S.147 NI Act Overrides BNSS; Cheque Bounce Offence Compoundable at Any Stage: Madras High Court - 2025-09-19

Madras High Court Rules Cheque Bounce Offence Compoundable at Any Stage, Citing Compensatory Nature of NI Act

MADURAI: In a significant ruling, the Madurai Bench of the Madras High Court has reaffirmed that an offence under Section 138 of the Negotiable Instruments Act, 1881 (NI Act) can be compounded at any stage, including during a revision petition after conviction by lower courts. Justice Shamim Ahmed, presiding over the case, emphasized that the special provision of Section 147 of the NI Act, which makes the offence compoundable, overrides the general procedural law laid down in the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS).

The court allowed a criminal revision petition filed by K. Balachenniappan, setting aside his conviction and one-year prison sentence after he reached a full and final settlement with the complainant, Jeyakrishnan.

Case Background

The case originated from a complaint filed by Jeyakrishnan against Balachenniappan for the dishonour of a cheque. In April 2022, the Judicial Magistrate in Peraiyur convicted Balachenniappan, sentencing him to one year of simple imprisonment and a fine. The conviction was subsequently upheld by the IV Additional District Sessions Judge, Madurai, in April 2025.

Aggrieved by the concurrent findings, Balachenniappan filed the present criminal revision petition before the Madras High Court. During the pendency of this revision, the parties, with the intervention of elders, decided to amicably settle the dispute for a total sum of ₹2,00,000. After initial payments, a Joint Memorandum of Compromise was filed before the High Court.

Arguments Before the Court

Petitioner's Counsel, Mr. J. Vishnu, argued that the primary object of Section 138 of the NI Act is compensatory rather than punitive. He submitted that Section 147 of the NI Act, which begins with a non-obstante clause ("Notwithstanding anything contained in the Code of Criminal Procedure..."), has an overriding effect, permitting the offence to be compounded at any stage. He cited several Supreme Court judgments, including Damodar S. Prabhu vs. Sayed Babalal H , to support his claim that compounding should be encouraged to secure the ends of justice.

Conversely, the Government Advocate (Criminal Side), Mr. M. Karunanithi, vehemently opposed the compromise. He contended that since the petitioner had already been convicted on merits by both the trial court and the appellate court, allowing a settlement at this advanced stage would amount to a misuse of the legal process.

High Court's Analysis and Ruling

The central legal question before Justice Shamim Ahmed was whether a conviction under Section 138 of the NI Act, confirmed on appeal, could be nullified by the High Court based on a subsequent compromise.

After a thorough examination of legal provisions and precedents, the Court concluded that it could. Justice Ahmed highlighted the special nature of the NI Act and the legislative intent behind its provisions.

Key Observations from the Judgment:

• Special Law Prevails over General Law: The Court held that Section 147 of the NI Act is a special law that prevails over the general provisions for compounding offences under Section 359 of the BNSS. The non-obstante clause in Section 147 explicitly grants it an overriding effect.
• Compensatory vs. Punitive Object: Quoting the Statement of Objects and Reasons of the 2002 amendment to the NI Act, the Court observed, "It is quite obvious that with respect to the offence of dishonour of cheques, it is the compensatory aspect of the remedy which should be given priority over the punitive aspect."
• Offence Character Unchanged: The Court clarified that the nature of the offence under Section 138 does not change merely because the litigation has reached the revisional stage. It remains an offence that the legislature has explicitly made compoundable.
• Inherent Powers to Secure Justice: The High Court affirmed its inherent power to intervene to do substantial justice and prevent a miscarriage of justice, especially when parties have amicably resolved their dispute. The court noted that forcing parties to approach the Supreme Court after a settlement would contradict the principle of providing "justice at the door step."

Final Decision

In light of the full and final settlement detailed in the compromise memo, the High Court allowed the compounding of the offence. The conviction and sentence passed by the lower courts were consequently set aside, and the petitioner, K. Balachenniappan, was acquitted of the charges.

The ruling reinforces the legal position that the primary goal in cheque dishonour cases is to ensure the complainant receives their due payment, and the courts should facilitate settlements between parties even at a belated stage to bring a quietus to the litigation.