S.138 NI Act: Conviction Set Aside by Punjab & Haryana HC After Parties Settle, Offence Compounded with Costs - 2025-05-21

Punjab & Haryana High Court Sets Aside Conviction in Cheque Bounce Case Post-Settlement, Orders Acquittal

Chandigarh: The High Court of Punjab and Haryana, in a significant ruling, has set aside the conviction and sentence of a petitioner in a cheque dishonour case under Section 138 of the Negotiable Instruments Act, 1881. Justice Vinay Mahajan allowed the revision petition after the parties reached a compromise and the petitioner paid the due amount to the complainant. The court ordered the petitioner's acquittal, emphasizing the compoundable nature of the offence.

The judgment was delivered on March 8, 2024, in the criminal revision petition (CRR 2154 / 2019) filed by Gurdev Singh against M/S Daljit Motors and another.

Case Background: From Conviction to Revision

The case originated when Gurdev Singh issued a cheque for Rs. 2,00,000 (Cheque No. 761708, dated January 7, 2014) in favour of M/S Daljit Motors. The cheque was subsequently dishonoured on January 8, 2014, with the remarks "Payment stopped by Drawer ." Despite a legal notice dated January 30, 2014, Singh failed to make the payment, leading to a complaint under Section 138 of the NI Act.

The Judicial Magistrate Ist Class, Rupnagar, convicted Singh on June 6, 2017, sentencing him to one year of rigorous imprisonment and a fine of Rs. 7,000. An appeal preferred by Singh was dismissed by the Additional Sessions Judge, Rupnagar, on July 3, 2019, upholding the trial court's decision. Aggrieved , Singh then approached the High Court with the present revision petition.

Compromise Leads to Compounding Plea

During the pendency of the revision petition before the High Court, the parties entered into a compromise. The counsel for Gurdev Singh contended that the entire cheque amount of Rs. 2,00,000 had been paid to the complainant, M/S Daljit Motors. It was submitted that a sum of Rs. 70,000, which had been deposited with the court's registry as per an earlier order (dated January 8, 2024), had already been disbursed to the complainant.

The counsel for the respondent-complainant acknowledged the compromise and stated that the complainant had no objection if the offence was compounded and the petitioner was acquitted.

Legal Framework: Compounding under NI Act

The High Court's decision hinged on the provisions for compounding offences under the Negotiable Instruments Act and the Code of Criminal Procedure (Cr.P.C.). The court referred to Section 147 of the NI Act , which states: > "Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), every offence punishable under this Act shall be compoundable."

The judgment also highlighted Section 320 of the Cr.P.C. , particularly sub-section (6), which empowers a High Court, exercising its revisional jurisdiction under Section 401 Cr.P.C., to allow compounding of offences.

The court cited precedents including M/s Meters and Instruments Private Limited & Anr. Vs. Kanchan Mehta (2018(1) SCC 560) and its own decision in M/s KLG Systel Ltd. vs. Bala Ji Electronics and Anr. (CRR-6767/2019, decided on 16.04.2022), which affirmed that once a settlement is effected, an offence under Section 138 NI Act ought to be compounded, leading to acquittal.

The court observed: > "This Court is in M/s KLG Systel Ltd. vs. Bala Ji Electronics and Anr. decided on 16.04.2022 in CRR-6767/2019 has also held that once a settlement is being effected, then in terms of Section 147 of the Negotiable Instruments Act and Section 320 Cr.P.C., the accused ought to be acquitted as the offence stands compounded."

High Court's Decision and Implications

Accepting the parties' submissions and considering the legal position, Justice Vinay Mahajan found it a fit case for allowing the compounding of the offence. The court noted the admitted position that the matter stood settled based on a mutual compromise.

Consequently, the High Court allowed the revision petition. The judgment and order of conviction and sentence dated June 6, 2017, passed by the Judicial Magistrate Ist Class, Rupnagar, and the appellate court's judgment dated July 3, 2019, were set aside.

Gurdev Singh was acquitted of the charge under Section 138 of the Negotiable Instruments Act. This acquittal was made subject to the petitioner depositing Rs. 30,000 (equivalent to 15% of the cheque amount) as costs with the Spinal Rehab Centre, Chandigarh.

This judgment reaffirms the principle that offences under Section 138 of the NI Act are compoundable at any stage, including revision, especially when parties have amicably settled their dispute, thereby promoting quicker resolution and reducing the burden on courts.