Information explosion along with the tremendous growth in software and hardware technology are moving industries, educational institutions, organizations towards "paperless" environment. This change has a direct impact on the amount of information digitized, thus increasing the need for efficient storage mechanisms. Digitized information mostly consist of compound images, which are a combination of different data types like text, graphics, line art, photographs, etc. Layer based compression is one of the frequently used solution to compress these kind of images. This paper proposes a novel layer based compound image compression technique. Care is taken to produce lossless compression for text part of the image and to improve the quality of the image as a whole after decompression. Experimental results were conducted to analyze the performance of the proposed compressor.