Gujarat HC Quashes Cheque-Bounce Conviction After Complainant Confirms Settlement, Orders Accused To Deposit 7.5% Of Cheque Amount With Legal Aid

The petitioners were convicted under Section 138 of the Negotiable Instruments Act, 1881, and sentenced to one year’s simple imprisonment, with a direction to pay the complainant compensation of ₹3,30,000, together with 6% annual interest, and a further three months’ imprisonment in default.

They sought to compound the offence and have the conviction, sentence, and consequential proceedings quashed.

The complainant affirmed that the parties had settled their disputes, acknowledged receipt of ₹3,30,000 in cash and a demand draft for ₹3,30,000, and stated that he had no further claim against the petitioners.

The State took no specific position against the requested relief.

Section 147 of the Negotiable Instruments Act makes offences under the Act compoundable.

The Court relied on its powers under Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023, alongside Articles 226 and 227 of the Constitution, to quash proceedings where doing so would secure the ends of justice and prevent abuse of process.

It considered the principles in Gian Singh v. State of Punjab, Madan Mohan Abbot v. State of Punjab, Nikhil Merchant v. CBI, Manoj Sharma v. State, Narinder Singh v. State of Punjab, and State of Haryana v. Bhajanlal concerning quashing on settlement.

It also referred to Sanjabij Tari v. Kishore S. Borcar, which set out graduated costs for compounding cheque-dishonour offences at different procedural stages, including 7.5% of the cheque amount where payment is made before a Sessions Court or High Court in revision or appeal.

The complainant’s affidavit and submissions established that the parties had settled and that he had received the agreed payments; he expressly disclaimed any further claim against the petitioners.

In those circumstances, the Court considered continued proceedings unnecessary and likely to amount to an abuse of process, and held that quashing would secure the ends of justice.

Applying the compounding-cost guidance it cited for proceedings before a High Court, the Court required the petitioners to pay 7.5% of the cheque amount to the Gujarat High Court Legal Aid Services Authority.

The complaint, the conviction and sentence dated 9 November 2022, and all consequential proceedings against the petitioners were quashed; the petitioners were directed to be released forthwith unless required in another case.

They were ordered to deposit 7.5% of the cheque amount with the Gujarat High Court Legal Aid Services Authority within four weeks.

If unpaid, the amount was to be recovered as a fine and as arrears of land revenue.