does not oppose the scheme of compromise or
arrangement under Section 391 of the Companies Act must be c
taken to have supported the scheme in its entirety once such a
scheme is sanctioned by the High Court, even a dissenting
creditor cannot file a criminal complaint under Section 138 of the
N. I. Act for enforcement of a pre-compromise debt. Nor can such
a creditor oppose the compounding of criminal complaint which
D
was filed under Section 138 of th!:! N.I. Act in respect of pre-
-<:,om promise debt.
4. The material facts of the case are that the appellant
company on or about 12th May, 2005 came out with a scheme
by which it was agreed that the appellant company should be
E
revived and thereafter payments will be made to the creditors.
Pursuant to such scheme the appellant company filed a petition
under Section 391 of the Companies Act to the High Court. The
whole scheme was placed before the High Court and according
to the appellant(s), first order of the scheme came to be passed
F
by the Hon'ble High Court by its order dated 5th May, 2005 in
Company Petition No.92 of 2005. At the time the said company
petition was pending, a meeting was convened by the appellant
company on 1.6.05 and the same was attended by several
creditors including representative of the first respondents and
G
they opposed the scheme. Despite the said opposition, the
appellant(s) succeeded in getting the scheme approved by
statutory majority as required under the law. Thereafter, on
17 .11.2005 another company petition with a fresh scheme
(Company petition No. 460 of 2005) was filed. After the said
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[2012) 3 S.C.R.
A company petition was filed all proceedings which were initiated
by different companies against the appellant(s) came to be
stayed by the High Court. In view of the aforesaid scheme the
appellant company filed application for compounding under
Section 147 of the N.I. Act read with Section 320 of the Criminal
B Procedure Code (hereinafter, 'the Code') and Section 391 of
the Companies Act. However, the respondents opposed the said
prayer of the petitioner and by an order dated 19th January, 2007,
the learned Chief Judicial Magistrate, Ahmednagar rejected the
application filed by the appellant for termination of the
c proceedings inter alia on the ground that the learned Magistrate
has no power to quash or terminate the proceedings.
5. Being aggrieved by the said order of the Magistrate, the
appellants filed writ petitions before the High court.
0
6. Similar petitions were filed on 6.7.2009 by JIK Industries
Limited and another. All those petitioners were dismissed by the
High court on 18.3.2010 in view of an order dated 14.8.2008
passed by the High Court in connection with the petitions filed
by other similarly placed companies (JIK Industries).
E
7. In the background of the aforesaid facts the contentions
raised by the appellant company is that the scheme envisaged
a compromise between the company and the secured creditors
on the one hand and its unsecured creditors on the other hand.
Such scheme was framed pursuant to the order of the Company
F Court dated 5th May, 2005 which directed meeting of the different
classes of creditors for consideration of the scheme. Thereafter,
meeting was convened of unsecured creditors and the scheme
was approved on 1st June, 2005 by the requisite majority of the
shareholders and unsecured creditors. Then the scheme was
G taken up for sanction by the Company Court. The Court
considered the objections of some of the unsecured creditors
and workmen but ultimately by its judgment dated 17th November,
2005 approved the scheme with a few minor modifications. It was
also urged that some of the secured and unsecured creditors
H have taken advantage of the scheme and did not challenge the
JIK INDUSTRIES LIMITED & ORS. v. AMARLAL V.
127
JUMANI AND ANR. [ASOK KUMAR GANGULY, J.]
scheme. However, the scheme was challenged by the
A
appellant(s) in respect of certain observations made therein by
the learned Company Judge and the said appeal is pending
before the Bombay High court. The learned counsel for the
appellant(s) argued that the effect of a scheme of compromise
between the company and its creditors under Section 391 of the
B
Companies Act is binding upon all class of creditors whether they
are assenting or dissenting. The purpose of a scheme under
Section 391 and 392 is restructure and alteration of the old debts
which were payable prior to the scheme so as to make the debts
payable in the manner and to the extent provided under the c
scheme.
8. In so far as the case of JIK Industries is concerned, it has
been urged that the scheme in JIK is different that Sharp. The
learned counsel for the appellant(s) urged that the once the
scheme is sanctioned, it relates back to the date of the meeting
D
and in support of the said contention reliance was placed on a
judgment of the Privy Council in the case of Raghubar Dayal vs.
