Conviction under NI Act Compounded upon Realization of Cheque Amount and Payment of Additional Litigation Costs

The applicant (original accused) was convicted by the 3rd Additional Chief Judicial Magistrate, Bhuj, in Criminal Case No. 2713 of 2010 for an offence under Section 138 of the Negotiable Instruments Act involving a cheque of Rs. 3,00,000/-.

He was sentenced to one year of simple imprisonment and ordered to pay compensation of Rs. 3,00,000/-.

This conviction was upheld by the 9th Additional District & Sessions Judge, Bhuj-Kachchh in Criminal Appeal No. 24 of 2018.

During the pendency of the revision application, the applicant deposited a total sum of Rs. 3,15,000/- across different stages of the proceedings, which was subsequently realized by the complainant.

The applicant filed an undertaking-cum-affidavit requesting the quashing of the conviction based on the settlement of the dues.

1. Whether the conviction under Section 138 of the Negotiable Instruments Act can be set aside and the offence compounded upon the realization of the cheque amount plus additional interest/costs by the complainant?

Section 147 of the Negotiable Instruments Act, 1881, which provides that every offence punishable under the Act shall be compoundable.

Revisional powers under Section 397 read with Section 401 of the Code of Criminal Procedure, 1973, to review the legality of the conviction.

Principles of Section 357 of the Code of Criminal Procedure regarding the award of compensation and litigation costs to the victim/complainant.

The court noted that the primary objective of Section 138 is compensatory rather than purely punitive. Although the applicant initially challenged the conviction on merits, the focus shifted to the fact that the complainant had realized Rs. 3,15,000/-, which exceeded the original cheque amount of Rs. 3,00,000/-.

The court reasoned that since the financial liability was discharged and recognized by both parties, a balance could be struck by compounding the offence while ensuring the complainant was further indemnified for litigation expenses.

The court found that the realization of the amount, coupled with an additional payment of litigation costs, justified the exercise of its discretion to set aside the concurrent findings of the lower courts.

The judgments and orders of conviction and sentence passed by the Trial Court and the Appellate Court were quashed and set aside, and the applicant was acquitted. The court directed the applicant to pay an additional sum of Rs. 25,000/- as litigation costs to the complainant within 30 days, failing which the revision application would be revived.