Cheque Bounce Cases Can Be Compounded Even After Conviction Is Upheld In Appeal: Punjab & Haryana High Court
However, compounding costs can be waived only in exceptional cases, Court held.
Holding that offences under Section 138 of the Negotiable Instruments Act can be compounded even after a conviction has been upheld in appeal, the Punjab and Haryana High Court has set aside the conviction of a cheque bounce accused after the parties reached an amicable settlement. The Court further clarified that while courts have the discretion to waive the costs ordinarily payable at the...
Holding that offences under Section 138 of the Negotiable Instruments Act can be compounded even after a conviction has been upheld in appeal, the Punjab and Haryana High Court has set aside the conviction of a cheque bounce accused after the parties reached an amicable settlement.
The Court further clarified that while courts have the discretion to waive the costs ordinarily payable at the stage of compounding, such power should be exercised only in exceptional circumstances.
Justice Sumeet Goel observed that the High Court, in exercise of its inherent powers under Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS), may quash a conviction where the parties have genuinely settled the dispute, provided the compromise does not impinge upon public interest or undermine the cause of justice.
The judge added that the compensatory aspect of the remedy under the NI Act must have priority over its punitive aspect.
The Court made the observations while allowing two criminal revision petitions filed by a cheque bounce convict after the parties entered into a settlement before the Mediation and Conciliation Centre, Sonipat.
Legal Position Of Compoundability After Conviction
Examining Section 147 of the NI Act and Section 359 of BNSS, 2023 (corresponding to Section 320 CrPC, 1973), read with Section 528 of BNSS, 2023, and the guidelines laid down by the Supreme Court in Damodar S. Prabhu v. Sayed Babalal H., (2010), and the recently revised guidelines in Sanjabij Tari v. Kishore S. Borcar (2025), the Court held:
"The offence under Section 138 of Negotiable Instruments Act, 1881 can be compounded at all stages of litigation, including when the matter has reached the High Court after having been conclusively dealt with by the Magisterial as also the Sessions Court. In other words, such an offence can be compromised/compounded even after the petitioner-accused has been convicted by the Court of learned Magistrate and his appeal against the same has been dismissed by the learned Sessions Court."
Cost Waiver: Exceptional Circumstances Required, Not Routine Exercise
The Court delineated the limits of the discretion available to courts to waive costs when compounding a Section 138 offence at an advanced stage.
While noting that Damodar S. Prabhu (supra) had reserved discretion in favour of the concerned court to reduce or waive costs based on the facts and circumstances of a given case, and that Sanjabij Tari (supra) had revised the quantum of costs payable but had not disturbed this latitude, the Court held:
"The discretion to waive the imposition of costs is not to be invoked as a matter of ordinary course. The exercise of such discretion must be predicated upon exceptional, compelling and accentuating circumstances which, in the considered opinion of the concerned Court seized of the matter, warrant deviation from the general rule of imposition of cost. The Court, while invoking such discretion, must record clear, cogent and reasoned findings delineating the special factors that justify the waiver."
The Court emphasised that this requirement is in consonance with the legislative intent behind the criminalisation of cheque dishonour — to inculcate financial discipline and uphold the credibility and sanctity of negotiable instruments — and that the liberty to waive costs is available to all courts, whether the High Court, Sessions Court, or the Magisterial Court conducting trial, but must be exercised with equal care across all levels.
Inherent Powers Under Section 528 BNSS: Width and Essence
The Court also elaborated on the nature and amplitude of the inherent powers of the High Court under Section 528 of BNSS, 2023, holding that these powers may be invoked to quash a conviction where the parties have genuinely settled, provided the compromise does not impinge upon public interest or undermine the cause of justice:
"The inherent powers of a High Court are incidental replete powers, in the absence of which, the Court would be obliged to sit still and helplessly witness the process of law being abused for the purposes of injustice. In other words, such power(s) is intrinsic to the High Court, forming its very life-blood, its very essence, its immanent attribute. Without such power(s), a High Court would retain form but lack substance."
The Court further held that though laws attempt to deal with all cases that may arise, the infinite variety of circumstances and the imperfections of language make it impossible to lay down provisions capable of governing every case.
The petitioner had been convicted by the Judicial Magistrate First Class, Sonipat, in two cheque bounce complaints and sentenced to rigorous imprisonment of one year and six months besides payment of compensation. His appeals were dismissed by the Additional Sessions Judge, Sonipat.
During the pendency of the revision petitions before the High Court, the parties settled their disputes before the Mediation and Conciliation Centre, Sonipat. The complainant confirmed the settlement and expressed no objection to compounding of the offences and the petitioner's acquittal.
Accepting the settlement, the High Court set aside the judgments of conviction and sentence passed by the Magistrate as well as the appellate court's order, acquitted the petitioner, and directed both sides to remain bound by the terms of the settlement.
Although the Court reiterated that costs are ordinarily payable when offences are compounded at a belated stage, it waived costs in the present case after noting that the petitioner had faced criminal proceedings since 2014 and that the facts warranted exercise of the discretion.
For the Petitioner: Mr. Parveen Sharma, Advocate
For the Respondent-Complainant: Ms. Sushma Suman, Advocate (Legal Aid Counsel); Mr. Amit Bansal, Advocate; Mr. Najar Singh, Advocate; Mr. Navmohit Singh, Advocate
Mr. Parveen Sharma, Advocate for the petitioner(s).
Ms. Sushma Suman, Advocate (legal aid counsel) and Mr. Amit Bansal, Advocate, Mr. Najar Singh, Advocate and Mr. Navmohit Singh, Advocate for the respondent – complainant.