TheBankofUpperlndia Ltd. reported in AIR 1919 P.C. 9. ltwas
also urged that in a scheme under Section 491 a judgment is in
rem. The learned counsel further submitted that admittedly the
respondents objected to the scheme and is a dissenting creditor.
E
9. The learned counsel for the respondents (in Sharp
Industries case) on the other hand submitted that in the petition
which was filed before the Magistrate on behalf of the Sharp
Industries the prayer was only for quashing of the criminal
proceedings and there was no prayer for compounding of the
offences. While the Magistrate refused to quash the said
proceeding then while challenging the same in the High Court
F
the prayer for compounding was made for the first time. The
learned counsel for the respondents (in the case of JIK Industries)
G
has drawn the attention of this Court to the order dated 3.10.2006
passed by the Metropolitan Magistrate, XII Court Sandra,
Mumbai whereby the learned Magistrate passed an order on the
application of the accused, the appellant, for compounding of
offences under Section 138. By the said order the learned
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[2012) 3 S.C.R.
A Magistrate rejected the prayer for compounding made by the
appellant(s) under Section 147 of the N.I. Act.
10. It was also pointed out by some of the respondents that
after the High Court passed the impugned order whereby the
prayer for compounding by the appellant(s) was rejected and the
8 appellant(s) were given an opportunity to file a petitiQn under
Section 482 of the Criminal Procedure Code for quashing of the
complaint, some of the appellant(s) availing of that liberty also
filed application for quashing of the proceedings. They have also
filed SLPs before this Court. This Court should, therefore,
C dismiss the SLPs.
11. Considering the aforesaid submissions of the rival
parties, this Court finds that the effect of approval of a scheme
of compromise and arrangement under Section 391 of the
0 Companies Act is that it binds the dissenting minority, the
company as also the liquidator if the company is under winding
up. Therefore, Section 391 of the Companies Act gives very wide
discretion to the Court to approve any set of arrangement
between the company and its shareholders.
E
12. Learned counsel for the appellant(s) placed reliance on
the decision of this Court in Mis. J.K. (Bombay) Private Ltd. vs.
Mis. New Kaiser-I-Hind Spinning and Weaving Co., Ltd., and
others reported in AIR 1970 SC 1041 in support of his contention
that a scheme under Section 391 of the Companies Act is not a
F mere agreement but it has a statutory force. The learned counsel
also urged, relying on the said judgment that the scheme is
statutorily binding even on dissenting creditors and shareholders.
The effect of the scheme is that so long as it was carried out by
the company by regular payment in terms of the scheme, a
G creditor is bound by it and cannot maintain even a winding-up
petition.
13. Even if the aforesaid position is accepted the same
does not have much effect on any criminal proceedings initiated
by the respondent creditors for non-payment of debts of the
H company arising out of dishonour of cheques. Factually the
JIK INDUSTRIES LIMITED & ORS. v. AMARLAL V.
129
JUMANI AND ANR. [ASOK KUMAR GANGULY, J.]
allegation of the respondent is that even payment under the
A
scheme has not been made. However, without going into those
factual controversies, the legal position is that a scheme under
Section 391 of the Companies Act does not have the effect of
creating new debt. The scheme simply makes the original debt
payable in a manner and to the extent provided for in the scheme.
B
In the instant appeal in most of the cases the offence under the
N.I. Act has been committed prior to the scheme. Therefore, the
offence which has already been committed prior to the scheme
does not get automatically compounded only as a result of the
said scheme. Therefore, even by relying on the ratio of the c
aforesaid judgment, this Court cannot accept the appellant's
contention that the scheme under Section 391 of the Companies
Act will have the effect of automatically compounding the offence
underthe N.l.Act.
14. The learned counsel for the appellant(s) also relied on
D
various other judgments to show the effect of the scheme under
Section 391 of the Companies Act. Reliance was also placed ·
on the decision of this Court in the case of S.K. Gupta and
another vs. K.P. Jain and another reported in 1979 (3) sec 54.
