Cheque-bounce offence can be compounded even after conviction and dismissal of revision, Gauhati HC holds and quashes sentence

The petitioner was convicted under Section 138 of the Negotiable Instruments Act, 1881 (“NI Act”) by the Judicial Magistrate First Class, Kamrup (Metro), Guwahati, and sentenced to two months’ simple imprisonment with compensation of ₹5,00,000, with a further one month’s simple imprisonment in default of payment

The conviction was affirmed by the Additional Sessions Judge (FTC) No. 3, Kamrup (Metro), in Criminal Appeal No. 200/2013, and the petitioner’s subsequent criminal revision was dismissed

During the pendency of the present petition under Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (“BNSS”) read with Article 227 of the Constitution, the petitioner and the complainant/respondent No. 2 entered into a Settlement Agreement dated 16.06.2026.

The petitioner agreed to pay ₹4,50,000 in full and final settlement, in addition to ₹1,50,000 previously deposited and released to the complainant pursuant to the revision proceedings

The parties jointly sought compounding of the offence under Section 147 of the NI Act

1. Whether an offence under Section 138 of the NI Act can be compounded under Section 147 of the NI Act after conviction and sentence have been affirmed in appeal and the subsequent criminal revision has been dismissed?

2. Whether the High Court can exercise its inherent jurisdiction under Section 528 BNSS to permit such compounding and set aside the finally affirmed conviction and sentence when no further proceedings are pending?

Section 147 of the NI Act provides that every offence punishable under the Act is compoundable, notwithstanding the Code of Criminal Procedure

In K.M. Ibrahim v. K.P. Mohammed, (2010) 1 SCC 798, the Supreme Court held that Section 147 has overriding effect and permits compounding of an offence under Section 138 even at the appellate stage, including in proceedings under Article 136

The Court also relied on Gian Chand Garg v. Harpal Singh, 2025 SCC OnLine SC 2317, including the principle that an offence under Section 138 may be compounded at any stage where the parties have voluntarily settled the dispute, and that courts should not override such compounding

Accordingly, the High Court’s inherent power under Section 528 BNSS may be exercised to give effect to a settlement and quash the conviction and sentence in an appropriate Section 138 prosecution

The Court treated the complainant’s voluntary settlement and receipt of the agreed payment as bringing the case within the broad statutory mandate of Section 147 of the NI Act.

Since the provision permits compounding notwithstanding the procedural limitations in the criminal-procedure law, the fact that the conviction had been affirmed in appeal and the revision proceedings had ended did not create a legal bar

Applying the Supreme Court’s interpretation in K.M. Ibrahim and Gian Chand Garg, the Court held that the purpose of Section 147 is to facilitate settlement of cheque-dishonour disputes and that the High Court could exercise its inherent jurisdiction even after the conclusion of the ordinary proceedings

It permitted compounding of the offence under Section 138 of the NI Act on the basis of the settlement between the parties, set aside the judgments of conviction and sentence passed by the trial and appellate courts, and quashed the non-bailable warrant issued against the petitioner

The criminal petition was accordingly allowed