Whether the order passed by the Appellate Court confirming the conviction of the trial court under Section 138 of the Negotiable Instruments Act can be nullified by the High Court on the basis of compromise entered between the parties?
Coram: Justice Shamim Ahmed
Negotiable Instruments Act, 1881 — s.138 — s.147 — Bharatiya Nagarik Suraksha Sanhita, 2023 — s.359 — Compounding of offence — Compromise in revision — Effect of acquittal — Negotiable Instruments Act, 1881 — s.147 — Compounding permissible at any stage — Held: Every offence punishable under the Act is compoundable notwithstanding the Code of Criminal Procedure, and the law on compounding under the N.I. Act is no more res integra; the offence may be compounded even at any stage of the proceedings. (¶12, 22) Bharatiya Nagarik Suraksha Sanhita, 2023 — s.359 — Revisional power to allow compounding — Held further: A High Court acting in the exercise of its powers of revision may allow compounding after the appellate court has confirmed the conviction and sentence, where the compromise is genuine and the complainant has received the entire amount agreed. (¶16, 22) Negotiable Instruments Act, 1881 — s.138 — Composition operates as acquittal — Held further: Composition of the offence has the effect of an acquittal, so the conviction and sentence stand annulled and the revision petitioner is treated as acquitted on account of compounding. Criminal Revision Petition allowed. (¶23)
Whether the order passed by the Appellate Court confirming the conviction of the trial court under Section 138 of the Negotiable Instruments Act can be nullified by the High Court on the basis of compromise entered between the parties?
Yes. Section 147 of the Negotiable Instruments Act makes every offence punishable under the Act compoundable notwithstanding the Code of Criminal Procedure, and Section 359 of the Bharatiya Nagarik Suraksha Sanhita, 2023 expressly permits a High Court acting in the exercise of its powers of revision to allow a person to compound such an offence. The law is no more res integra and the offence can be compounded even at any stage of the proceedings; where the complainant has voluntarily agreed for settlement, has received the entire amount agreed and has no objection, there is no impediment for the Court to permit compounding of the offence in the interest of justice.
What is the effect of permitting compounding under the Negotiable Instruments Act on a conviction and sentence already confirmed in appeal?
The composition of an offence has the effect of an acquittal of the accused with whom the offence has been compounded. Accordingly the judgment of conviction and sentence passed by the trial court and confirmed by the appellate court is set aside, the conviction and sentence stand annulled, and the accused is treated as acquitted on account of compounding with the complainant.
What did the High Court finally decide on compounding the offence under Section 138 of the Negotiable Instruments Act?
The Criminal Revision Petition was allowed. The judgment of conviction and sentence imposed by the trial court and confirmed by the appellate court was set aside, compounding of the offence was permitted under Section 147 of the Negotiable Instruments Act, and the revision petitioner was treated as acquitted. The connected criminal miscellaneous petition was closed, with no order as to costs.
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Heard Mr.K.Balaji, learned counsel appearing for the Petitioner and Mr.- Abishek Saikumar, learned counsel for the Respondent.
This Criminal Revision Case has been filed by the petitioner challen- ging the judgment dated 11.02.2026 passed by the learned II Additional District and Sessions Judge, Erode, in C.A.No.82 of 2022, confirming the judgment of conviction and sentence imposed by the learned Fast Track Court-II, Magis- terial Level, Erode, in S.T.C.No.140 of 2018 dated 05.05.2022 and con- sequently to set aside the same.
The facts of the case in nutshell, which led to the filing of the present Criminal Revision Petition and are necessary for disposal of the same, are as follows:- The respondent/complainant had initiated proceedings against the peti- tioner under Section 138 of the Negotiable Instruments Act alleging that the cheque issued by the petitioner towards discharge of a legally enforceable liabil- ity was dishonoured for want of sufficient funds. After completion of trial, the learned Fast Track Court-II, Magisterial Level, Erode, by judgment dated 05.05.2022 in S.T.C.No.140 of 2018, convicted the petitioner and imposed sen- tence, to undergo simple imprisonment for six months and to pay compensation amount of Rs.2,00,000/-. . Aggrieved by the same, the petitioner preferred an appeal in C.A.No.82 of 2022 before the learned II Additional District and Ses- sions Judge, Erode. The learned Appellate Court, by judgment dated 11.02.2026, confirmed the judgment of conviction and sentence passed by the Trial Court. Challenging the same, the present Criminal Revision Petition has been filed before this Court.
During the pendency of the present Criminal Revision Petition, the parties have arrived at an amicable settlement. Pursuant to the settlement, the petitioner has filed a memo of compliance before this Court stating that, by or- der dated 22.04.2026 passed in Crl.M.P.Nos.7291 and 7293 of 2026 in Crl.R.C.No.927 of 2026, this Court was pleased to suspend the sentence im- posed on the petitioner subject to the condition that the petitioner shall deposit 50% of the cheque amount.