In the case of S.K. Gupta (supra) also the ratio in the case of Ml E
s. J.K. (Bombay) Private Ltd. (supra) was relied upon and it was
held that a scheme under Section 391 of the Companies Act has
a statutory force and is also binding on the dissenting creditor ..
Various other questions were discussed in the said judgment
with which we are not concerned in this case.
F
15. The scheme under Section 391 of the Companies Act
has been very elaborately dealt with by this Court in the case of
Miheer H. Mafat/a/ vs. Mafatla/ Industries Ltd. reported in AIR
1997 SC 506. From a perusal of the various principles laid down
in Mafatlal (supra), it is clear that the proposed scheme cannot
G
be violative of any provision of law, nor can it be contrary to public
policy. (see paragraph 29 sub-paragraph 6 at page 602 of the
report).
16. In Hindustan Lever and another vs. State of H
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SUPREME COURT REPORTS
[2012] 3 S.C.R.
A Maharashtra and another reported in (2004) 9 SCC 438 it has
been reiterated that a scheme under Section 391 of the
Companies Act is binding on all shareholders including those
who oppose it from being sanctioned. It has also been reiterated
that the jurisdiction of the Company Court while sanctioning the
B scheme is supervisory. This Court in Hindustan Lever (supra)
also accepted the principle laid down in sub-para 6 of para 29
in Mafatlal. (supra) discussed above and held that a scheme
under Section 391 of the Companies Act cannot be unfair or
contrary to public policy, nor can it be unconscionable or against
c the law (see para 18 page 451 of the report)
17. In the case of Administrator of the Specified
Undertaking of the Unit Trust of India and another vs. Garware
Polyester Ltd. reported in (2005) 10 SCC 682, this Court held
that a scheme under Section 391 of the Companies Act is a
D commercial document and the principles laid down in the case
of Mafatlal (supra) have been relied upon and in para 32 at page
697 of the report it has been reiterated that the scheme must be
fair, just and reasonable and should not contravene public policy
or any statutory provision and in paragraph 33 at page 697 of
E the report, sub-paragraph 6 of para 29 of Mafatlal (supra) has
been expressly quoted and approved.
18. Therefore, the main argument of the learned counsel for
the appeilant(s) that once a scheme under Section 391 of the
Companies Act is sanctioned by the Court the same operates
F as compounding of offence under Section 138 read with Section
141 of the N. I. Act cannot be accepted. Rather the principle which
has been reiterated by this Court repeatedly in the aforesaid
judgments is that a scheme under Section 391 of the
Companies Act cannot be contrary to any law. From this
G consistent view of this Court it clearly follows that a scheme under
Section 391 of the Companies Act cannot have the effect of
overriding the requirement of any law. The compounding of an
offence is always controlled by statutory provision. There are
various features in the compounding of an offence and those
H features must be satisfied before it can be claimed by the offender
JIK INDUSTRIES LIMITED & ORS. v. AMARLAL V.
131
JUMANI AND ANR. [ASOK KUMAR GANGULY, J.]
that the offence has been compounded. Thus, compounding of
A
an offence cannot be achieved indirectly by the sanctioning of a
scheme by the Company Court.
·
19. The learned counsel also relied on a few other judgments
in order to contend the scheme of compromise operates a
statutory consent and the same will have the effect of restructuring
legally enforceable debts or liabilities of the company. In support
of the said contention reliance was placed on the judgment of
this Court in the case of Balmer Lawri~ Workers' Union, Bombay
and another vs. Balmer Lawrie & Co. Ltd. and others reported
B
in 1984 (Supp.) SCC 663. That decision related to a settlement
C
reached in a proceeding under Industrial Disputes Act in which
a representative union was a party. The Court held that such a
settlement is binding on all the workmen of the undertaking. This
Court fails to understand the application of this ratio to the facts
of the present case.
D
20. Reliance was also placed by the learned counsel for the
appellant(s) on the decision of this Court in the case of
Shivanand Gaurishankar Baswanti vs. Laxmi Vishnu Textile
Mills and others reported in (2008) 13 sec 323. In that case
also the question of an agreement under Section 18 of Industrial
E
Disputes Act came up for consideration by this Court. The wide
sweep of an agreement under Section 18 of the Industrial
Disputes Act for the purpose of maintaining industrial peace is
not in issue in this case. Therefore, the decision in Shivanand
(supra) does not have any relevance to the question with which
F
we are concerned in the facts and circumstances of the case.
