A Section 147 compromise can set aside a Section 138 conviction at the revision stage.

The applicant was convicted under Section 138 of the Negotiable Instruments Act, 1881, and sentenced to six months’ rigorous imprisonment with a fine of ₹2,19,200.

The Sessions Court partly allowed the applicant’s appeal and modified the trial court’s judgment.

In revision, the parties reported that they had amicably settled the dispute, the respondent had received the entire amount, and they filed an application for compromise under Section 147 of the NI Act.

The applicant relied on Gian Chand Garg v. Harpal Singh & Anr., which addressed the effect of a full-and-final settlement on Section 138 proceedings.

1. Whether the parties’ settlement and the respondent’s receipt of the full amount justified compounding the Section 138 offence and setting aside the concurrent judgments.

2. Whether, given that the compromise was reached at the revision stage, costs should be imposed under the principles in Damodar S. Prabhu v. Sayed Babalal H.

Section 147 of the NI Act permits compounding of offences under the Act.

In Gian Chand Garg v. Harpal Singh & Anr., the Court relied on the principle that proceedings under Section 138 cannot continue where the complainant has accepted the amount in full and final settlement.

Under Damodar S. Prabhu v. Sayed Babalal H., (2010) 5 SCC 663, costs may be imposed on a graded basis for delayed compounding; the suggested rate for compounding before a Sessions Court or High Court in appeal or revision is 15% of the cheque amount.

The competent court may, however, vary the suggested costs in its discretion, recording reasons for doing so.

The Court found that the dispute was private in nature, the parties had voluntarily settled it, and the respondent had received the entire amount. Applying Section 147 and the settlement principle stated in Gian Chand Garg, it accepted the compromise and set aside the lower courts’ judgments.

Because settlement occurred at the revision stage, the Court also considered Damodar S. Prabhu and imposed costs. Although that decision suggests 15% for compounding at the High Court revision or appeal stage, the Court directed payment of 1% of the cheque amount—₹1,500—without expressly explaining the departure from the suggested rate.

The applicant’s bail bonds were to be discharged upon compliance. If the amount was not deposited within the prescribed period, the acquittal would not enure to the applicant’s benefit, and he would remain liable to undergo the sentence in accordance with law.

The respondent was permitted to withdraw any fine amount deposited by the applicant.