It is further submitted that, in compliance with the said order, the peti- tioner has deposited a sum of ₹1,00,000/- (Rupees One Lakh only) before the Fast Track Court-II, Magisterial Level, Erode, on 20.05.2026 and further depos- ited a sum of Rs.40,000/- (Rupees Forty Thousand Only) before the Trial Court on 23.06.2022. Thereafter, this Court, while referring the matter for mediation, directed the petitioner to pay the balance settlement amount of ₹60,000/- to the respondent. In compliance with the said direction, the petitioner has drawn a Demand Draft bearing No.58431 dated 23.07.2026 for a sum of ₹60,000/- in fa- vour of the respondent, and the same has been received by the learned counsel appearing for the respondent.
The learned counsel appearing for the Revision Petitioner submits that the entire settlement amount has been paid to the respondent and that no further amount remains due from the petitioner. The learned counsel further submits that, in view of the settlement arrived at between the parties, the offence under Section 138 of the Negotiable Instruments Act may be permitted to be com- pounded and the petitioner may be acquitted.
The learned counsel appearing for the respondent also confirms the re- ceipt of the settlement amount and submits that the respondent has no further claim against the petitioner and has no objection for compounding the offence.
In support of his arguments, learned counsel for the Revision Petitioner has submitted that in the case of Damodar S. Prabhu vs. Sayed Babalal H re- ported at 2010 (2) SCC (Cri) 1328, the Hon'ble Apex Court had formulated the guidelines for compounding the offence under section 138 N.I. Act wherein in para 21, it was pleased to observe as under: "With regard to the progression of litigation in cheque boun- cing cases, the learned Attorney General has urged this Court to frame guidelines for a graded scheme of imposing costs on parties who unduly delay compounding of the offence. It was submitted that the requirement of deposit of the costs will act as a deterrent for delayed composition, since at present, free and easy compounding of offences at any stage, however belated, gives an incentive to the drawer of the cheque to delay settling the cases for years. An application for compounding made after several years not only results in the system being burdened but the complainant is also deprived of effective justice. In view of this submission, we direct that the following guidelines be fol- lowed:- THE GUIDELINES (i) In the circumstances, it is pro- posed as follows:
(a) That directions can be given that the Writ of Summons be suitably modified making it clear to the accused that he could make an application for compounding of the offences at the first or second hearing of the case and that if such an application is made, compounding may be allowed by the court without im- posing any costs on the accused.
(b) If the accused does not make an application for compound- ing as aforesaid, then if an application for compounding is made before the Magistrate at a subsequent stage, compound- ing can be allowed subject to the condition that the accused will be required to pay 10% of the cheque amount to be deposited as a condition for compounding with the Legal Services Authority, or such authority as the Court deems fit.
(c) Similarly, if the application for compounding is made before the Sessions Court or a High Court in revision or appeal, such compounding may be allowed on the condition that the accused pays 15% of the cheque amount by way of costs. (d) Finally, if the application for compounding is made before the Supreme Court, the figure would increase to 20% of the cheque amount."
Learned counsel for the Revision petitioner also submitted that in the case of M/s Meters and Instruments Private Limited and an- other vs. Kanchan Mehta reported at 2017 (7) Supreme 558, the Hon'ble the Apex Court in para 18, was pleased to observe as under:
“i) Offence under Section 138 of the Act is primarily a civil wrong. Burden of proof is on accused in view presumption under Section 139 but the standard of such proof is "preponderance of probabilit- ies". The same has to be normally tried summarily as per provi- sions of summary trial under the Cr.P.C. but with such variation as may be appropriate to proceedings under Chapter XVII of the Act. Thus read, principle of Section 258 Cr.P.C. will apply and the Court can close the proceedings and discharge the accused on sat- isfaction that the cheque amount with assessed costs and interest is paid and if there is no reason to proceed with the punitive aspect. (ii)The object of the provision being primarily compensatory, pun- itive element being mainly with the object of enforcing the com- pensatory element, compounding at the initial stage has to be en- couraged but is not debarred at later stage subject to appropriate compensation as may be found acceptable to the parties or the Court. (iii)Though compounding requires consent of both parties, even in absence of such consent, the Court, in the interests of justice, on being satisfied that the complainant has been duly compensated, can in its discretion close the proceedings and discharge the ac- cused. (iv)Procedure for trial of cases under Chapter XVII of the Act has normally to be summary. The discretion of the Magistrate under second proviso to Section 143, to hold that it was undesir- able to try the case summarily as sentence of more than one year may have to be passed, is to be exercised after considering the fur- ther fact that apart from the sentence of imprisonment, the Court has jurisdiction under Section 357(3) Cr.P.C. to award suitable compensation with default sentence under Section 64 IPC and with further powers of recovery under Section 431 Cr.P.C. With this ap- proach, prison sentence of more than one year may not be required in all cases. (v) Since evidence of the complaint can be given on af- fidavit, subject to the Court summoning the person giving affidavit and examining him and the bank's slip being prima facie evidence of the dishonor of cheque, it is unnecessary for the Magistrate to record any further preliminary evidence. Such affidavit evidence can be read as evidence at all stages of trial or other proceedings. The manner of examination of the person giving affidavit can be as per Section 264 Cr.P.C. The scheme is to follow summary proced- ure except where exercise of power under second proviso to Sec- tion 143 becomes necessary, where sentence of one year may have to be awarded and compensation under Section 357(3) is con- sidered inadequate, having regard to the amount of the cheque, the financial capacity and the conduct of the accused or any other cir- cumstances.”