21. The learned counsel forthe appellant(s) then advanced
his argument on the provisions of N.I. Act and the nature of the
offence under the N.I. Act. Reliance was placed on explanation
G
to Section 138 of the N.I. Act in order to show that for the
purposes of an offence under Section 138 of the N.I. Act, debt
. or other liability must mean a legally enforceable debt or liability.
The learned counsel urged that even if a cheque is issued by the
appellant company and which has been subsequently
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[2012] 3 S.C.R.
A dishonoured, the same is a cheque relating to the debt of the
company in respect of which there is a sanctioned scheme.
Therefore, the same is not a legally enforceable debt in as much
as after the sanctioning of the scheme the debt of the company
can only be enforced against the company by a creditor in
s accordance with the said scheme and not otherwise. Reliance
was also placed on Section 139 of the N.I. Act in order to contend
that the statutory presumption must be construed in favour of the
appellant company in as much as the cheque which has been
received by the respondent is not for the discharge of any debt
c of the company which is legally enforceable. The learned counsel
relied on several judgments of this Court on the question of the
nature of the offence under Section 138 of the N.I. Act.
22. Reliance was.placed on the decision of this Court in the
case of Kaushalya Devi Massand vs. Roopkfstlbre Khore
D reported in (2011) 4 sec 593. The learned counsel relied on
the observation made in para 11, at page 595 of the report and
contended that the gravity of a complaint under the N. I. Act cannot
be equated with an offence under the provisions of Indian Penal
Code and further urged that this Court held that a criminal offence
E under Section 138 of the N. I. Act is almost in the nature of a civil
wrong which has been given criminal overtones.
23. Reliance was also placed on the judgment of this Court
in the case of Mandvi Cooperative Bank Limited vs. Nimesh
8. Thakore reported in (2010) 3 SCC 83. This Court in Mandvi
F (supra) discussed the scope of N.I. Act including the first
amendment to the Act inserted under Chapter XVII in the Act.
This Court looked into the Statement of Objects and Reasons
introducing the amendment and noted the rationale for
introduction of Section 147 of N.I. Act. Section 147 of N.I. Act
G made the offences under the said Act compoundable. The Court
noted that from the Statement and Objects and Reasons it is clear
that the Parliament became aware of the fact that the courts are
not able to dispose of, in a time bound manner, large number of
cases coming under the said Act in view of the procedure in the
H
JIK INDUSTRIES LIMITED & ORS. v. AMARLAL V.
133
JUMANI AND ANR. [ASOK KUMAR GANGULY, J.]
Act. In order to deal with such situation, several amendments
A
were introduced and one of them is making offences under the
said Act compoundable. Section 147 of the N.I. Act is as follows:
"147. Offences to be compoundable. - Notwithstanding
anything contained in the Code of Criminal Procedure, 1973
8
(2 of 197~) •• every offence punishable under this Act shall
be compoundable."
24. This Court fails to understand the applicability of the
principle laid down in Mandvi (supra) to the facts of the present
case. It is no doubt true that Section 147 of the N.I. Act makes c
an offence under N.I. Act a compoundable one. But in order to
make the offence compoundable the mode and manner of
compounding such offences must be followed. No contrary view
has been expressed by this Court in Mandvi (supra).
25. On the nature of the offence under N.I. Act learned
D
counsel for the appellant(s) also placed reliance on a decision
of this Court in the case of Damodar S. Prabhu vs. Sayed
Baba/al H. reported in (2010) 5 SCC 663. In paragraph 4, this
Court.held that the dishonour of a cheque can be best described
as a regulatory offence which has been created to serve the
E
public interest in ensuring the reliability of these instruments and
the Court has further held that the impact of the offence is
confined to private parties involvement in commercial
transactions. The Court also noted the situation that large number
of cases involving dishonour of cheques are choking the criminal
F
justice system and putting an unprecedented strain on the judicial
functioning.