After Cheque Settlement, Gujarat HC Quashes Section 138 Conviction And One-Year Sentence, Orders 7.5% Cheque-Amount Cost

Respondent No. 2 filed a complaint under Section 138 of the Negotiable Instruments Act, 1881, registered as Criminal Case No. 109509 of 2019.

On 11 December 2024, the Magistrate convicted the petitioners and sentenced them to one year’s simple imprisonment, payment of ₹3,40,000 as compensation with 9% annual interest, and, in default, a further three months’ simple imprisonment.

Before the High Court, the parties stated that they had amicably settled the dispute; the complainant confirmed receipt of the amount, filed an affidavit relinquishing further claims, and did not oppose quashing.

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

Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023 preserves the High Court’s inherent power to make orders necessary to secure the ends of justice or prevent abuse of process.

The Court relied on Gian Singh v. State of Punjab, Madan Mohan Abbot v. State of Punjab, Nikhil Merchant v. CBI, Manoj Sharma v. State, Narinder Singh v. State of Punjab and State of Haryana v. Bhajan Lal in considering quashing following settlement.

It also applied the compounding-cost guidelines stated in Sanjabij Tari v. Kishore S. Borcar: where payment is made before a High Court in revision or appeal, compounding may be permitted subject to costs of 7.5% of the cheque amount.

The complainant’s affidavit confirmed the settlement, receipt of the amount and waiver of further claims, and the complainant expressly had no objection to quashing.

In light of the settlement and the compoundable nature of the Section 138 offence, the Court concluded that continuing the criminal proceedings would be futile, cause unnecessary harassment and constitute an abuse of process; quashing was therefore warranted to secure the ends of justice.

Applying the Sanjabij Tari guideline for proceedings before a High Court, the Court additionally required the petitioners to deposit 7.5% of the cheque amount with the Gujarat High Court Legal Aid Services Authority.

The complaint, the judgment and order of conviction dated 11 December 2024, and all consequential proceedings against the petitioners were quashed and set aside; the petitioners were to be released forthwith unless required in another case.

They were directed to deposit 7.5% of the cheque amount with the Gujarat High Court Legal Aid Services Authority within four weeks. If they failed to do so, the amount was to be recovered as a fine, including as arrears of land revenue.