A Section 138 conviction may be set aside when the parties compound the offence under Section 147.

The petitioner had issued a cheque for ₹5,71,000 in connection with a land transaction; it was dishonoured when presented for payment.

The respondent filed a complaint under Section 138 of the Negotiable Instruments Act.

The Trial Court convicted the petitioner and sentenced him to six months’ simple imprisonment and to pay ₹8,56,500 as compensation, with a one-month default sentence; the appellate court affirmed the conviction and sentence.

During the revision, the parties executed a compromise dated 6 February 2026.

The respondent agreed to accept ₹8,00,000 in full and final settlement, and the memorandum addressed the ₹1,71,300 deposited by the petitioner in the Trial Court, as well as the respondent’s civil suit and claims concerning the property.

Both parties supported compounding of the offence.

Whether the High Court could set aside the conviction and sentence under Section 138 of the Negotiable Instruments Act on the basis of a compromise reached after the appellate court had affirmed the conviction.

Whether, in the circumstances of this case, the offence could be compounded and the petitioner treated as acquitted.

Section 147 of the Negotiable Instruments Act makes offences under that Act compoundable.

Section 359(5), (6) and (8) of the Bharatiya Nagarik Suraksha Sanhita, 2023, as set out in the judgment, addresses composition after conviction or during appeal, permits a revisional court to allow composition, and provides that composition results in acquittal.

The Court also stated that inherent powers should be exercised sparingly, but may be used to secure the ends of justice or prevent miscarriage of justice.

It considered Damodar S. Prabhu v. Sayed Babalal H., M/s Meters and Instruments Private Limited v. Kanchan Mehta, Vinay Devanna Nayak v. Ryot Seva Sahkari Bank Limited, and K. Balachenniappan v. Jeyakrishnan in addressing delayed compounding and settlement of Section 138 proceedings.

The Court treated the parties’ joint compromise and the respondent’s consent as special circumstances warranting intervention notwithstanding the appellate court’s confirmation of the conviction.

It considered the dispute amicably resolved and relied on Section 147 to permit compounding, noting the respondent’s voluntary agreement to the settlement.

The Court accordingly modified the judgments below and treated the petitioner as acquitted on account of compounding.

It further permitted the respondent to apply to the Trial Court to withdraw the ₹1,71,300 deposited by the petitioner and directed the Trial Court to release that amount to the respondent if such an application was filed.