Dayawati v. Yogesh Kumar Gosain: Expanding The Scope of Mediation to Criminal Matters?

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Alternative Dispute Resolution (ADR) mechanisms are deep-rooted in Indian society. Since the ancient period ADR techniques like panchayats have played an important role in village level dispute resolution.[i] In the recent times, mediation has emerged as the most preferred mode of dispute resolution in which a neutral third party assists the parties at dispute to arrive at consensus with concrete effects.

Traditionally, mediation has been viewed as a method which can be used to resolve only civil dispute affecting right in personam. On 17th October, 2017, a division bench of Delhi High Court delivered the judgement in Dayawati v Yogesh Kumar Gosain  (Hereinafter “Dayawati”) and held that a criminal compoundable case of ‘cheque bounce’ under section 138 of Negotiable Instrument Act, 1881 (Hereinafter “The NI Act”), can be referred and resolved through mediation.

Part A: Background

Mediation has been traditionally used in India for resolving wide variety of disputes. However, it gained legal recognition in India in when the Parliament amended Code of Civil Procedure, 1908 (CPC) and inserted section 89 which provides for reference of cases pending in the Courts to ADR which includes mediation. This section is based on the view that only civil disputes can be resolved through ADR mechanisms. As far as referring criminal cases to mediation is concerned, the Supreme Court in case of Gian Singh v State of Punjab & Anr. (2012), held that High Courts can exercise their inherent power under section 482 of Criminal Procedure Code, 1973 (CrPC) to quash the criminal proceeding or criminal complaint involving a non-compoundable criminal offence which is ‘overwhelmingly and predominantly bear civil flavour’ arising out of civil, mercantile, commercial, financial, partnership or similar transactions, if the offender and the victim have amicably settled all the disputes.

Section 138 of the NI Act provides that where a cheque is dishonoured, the person drawing the cheque shall be deemed to have committed an offence and shall be punished with imprisonment for a term which may extend to one year or with fine which may extend to twice the amount of the cheque or with both.[ii] The offence under section 138 of NI Act is classified as criminal offence which is compoundable. However, the Supreme Court has interpreted the nature of offence under section 138 in a different manner. In case of Kaushalya Devi v Roopkishore Khore (2011), it was observed that the offence is almost in the nature of a civil wrong which has been given criminal overtones. Thus, the cases under section 138, tough labelled ‘criminal’ by law, can be considered ‘civil cases masquerading as criminal cases.’

Part B: Facts, Issues and Judgement

In 2014, Dayawati, the Appellant in the instant case, supplied certain fire-fighting goods and equipment to Yogesh, the Respondent. The Respondent issued two cheques Rs. 11 lakhs and 16 lakhs each, in favour of Appellant.  Subsequently, the Appellant presented the cheques to 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 NI Act before the Patiala House Courts, New Delhi. Since the parties expressed their intention to settle the matter, the Court referred cases for mediation to Delhi High Court Mediation and Conciliation Centre. After participating in the mediation process, the parties concluded a settlement agreement on 14.05.2015 whereby the Respondent agreed to pay an amount of Rs. 55, 54, 600 in instalments. However, the Respondent frustrated the settlement agreement and the lower Court referred the case to the Delhi High Court.

The primary issues which arose in the present case were, firstly, whether it is permissible to refer a criminal matter such as under section 138, for settlement trough mediation. Secondly, what would be the consequences of breach of such settlement accepted by the Court?

While considering the first issue, the High Court battled with the power of a criminal court to refer criminal cases for mediation and the nature of proceedings under section 138 of NI Act.. The Court, after referring to various statutory provisions, observed that tough neither the CrPC nor the NI Act provides 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 Court relied on section 19(5) of the Legal Service Authorities Act, 1987 (LSA Act) which confers jurisdiction on Lok Adalat to settle ‘any case’ pending before or falling under jurisdiction of any court. Furthermore, the Court also relied on precedents of Gian Singh & Kaushalya Devi and held that a 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 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.’[1] Moreover, the accused will also be punished for ‘civil contempt’.[iii]

Part C: Analysis-Identifying the Loophole.

This judgement is a welcome decision by the Court as it promotes settlement of criminal cases having civil nature by the most convenient and expeditious ADR method i.e. mediation. The decision seems to be appropriate considering the high number of cheque bounce cases. The Court rightly relied on the reasoning of the Supreme Court in R. Vijayan and Kaushalya Devi to hold that the crime under section 138 is of civil nature unlike other heinous crimes under Indian Penal Code and involves a private dispute between parties. Further it is compoundable offence and can be settled through mediation.

However, the judgement suffers from certain follies. The Court excessively relied on provisions of CPC, a statute dealing with civil court, to elucidate and establish power of a criminal court to refer a criminal case for mediation. This goes against the fundamental concept of separation of criminal and civil domain of law. It relied on the jurisdiction of Lok Adalat to establish the power of criminal court to ‘refer’ a criminal case for mediation despite the fact that no statute provides such power to a criminal court. The Court also emphasised on the inherent power of High Court under section 482 of CrPC and case of Gian Singh to highlight that criminal cases of civil nature can and have been referred for out of court settlement by the court. But this observation clearly suggests that only a High Court has such inherent and a lower criminal court lacks power to refer a criminal case for mediation.

Furthermore, the safeguard for the event of default, laid down by the Court seems to be insufficient and unsatisfactory. Since in case of default the amount agreed to be paid would be recovered as fine under section 431 of CrPC, it would be too easy for the offender to abuse the legal process. Once an accused is acquitted and the proceedings are quashed, any coercive process would hardly be effective to secure his appearance before the Court. Also, in case of default in payment of fine the punishment of imprisonment is 6 months which is hardly satisfactory. This would be more difficult when the offender is a body corporate. Also, the punishment for the civil contempt of court mere is fine of Rs.2000 which be easily paid off by an offender to escape liability.

Conclusion and Suggestions

It’s a landmark judgment by the Delhi High Court which tends to promote mediation as the most effective ADR method to resolve cases and reduce unnecessary litigation.  However, the Court should have provided for a better safeguard mechanisms considering the above discussed possibilities. The Court should have provided for the following:

‘In the event of default, the original case must be re-instated before the same court from the same stage of proceedings and the court must conduct a regular trial.’

This will prevent the abuse of legal process and also give parties a chance to resolve dispute amicably.

In order to strengthen this judgement and promote resolution of compoundable criminal cases through mediation, it is necessary to amend CrPC and insert a provision similar to section 8 of CPC, which gives power to criminal courts to refer compoundable criminal case for ADR methods.

[i] Dr. Laju P. Thomas, ‘Dispute Resolution in Rural India: An Overview’ (2016) 2 JLSR 96.

[ii] R. Vijayan v Baby & Anr (2012) AIR 528, SC.

[iii] Contempt of Courts Act 1971, s 2(b).

This article was written by Mudit Nigam, a fourth year student in National Law Institute University Bhopal and Senior Member of Alternate Dispute Resolution Cell (ADRC), NLIU.

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