Compounding of Section 138 NI Act offence permitted at revision stage following post-conviction settlement.

The petitioner was originally convicted by the Fast Track Court No. II, Erode, in S.T.C.No.694 of 2018 for an offence under Section 138 of the Negotiable Instruments Act.

He was sentenced to six months of simple imprisonment and directed to pay compensation of Rs. 12,33,449/-.

This conviction and sentence were subsequently confirmed by the II Additional District and Sessions Judge, Erode, in C.A.No.156 of 2021 on 02.02.2026.

The petitioner moved the High Court in revision under Sections 438 and 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.

Whether the High Court can set aside a concurrent conviction under Section 138 of the Negotiable Instruments Act based on a compromise entered into by the parties during revisionary proceedings?

The court primarily considered Section 138 of the Negotiable Instruments Act regarding dishonour of cheques.

Although not explicitly cited by section number in the order, the court exercised its inherent and revisionary powers to permit the "compounding of the offence," a principle derived from Section 147 of the Negotiable Instruments Act, which makes every offence punishable under the Act compoundable.

Procedurally, the revision was filed under Sections 438 and 442 of the Bharatiya Nagarik Suraksha Sanhita (BNSS), 2023.

The court took note of the Memo of Compromise filed by both parties on 18.03.2026.

To verify the authenticity of the settlement, the respondent/complainant appeared via video conferencing and affirmed that the dispute had been fully settled.

The court reasoned that given the nature of the offence (which is essentially a regulatory/civil wrong in a criminal framework) and the fact that the parties had reached a mutual agreement, the interest of justice would be served by permitting the compounding of the offence.

Consequently, the court found it appropriate to exercise its discretion to set aside the previous judgments of the Trial Court and the Appellate Court in light of this settlement.

The judgment and conviction dated 02.02.2026 in C.A.No.156 of 2021 and the Trial Court judgment dated 07.10.2021 in S.T.C.No.694 of 2018 were set aside.

The petitioner was acquitted of all charges.

The court further directed the refund of any fine amount paid by the petitioner and the discharge of executed bail bonds.