Learned counsel for the Revision Petitioner further relied upon the judgment of Gujarat High Court in the case of Kripal Singh Pratap Singh Ori vs. Salvinder Kaur Hardip Singh reported in 2004 Crl. L. J. 3786 wherein, the Gujarat High Court was pleased to observe as under:- “31. In the circumstances, it is hereby declared that the comprom- ise arrived between the parties to this litigation out of court is ac- cepted as genuine and the order of conviction and sentence passed by the learned JMFC, Vadodara and confirmed in appeal by the learned Sessions Judge, Fast Track Court, Vadodara, therefore, on the given set of facts are hereby quashed and set aside as this court intends, otherwise to secure the ends of justice as provided under section 482 Cr.P.C. Obviously the order disposing Revision Ap- plication would not have any enforceable effect."
Learned counsel for the Revision Petitioner has also relied upon the judgment of Hon'ble the Apex Court in the case of Vinay Devanna Nayak vs. Ryot Seva Sahkari Bank Limited reported in AIR 2008 SC 716, wherein the Hon'ble Apex Court was pleased to observe as under: “18. Taking into consideration even the said provision (Section 147. and the primary object underlying Section 138, in our judg- ment, there is no reason to refuse compromise between the parties. We, therefore, dispose of the appeal on the basis of the settlement arrived at between the appellant and the respondent. 19. For the foregoing reasons the appeal deserves to be allowed and is accordingly allowed by holding that since the matter has been compromised between the parties and the amount of Rs.45,000/- has been paid by the appellant towards full and final settlement to the respondent-bank towards its dues, the appellant is entitled to acquittal. The order of conviction and sentence recorded by all courts is set aside and he is acquitted of the charge levelled against him."
Learned counsel for the Revision Petitioner has argued that the law regarding compounding of offences under the N.I. Act is very clear and is no more res integra and the offences under the N.I. Act can be compounded even at any stage of the proceedings. He submits that in terms of the aforesaid law laid down by the Hon'ble Supreme Court, the parties may be permitted to com- pound the offence and the conviction of the petitioner be set aside.
Learned Counsel for the Revision Petitioner submits that this Court has already decided a similar issue vide judgment and order dated 19.09.2025 in Crl.R.C.(MD)No.875 of 2025 [K.Balachenniappan Vs Jeyakrishnan]. The counsel argues that the present revision petitioner's case is fully covered by the aforesaid judgment and prays that the present Revision Petition may be dis- posed of in the same terms. A copy of the judgment has been placed before the Court for perusal.
I have heard both the learned counsel for the Revision Petitioner, the learned counsel for the Respondent and learned Government Advocate (Crim- inal Side) appearing for the State and perused the materials placed on record.
Considering the facts as narrated above, the following question arose for consideration. 'Whether the order passed by the Appellate Court confirming the conviction of the trial court under section 138 of Negotiable In- struments Act can be nullified by the High Court on the basis of compromise entered between the parties'.
