Gujarat HC Quashes Cheque-Bounce Conviction After Settlement, Orders 7.5% Of Cheque Amount Paid To Legal Aid

In brief

The question

Whether the High Court should quash the petitioner’s conviction under Section 138 of the Negotiable Instruments Act and the related proceedings in view of the parties’ settlement.

The court held

The petition was allowed, and the judgment dated 1 June 2026 in Criminal Case No. 84032 of 2021, together with the related proceedings, was quashed.

It also directed

The petitioner was ordered to deposit 7.5% of the cheque amount with the Gujarat High Court Legal Aid Services Authority within two weeks; non-payment would be recoverable as a fine and as arrears of land revenue.

The petitioner was to be released forthwith if not required in another case.

01Facts

The petitioner was convicted under Section 138 of the Negotiable Instruments Act, 1881, by the 30th Additional Chief Judicial Magistrate, Ahmedabad, in Criminal Case No. 84032 of 2021, by judgment dated 1 June 2026.

p. 1 · ¶ 2

He sought to quash that judgment and the related proceedings under Article 226 of the Constitution and Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023.

p. 1 · ¶ 2

The parties informed the High Court that they had amicably settled the dispute and that the complainant had received the settlement amount; the complainant company’s authorised officer confirmed the settlement and receipt of payment.

p. 2 · ¶ 5

02Issues

i.Whether the High Court should quash the petitioner’s conviction under Section 138 of the Negotiable Instruments Act and the related proceedings in view of the parties’ settlement.

pp. 2–3 · ¶ 5–6

ii.Whether the petitioner should be required to pay costs as a condition of compounding or quashing the cheque-dishonour proceedings after the matter reached the High Court.

pp. 3–5 · ¶ 7, 9

03Law Applied

Section 138 of the Negotiable Instruments Act, 1881, criminalises dishonour of a cheque, while Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023, preserves the High Court’s inherent power to make orders necessary to secure the ends of justice or prevent abuse of process; the Court also invoked Article 226 of the Constitution.

p. 1 · ¶ 2 · p. 3 · ¶ 6

In considering quashing following settlement, the Court relied on Gian Singh v. State of Punjab, Madan Mohan Abbot v. State of Punjab, Nikhil Merchant v. Central Bureau of Investigation, Manoj Sharma v. State, Narinder Singh v. State of Punjab and State of Haryana v. Bhajanlal.

pp. 2–3 · ¶ 3.1, 6

It further relied on Sanjabij Tari v. Kishore S. Borcar, reported as 2025 LawSuit (SC) 1302, for the revised compounding-cost guideline that payment made before a High Court in revision or appeal may attract costs of 7.5% of the cheque amount.

p. 3 · ¶ 7

Provisions in the judgment · 2 · Linked ones open on LawLens

Bharatiya Nagarik Suraksha Sanhita, 2023 Section 528

Negotiable Instruments Act, 1881 Section 138

04Reasoning

The Court accepted the parties’ settlement as genuine, noting that the complainant’s authorised officer appeared and confirmed receipt of the settlement amount.

p. 2 · ¶ 5

In light of the settlement and the cited authorities, it concluded that continuing the criminal proceedings would unnecessarily harass the petitioner, make the trial a futile exercise and amount to an abuse of process.

p. 3 · ¶ 6

Applying the Sanjabij Tari guideline, it nevertheless directed the petitioner to pay 7.5% of the cheque amount to the Gujarat High Court Legal Aid Services Authority.

pp. 3–5 · ¶ 7, 9