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Does Belated Out Of Court Settlement Between The Litigating Parties Amount To Abuse Of Precious Judicial Time Of Courts And Need To Be Penalized

It is common knowledge that the parties to a case, with the intervention of friends and well-wishers or based on legal advice, enter into a compromise with the aim to put an end to vexatious endless litigation. The compromise sometimes takes place after a long time of the institution of the case and also during the pendency of SLP/Appeal in the Apex Court. A question arises whether a belated compromise should be encouraged by the Courts or should be penalized as amounting to wastage of the 'Precious Judicial Time' of the Courts.

The Apex Court recently in SLP (Crl.) No. 119/2022 in the case of Santhosh, J vs. Narasimha Murthy decided on 18-10-2022 passed an exemplary order which shall have bearing on similar matters that shall come up in the various Courts in future.

The brief facts are that the complainant, respondent in the aforesaid SLP, filed a complaint u/s 138 of the Negotiable Instruments Act, 1881 against the present Petitioner. The said complaint was tried by three different Courts in the hierarchy and all these three Courts concurrently upheld the conviction of the present Petitioner.

This process had taken 10 precious judicial years before the matter was compromised between the Petitioner & the Respondent, during the pendency of the SLP in the Apex Court. During the hearing by the Court, the counsel of the complainant informed the Court that the said dispute between the complainant and the present petitioner had been settled and a sum of Rs. 69 Lakhs had been paid by the present Petitioner to the complainant and therefore he does not want to proceed against the petitioner any further.

The Apex Court was pinched by the compromise at the stage of admission of SLP, more so as the matter had travelled for 10 long years in 3 Courts and amounted to abuse of the 'precious judicial time' of the Courts and imposed exemplary costs. The Court observed thus:

".....but this Court cannot be oblivious of the situation that precious judicial time of almost 10 years of the Courts has been consumed in this litigation and mere compromise entered into by the parties may not be sufficient to close the proceedings. Looking to the quantification of default amount in reference to which the petitioner was convicted under Section 138 of the NI Act, let an additional sum of Rs. 5 lakhs be deposited by the petitioner with the Supreme Court Advocate-on-Record Advocates Welfare Fund within a period of two months and the receipt of money deposited be placed with the Registry of this Court."

A question that arises is that the Courts usually promote & propagate 'Out of Court Settlements' in order to curb litigation, bring finality and reduce pendency. In fact the Apex Court and the High Courts often ask the contesting counsels to facilitate out-of-court settlement. Both the Government and the Judiciary are promoting ' Mediation' and 'Alternate Dispute Resolution' in order to minimize litigation.

Out of the Court settlements, even belatedly, ought not to be deprecated but on the contrary should be encouraged. It is pertinent that Alternative Dispute Mechanism. Mediation, Conciliation, Lok Adalats are the new tools of the justice dispensing system which provide different ways of settling a case out of court.

It cannot be denied that Alternate Dispute Resolution is the need of the hour. It is more convenient to settle a case outside the court in a regulated mechanism than to fight the same in the court of law. The concept of ADR through Arbitration, Conciliation, Mediation and Neutral Evaluation are being resorted to rescue to help people settling their cases out of court. It is relevant that the legislature with a view to curb litigation has mandated mandatory statutory pre-litigation mediation under Section 12A of the Commercial Courts Act, 2015 as amended by the Amendment Act of 2018.

It would would be trite to refer to Suresh Narayan Kadam & Ors vs Central Bank Of India & Ors decided on 5 February, 2016(2016 Latest Caselaw 123 SC). The prologue to the said judgment is very relevant as it highlights the need of mediation mechanism for settlement of cases amongst litigating parties & is reproduced thus:
  1. The proceedings in these petitions as indeed the proceedings in the Bombay High Court (out of which the present petitions have arisen) indicate a clear need for encouraging an amicable settlement process, preferably through mediation, in which the services of a mediator well-versed in the art, science and technique of mediation may be taken advantage of. The alternative, of course, is protracted litigation which may not be the best alternative for the contesting parties or for a society that requires expeditious justice delivery.
  2. In his Foreword written on 12th April, 2011 to the first edition of Mediation Practice & Law:
    The path to successful dispute resolution written by Mr. Sriram Panchu, Senior Advocate and Mediator, Mr. Fali S. Nariman, a Senior Advocate of this Court and a respected jurist, writes:

    The same subject matter of disputation between two parties can be dealt with in two different ways, not necessarily exclusive: first, by attempting to resolve a dispute in such a way that the parties involved win as much as possible and lose as little as possible through the intervention of a third party steeped in the techniques of mediation; and second, (failing this) the dispute would be left to be resolved by each party presenting its case before a disinterested third party with an expectation of a binding decision on the merits of the case: a win-all lose-all, final determination.

    The second alternative may not be the best alternative, as already mentioned by us.
  3. The decision rendered by the High Court which is under challenge before us states that efforts were made to have the disputes between the contesting parties settled but it is clear that no institutional mechanism was invited to assist in the settlement process.

    The proceedings before us also indicate that several efforts were made to encourage the contesting parties to arrive at a settlement, and at one point of time the parties did reach an interim arrangement but that could not fructify into a final settlement only because of the absence of an intervention through an institutional mechanism.

    Appreciating this, this Court has consistently encouraged the settlement of disputes through an institutionalized alternative dispute resolution mechanism and there are at least three significant decisions rendered by this Court on the subject.

