Compounding of Offence Under Section 138 of NI Act Permitted Post-Conviction Upon Forfeiture of Cheque Amount

The petitioner was the original accused in a criminal complaint filed by respondent No. 2 (HDFC Bank) under Section 138 of the Negotiable Instruments Act, 1881.

On November 7, 2025, the 9th Additional Chief Judicial Magistrate at Rajkot convicted the petitioner in Criminal Case No. 511 of 2023.

Following the conviction, the petitioner arranged funds and paid the full cheque amount of ₹65,346/- to the complainant bank.

Both parties subsequently approached the High Court seeking to quash the conviction and sentence based on an amicable settlement.

1. Whether the High Court can exercise its inherent powers to quash a conviction under Section 138 of the Negotiable Instruments Act after the parties have reached an amicable settlement post-conviction.

Section 138 of the Negotiable Instruments Act, 1881, which governs the dishonour of cheques for insufficiency of funds.

Section 482 of the Cr.P.C. / Section 528 of the BNSS regarding inherent powers to quash proceedings to subserve the ends of justice.

The legal principle applied is that offenses under the N.I. Act are essentially civil in nature and compoundable, allowing for settlement even at the post-conviction stage to restore harmony between parties.

The court evaluated the settlement through an affidavit dated May 11, 2026, submitted by the authorized representative of HDFC Bank, which confirmed the receipt of the cheque amount.

The court verified the settlement further through a virtual appearance of the bank's representative, who expressed "no objection" to the quashing of the conviction.

Reasoning that the dispute was private and financial, and that the parties had resolved their grievances, the court determined that maintaining the conviction would serve no purpose and that quashing the proceedings was necessary to meet the ends of justice.

The petition was allowed, and the judgment and order of conviction dated November 7, 2025, passed by the 9th Addl. Chief Judicial Magistrate, Rajkot, in Criminal Case No. 511 of 2023, were quashed and set aside.