Conviction under NI Act quashed upon settlement subject to payment of costs and disbursement of deposited amount.

The applicants were convicted under the Negotiable Instruments Act (NI Act) by the learned Chief Judicial Magistrate, Vapi, on 17.02.2018 in Criminal Case Nos. 2940/2016 and 2192/2016.

This conviction was subsequently upheld by the learned 3rd Additional Sessions Judge, Valsad, on 09.12.2021.

During the pendency of these proceedings, the applicants and the original complainant amicably resolved the dispute, with the applicants depositing a total of ₹7,50,000/- before the Sessions Court.

The complainant filed an affidavit expressing no objection to the quashing of the conviction.

1. Whether the conviction and sentence under the Negotiable Instruments Act can be quashed and set aside based on a compromise between the parties at the revision stage.

2. What conditions and costs should be imposed when the compounding of an offence occurs at a belated stage before the High Court.

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

Damodar S. Prabhu v. Sayed Babalal H. (2010), which mandates the imposition of costs when compounding happens at a delayed stage.

Sanjabij Tari v. Kishore S. Borcar (2025 INSC 1158) regarding the maintenance of conviction while extending benefits under the Probation of Offenders Act, 1958.

Section 397 read with Section 401 of the CrPC regarding revisional powers.

The Court noted that the dispute was entirely private in nature and that the parties had reached a settlement.

While the High Court usually exercises limited revisional jurisdiction, the compoundable nature of NI Act offences under Section 147 allows for settlement "at any stage".

Since the settlement was reached at the revision stage (a belated stage), the Court determined that the applicants must be saddled with a cost of 7.5% of the settlement amount to be deposited with the State Legal Services Authority, following the Damodar S. Prabhu guidelines.

The Court found that since the complainant was satisfied with the deposited amount of ₹7,50,000/-, continuing the criminal proceedings would serve no purpose.

The Court directed the Nazir of the District Court, Valsad, to disburse the deposited ₹7,50,000/- with accrued interest to the complainant. The quashing is subject to the applicants depositing 7.5% of the settlement amount as costs to the Gujarat State Legal Services Authority.