Compounding of Section 138 Negotiable Instruments Act offence permitted in revision resulting in acquittal.

The petitioner was originally convicted for an offence under Section 138 of the Negotiable Instruments Act by the Fast Track Court No. II, Erode, in S.T.C. No. 695 of 2018 on 07.10.2021.

The Trial Court sentenced the petitioner to six months of simple imprisonment and directed the payment of Rs. 8,01,990 as compensation.

This judgment was subsequently confirmed on appeal by the II Additional District and Sessions Judge, Erode, in C.A. No. 157 of 2021 on 02.02.2026.

The petitioner challenged these concurrent findings by filing a Criminal Revision Case under Section 438 read with Section 442 of the Bharatiya Nagarik Suraksha Sanhita (BNSS), 2023.

During the pendency of the revision, the parties arrived at an amicable settlement and filed a Memo of Compromise dated 18.03.2026.

1. Whether the Court should permit the compounding of the offence under Section 138 of the Negotiable Instruments Act in view of the Memo of Compromise filed by the parties during revision proceedings.

2. Whether the judgments of conviction and sentence passed by the Trial Court and the Appellate Court should be set aside following the settlement.

The Court primarily applied Section 138 of the Negotiable Instruments Act, 1881, which governs the criminal liability for dishonour of cheques.

It exercised revisional jurisdiction under Sections 438 and 442 of the Bharatiya Nagarik Suraksha Sanhita (BNSS), 2023.

The Court relied on the legal principle of compounding of offences, which allows for the settlement of certain criminal matters (specifically those of a commercial or private nature) whereby the complainant agrees to drop charges, leading to the acquittal of the accused.

The Court noted that the learned counsel for the petitioner submitted a Memo of Compromise dated 18.03.2026, indicating that the parties had settled the dispute entirely.

To verify the settlement, the respondent/complainant appeared via video conferencing and affirmed that the dispute was fully resolved.

The Court evaluated the nature of the offence under the Negotiable Instruments Act, which is essentially a regulatory offence aimed at ensuring the credibility of banking operations.

Given the consensus between the parties and the fact that the complainant had been satisfied through the compromise, the Court found it appropriate to exercise its discretion to allow compounding at the revisional stage.

By doing so, the Court effectively nullified the need for the execution of the sentence previously imposed.

The Court set aside the judgment dated 02.02.2026 in C.A. No. 157 of 2021 and the Trial Court judgment dated 07.10.2021 in S.T.C. No. 695 of 2018. The petitioner was acquitted of all charges.

The Court further directed that any fine amount paid by the petitioner be refunded and that bail bonds be discharged.