Kuchibhotla Venkatasubba Rao vs Chandanmal and Another

Alfred Henry Lionel Leach, C.J.—This appeal must be allowed. The first Despondent instituted a suit in the Court of the District Munsif of

Bezwada to recover from the three defendants a sum of Rs. 2,086-14-6, which he claimed to be due on a promissory note, which the defendants

had executed in his favour. The instrument was executed in these circumstances. The first defendant had borrowed moneys from the plaintiff on the

security of what were represented to be cases of marketable goods, namely condensed milk and an ayurvedic medicine put up separately in

bottles. The loan was not repaid and the plaintiff, as the pledgee, decided to sell them, which, of course, he had a right to do. The packages were

opened for the purpose of sale and it was then found that they contained stones, husk, saw-dust, waste paper, etc. A gross fraud had been

committed by the first defendant on the plaintiff arid there can be no doubt that the fraud involved an offence of cheating punishable u/s 420 of the

Indian Penal Code. It is not surprising that when the fraud was discovered the plaintiff threatened to prosecute the first defendant. He was,

however, induced to refrain from taking this step in consideration of the second and third defendants, who are relations of the first defendant,

joining in the execution of the promissory note in suit. More than Rs. 2,800 was due to the plaintiff but he agreed to accept this sum, of which Rs.

750 was paid in cash and a promissory note given for Rs. 2,050. The District Munsif found that the second and third defendants joined in signing

the promissory note in, order to stifle the threatened prosecution and the finding was concurred in by the Subordinate Judge of Bezwada on

appeal. Therefore the finding is not now open to question. When the plaintiff launched his suit the second and third defendants pleaded that they

were not liable as the consideration was unlawful. This defence was accepted by the District Munsif who passed a decree for the amount against

the first defendant alone. The District Munsif''s decision was upheld by the Subordinate Judge. The plaintiff then appealed to this Court on the

ground that the Courts below had erred in holding that the consideration so far as the second and third defendants were concerned was unlawful.

His contentions were accepted by Somayya, J., who heard the second appeal. Consequently the learned Judge decreed the suit against the second

and third defendants also. The third defendant has now appealed under Clause 15 of the Letters Patent, the learned Judge having given the

necessary certificate.

Section 345 of the Code of Criminal Procedure states what offences are compoundable. Some of them are compoundable without the leave of

the Court and the others can only be compounded � with the sanction of the Court. The offences which are not mentioned in the section cannot

be compounded under any circumstances. The offence of cheating falls within the list of offences which are compoundable with the leave of the

Court. Sub-S. (7) states that no offence shall be compounded except as provided by the section. Section 213 of the Penal Code makes it, a,

punishable offence to accept a gratification or the restitution of property in consideration of his not proceeding against a person for the purpose of

bringing him to legal punishment and Section 214 makes it an offence to ""offer"" a gratification in such circumstances.

The basis of the decision of Somayya, J., is that no criminal proceedings had been instituted. He considered that in these circumstances the

parties were at liberty to compound. This is contrary to the provisions of Section 345 of the Code of Criminal Procedure which expressly prohibits

the compounding of the offence of cheating without the leave of the Court. Notwithstanding that no prosecution is launched the offence remains.

What the second and. third defendants did was to execute a negotiable instrument in consideration of the payee undertaking not to prosecute a

person who had committed a criminal offence which could not be compounded without the Court''s sanction. The consideration for the note so far

as the second and third defendants were concerned was manifestly unlawful and therefore the promissory note cannot be enforced against them.

It follows that the appeal will be allowed with costs throughout against the plaintiff respondent. Only the third defendant has appealed but his

success means that the suit will be dismissed as against the second defendant as well.