Recently, the Supreme Court observed that the power of compounding must be expressly conferred by the Statute that creates the offence.
A Bench of Hon’ble Justice MR Shah and Hon’ble Justice DY Chandrachud observed that in respect of offences that lie outside IPC, compounding might be permitted if the Statute that creates the offence contains a provision for compounding before the offence could be made compoundable. This happens because Section 320 provides a compounding offence under IPC.
This observation, when the Bench was interpreting compounding provision, mentioned u/s 24A Securities & Exchange Board of India Act and referred to Section 320 of IPC.
it further observed that legislative sanction for compounding was based on the following two principles:-
- Private parties should be allowed to settle disputes at any stage, even in criminal cases, if parties have reached proper restitution.
- This exception would not be extended to offences that are of the public in nature, even if the aggrieved party is directly affected.
As per the Court, the first principle is crucial to allow amicable resolution between parties. The second principle is essential as an offence committed against a private individual might affect society.
While referring to Section 320, the Bench remarked that compounding of offence is only under IPC, therefore for offences outside of IPC, compounding is permitted only if a provision expressly permits it. In this regard Court placed reliance on JIK Industries Limited vs Jumani where it was observed that Section 147 of the NI Act should be construed that the offence was compoundable because of the section.
It also noted that the court’s decision in Damador S Prabhu vs Sayed Babalal ruled that the scheme mentioned in Section 320 can’t be followed strictly.