Before answering the aforesaid question as framed, I shall examine the relevant provision of the B.N.S.S, as well as the Negotiable Instrument Act. I may extract Section 359 of B.N.S.S., and Section 147 of Negotiable Instru- ments Act. Section 359 B.N.S.S. - Compounding of Offences - 1. The offences punishable under the sections of the Bharatiya Nyaya Sanhita, 2023 specified in the first two columns of the Table next following may be compounded by the persons men- tioned in the third column of that Table:- 2)The offences punishable under the sections of the Bharatiya Nyaya Sanhita, 2023 specified in the first two columns of the Table next following may, with the permission of the Court be- fore which any prosecution for such offence is pending, be com- pounded by the persons mentioned in the third column of that Table:- 3. When an offence is compoundable under this section, the abetment of such offence or an attempt to commit such offence (when such attempt is itself an offence) or where the accused is liable under sub section (5) of section 3 or section 190 of the Bharatiya Nyaya Sanhita, 2023 (45 of 2023), may be compoun- ded in like manner. (4)(a) When the person who would otherwise be competent to compound an offence under this section is a child or of unsound mind, any person competent to contract on his behalf may, with the permission of the Court, compound such offence; (b) When the person who would otherwise be competent to compound an offence under this section is dead, the legal representative, as defined in the Code of Civil Procedure, 1908 (5 of 1908) of such person may, with the consent of the Court, compound such offence. (5) When the accused has been committed for trial or when he has been convicted and an appeal is pending, no composition for the offence shall be allowed without the leave of the Court to which he is committed, or, as the case may be, before which the appeal is to be heard. (6) A High Court or Court of Session acting in the exercise of its powers of revision under section 442 may allow any person to compound any offence which such person is competent to compound under this section. (7) No offence shall be compounded if the accused is, by reason of a previous conviction, liable either to enhanced punishment or to a punishment of a different kind for such offence. (8) The composition of an offence under this section shall have the effect of an acquittal of the accused with whom the offence has been compounded. (9) No offence shall be compounded except as provided by this section. Section 147 of the Negotiable Instrument Act:- Offences to be compoundable.—Notwithstanding anything con- tained in the Code of Criminal Procedure, 1973 (2 of 1974), every offence punishable under this Act shall be compoundable.
It is well settled that inherent power of the Court can be exercised only when no other remedy is available to the litigants and nor a specific rem- edy as provided by the statute. It is also well settled that if an effective, alterna- tive remedy is available, the High Court will not exercise its inherent power, es- pecially when the Revision Petitioner may not have availed of that remedy. The power can be exercised by the High Court to secure the ends of justice, prevent abuse of the process of any court and to make such orders as may be necessary to give effect to any order under this Sanhita or Act, depending upon the facts of the given case. This Court can always take note of any miscarriage of justice and prevent the same by exercising its power. These powers are neither limited, nor curtailed by any other provision of the Sanhita or Act. However, such inher- ent powers are to be exercised sparingly and with caution.
In the instant case, it is true that the appeal was dismissed and the conviction and sentence was upheld by the appellate court, but it cannot be lost sight of the fact that this Court has power to intervene in exercise of its power only with a view to do the substantial justice or to avoid a miscarriage and the spirit of compromise arrived at between the parties. This is perfectly justified and legal too.
I have considered the judgments cited by the learned counsel for the Revision Petitioner as well as by the learned Counsel for the Respondent and other decisions of the Hon'ble Apex Court and I do not think it necessary to en- list those decisions which are taken into consideration for the purpose of the present proceedings.
In the instant case, the Revision Petitioner is invoking the inherent power of this court after dismissal of the appeal confirming his conviction and sentence. In these circumstances, I have to examine as to whether for entertain- ing the aforesaid case, any special circumstances are made out or not, so it can be legitimately argued and inferred and held that in all cases where the Revision Petitioner is able to satisfy this Court that there are special circumstances which can be clearly spelt out subsequent proceeding invoking inherent power of this court can be modified and cannot be thrown away on that technical argument as to its sustainability once the contesting parties entered into subsequent compro- mise.
In view of the decisions rendered in the judgment dated 19.09.2025 in Crl.R.C.(MD)No.875 of 2025 [K.Balachenniappan Vs Jeyakrishnan] and tak- ing into account the fact that the parties have settled the dispute amicably by way of compromise, this Court is of the view that the compounding of the of- fence as required to be permitted.
In view of the settlement arrived at between the parties and the joint memo/compliance memo filed before this Court, this Court is of the view that the dispute between the parties has been amicably resolved. Section 147 of the Negotiable Instruments Act provides that offences punishable under the said Act shall be compoundable. Since the respondent/complainant has voluntarily agreed for settlement and has received the entire amount agreed between the parties, there is no impediment for this Court to permit compounding of the offence in the interest of justice.
Accordingly, the Criminal Revision Petition is allowed. The judgment of conviction and sentence imposed by the learned Fast Track Court- II, Magisterial Level, Erode, in S.T.C.No.140 of 2018 dated 05.05.2022 and confirmed by the learned II Additional District and Sessions Judge, Erode, in C.A.No.82 of 2022 dated 11.02.2026, are hereby set aside. The conviction and sentence imposed against the petitioner for the offence under Section 138 of the Negotiable Instruments Act stand annulled, as this Court permits compounding of the offence under Section 147 of the Negotiable Instruments Act. Consequently, the Revision Petitioner shall be treated as acquitted on account of compounding of the offence with the respondent/complainant.
Consequently, the connected Criminal Miscellaneous Petition is closed. However there shall be no order as to costs. 27-07-2026
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