Appellate Courts may exercise sentencing and probation powers in NI Act cases despite complainant's refusal to compound.

The Petitioner, a company purchasing diesel from Respondent No. 2, issued three cheques for Rs. 1,13,176/- each in September 2017.

These cheques were dishonored for "Funds Insufficient," leading to three complaints under Section 138 of the Negotiable Instruments (NI) Act.

The Trial Court convicted the Petitioner, sentencing him to three months' imprisonment and a fine of Rs. 1,60,000/- per case.

During the appeal, the Petitioner deposited the full fine amount (Rs. 1,60,000/-) and later applied for acquittal, offering additional sums to settle the matter.

The Appellate Court rejected the applications because the complainant refused to consent to the compounding, citing insufficient compensation.

1. Whether an Appellate Court can exercise powers to acquit or grant relief under the Probation of Offenders Act when the complainant refuses to consent to compounding under the NI Act.

2. Whether the modified compounding guidelines established by the Supreme Court apply to proceedings at the appellate stage.

Section 138 of the Negotiable Instruments Act, 1981, regarding the penalties for cheque dishonor.

Supreme Court precedent in Damodar S. Prabhu v. Sayed Babalal H. (2010), which established graded costs for compounding.

Supreme Court decision in Sanjabij Tari v. Kishore S. Borcar (2025), which modified the compounding guidelines.

Section 255(2) and 255(3) of the Cr.P.C. (or Section 278 of the BNSS, 2023) regarding sentencing upon a plea of guilt, and the provisions of the Probation of Offenders Act, 1958.

The Court reasoned that while Section 138 of the NI Act allows for imprisonment and heavy fines, the primary objective is compensatory.

Following Sanjabij Tari, the Court noted that if an accused is willing to pay the cheque amount plus specified costs (7.5% at the appellate stage), the court has the discretion to act even if the complainant withheld consent.

The Court clarified that the directions in Sanjabij Tari—suggesting a plea of guilt followed by the exercise of discretionary sentencing powers or the benefit of the Probation of Offenders Act—are not restricted to the Magistrate but are equally applicable to the Appellate Court.

The Court found that the lower court erred by rejecting the applications solely on the basis of the complainant's lack of consent without considering these judicial guidelines.

The Petitioner was directed to deposit an additional Rs. 30,000/- per appeal; and if the Petitioner pleads guilty, the Appellate Court should consider exercising powers under Section 255 Cr.P.C. or the Probation of Offenders Act, while ensuring the complainant receives the deposited amounts as compensation.