A cheque-dishonour conviction may be set aside on verified compromise, subject to 1% costs.

The applicant was convicted under Section 138 of the Negotiable Instruments Act, 1881, by the Judicial Magistrate First Class, Ratlam, and fined ₹1,25,000.

The First Additional Sessions Judge dismissed his appeal and affirmed the conviction.

During the revision, the parties reached a compromise, which the Principal Registrar verified as voluntary and free from coercion.

The applicant paid the entire settled amount to the complainant.

1. Whether the parties’ compromise at the revision stage could be accepted and the conviction under Section 138 set aside.

2. Whether the applicant should be directed to pay costs for compounding at the revision stage, and whether the benefit of acquittal should be conditional on payment.

Section 147 of the Negotiable Instruments Act permits compounding of offences under the Act.

In Damodar S. Prabhu v. Sayed Babalal H., (2010) 5 SCC 663, the Supreme Court prescribed a graded costs framework to discourage delayed compounding: 15% of the cheque amount where compounding is sought before a Sessions Court or High Court in appeal or revision; it also recognized that the competent court may reduce costs in the circumstances of the case, recording reasons in writing.

The revision was stated to be filed under Section 438 of the Bharatiya Nagarik Suraksha Sanhita, 2023.

The Court accepted the compromise because it had been independently verified as voluntary, the parties had amicably settled their dispute, and the complainant had received the full settled amount.

Applying Damodar S. Prabhu, the Court directed payment of costs, but fixed them at 1% of the cheque amount—₹1,250—rather than the 15% figure indicated for compounding at the revision stage.

The acquittal was made conditional: failure to pay within 10 days would deprive the applicant of its benefit and leave him liable to undergo the trial court’s sentence.

It directed him to deposit ₹1,250 with the Secretary, High Court Legal Services Authority, Indore, within 10 days; his bail bonds would stand discharged subject to compliance, and non-payment would render the compromise-based acquittal ineffective.

The revision and any pending interlocutory application were disposed of.