    They are:
    1. Salem Advocate Bar Assn. (II) v. Union of India (2005) 6 SCC 344
    2. Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. (P) Ltd.(2010) 8 SCC 24
    3. K. Srinivas Rao v. D.A. Deepa(2013) 5 SCC 226.
  4. That apart this Court has, on several occasions, referred disputes for amicable settlement through the Mediation Centre functioning in the Supreme Court premises itself and Mediation Centres across the country in a large variety of disputes including (primarily) matrimonial disputes.

    In spite of the encouragement given by this Court, for one reason or another, institutionalized mediation has yet to be recognized as an acceptable method of dispute resolution provoking Mr. Fali S. Nariman to comment in the same Foreword in the context of the Afcon's decision that:
    "Mediation must stand on its own; its success judged on its own record, un-assisted by Judges.

    It would be apropos to refer to the Report No. 222 of the Law Commission of India titled 'Need for Justice-dispensation through ADR etc.

The relevant extracts of the said report are reproduced as under:
1.3 Man is not made for law, but the law is for man. Law is a regulator of human conduct. No law works smoothly unless the interaction between the two is voluntary. An act is justified by law, only if it is warranted, validated and made blameless by law.

1.12 The Judiciary is playing a significant role in providing justice to the under-privileged, indigent and helpless individuals through public interest litigation. The legal aid network is taking firm roots and legal services functionaries are actively engaged in fulfilling the constitutional promise of equality before the law.

The provision of legal aid to eligible persons, the speedy settlement of their legal disputes by counselling and conciliation and failing that by Lok Adalats rank high on the agenda of legal services functionaries, as high as running legal education awareness programmes. Of course, we have miles to go before we can claim that the realm of equal justice for all has become a reality.

Dr. A. S. Anand, a former Chief Justice of India, has wished that the next century would not be a century of litigation, but a century of negotiation, conciliation and arbitration. This dream has to be fulfilled for settling disputes both pending in courts as well as at pre-litigative stage.

Where there is a huge pendency of cases, the only panacea is establishment of more and more permanent Lok Adalats where the expertise of the judicial officers both in service and retired could be effectively utilized in resolution of matters by conciliation. A large number of consumers in our country feel handicapped in getting justice due to poverty, illiteracy, social backwardness and also geographical barriers.

1.22 Legal aid without legal literacy is less meaningful and purposeful. So, it would be highly useful if some important legal topics are included as compulsory subjects from primary education stage itself. Such education would enable the people to settle several of their disputes outside the courts at the grass roots level without seeking help from legal experts who are generally expensive.

1.23 It is high time that fora for the poor and needy people for redressal of their grievances speedily are created. As we all know, delay in disposal of cases in law courts, for whatever reason it may be, has really defeated the purpose for which the people approach the courts for redressal. It is said that justice delayed is justice denied. So, we will have to find out a via media to render social justice to the poor and needy who want their grievances redressed through law courts.

1.32 Advantages of ADR:
  1. It is less expensive.
  2. It is less time-consuming.
  3. It is free from technicalities as in the case of conducting cases in law Courts.
  4. Parties are free to discuss their differences of opinion without any fear of disclosure of this fact before any law courts.
  5. Parties have the feeling that there is no losing or winning side between them but at the same time their grievance is redressed and their relationship is restored.
1.38 The development of ADR methods will provide access to many litigants. It helps in reducing the enormous work-load that is put on the Judiciary. This will go a long way in improving not only the access to justice, but even the quality of justice."

It is worth mentioning that the Apex Court has compounded the offence of Rape on the basis of compromise reached between the victim & the accused. It is all the more relevant that rape is a non-compoundable offence due to its gravity, as enshrined under section 320 of the Code of Criminal Procedure 1973.

It is worthwhile to refer to the Apex Court judgment in the case of Baldev Singh v. State of Punjab, Criminal Appeal No. 749 of 2007 decided on 22 February, 2011 which gave sanctity to the compromise/out of Court settlement in a case of gang rape and in consonance of the compromise/out of court settlement reduced the 10 year sentence to the period already undergone.

Various High Courts have quashed the complaint of rape on the basis of compromise/ out of Court settlement between the victim and the accused. It is pertinent that rape is a crime not just against the victim but against the whole society. The aforesaid case of Santhosh, J relates to NI Act and the offence is just pecuniary and in no way similar to offence of rape which is regularly being compounded on the basis of compromise/out of Court settlement in the higher Judiciary.

It would be befitting to refer to Apex Court judgment in Madan Mohan Abbot vs State of Punjab in Appeal (crl.) 555 of 2008 decided on 26 March, 2008 wherein the Apex Court not only accepted the compromise/ out of Court settlement holding that the time so saved can be better utilized in deciding more effective and meaningful litigation, thereby encouraging out of Court settlement. The Court held thus:

"We need to emphasize that it is perhaps advisable that in disputes where the question involved is of a purely personal nature, the Court should ordinarily accept the terms of the compromise even in criminal proceedings as keeping the matter alive with no possibility of a result in favour of the prosecution is a luxury which the Courts, grossly overburdened as they are, cannot afford and that the time so saved can be utilized in deciding more effective and meaningful litigation. This is a common sense approach to the matter based on ground of realities and bereft of the technicalities of the law."

Needless to say out of Court settlement/ compromise at any stage of litigation is in consonance with the judicial pronouncements and recommendation of the Law Commission. Moreover, the aforesaid case dated 18-10-2022 would be a binding precedent and may act as a deterrent to the litigants who wish to go for out of court settlement belatedly for fear of exemplary costs and may also prove to be an impediment in the way to promote Judicial Reforms & contain mounting pendency by way of Out of Court settlements.

Written By: Inder Chand Jain
Email: [email protected], Ph no: 8279945021

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