Madras HC Acquits Borrower In ₹5 Lakh Cheque-Bounce Case After Lender Accepts ₹3 Lakh Settlement

In brief

The question

Whether the High Court could permit compounding of a Section 138 offence and set aside the conviction affirmed on appeal, on the basis of a subsequent settlement between the parties

The court held

The conviction and sentence under Section 138 were set aside, and the petitioner was treated as acquitted on account of compounding

It also directed

The revision was disposed of in terms of the settlement. The respondent was permitted to apply to the Trial Court to withdraw the ₹1,00,000 deposit, which the Trial Court was directed to release within three weeks of the application

01Facts

The petitioner was convicted under Section 138 of the Negotiable Instruments Act, 1881, for dishonour of two cheques issued towards a ₹5,00,000 loan. The Trial Court sentenced her to ten months’ simple imprisonment and directed her to pay ₹4,00,000 as compensation; the appellate court affirmed the conviction and sentence

pp. 2–3

During the revision, the parties entered into a settlement for ₹3,00,000: the petitioner paid ₹2,00,000 directly to the respondent, and the respondent agreed to withdraw ₹1,00,000 deposited with the Trial Court as the balance. The respondent consented to compounding and had no further claim

pp. 4–6

02Issues

i.Whether the High Court could permit compounding of a Section 138 offence and set aside the conviction affirmed on appeal, on the basis of a subsequent settlement between the parties

p. 11 · ¶ 17

ii.Whether the respondent was entitled to withdraw the ₹1,00,000 deposited by the petitioner with the Trial Court under the settlement

p. 16 · ¶ 28

03Law Applied

Section 147 of the Negotiable Instruments Act makes every offence under that Act compoundable.

p. 13 · ¶ 18

Section 359(6) of the Bharatiya Nagarik Suraksha Sanhita, 2023 empowers a High Court or Court of Session exercising revisional jurisdiction to permit compounding of an offence compoundable under that section; under Section 359(8), composition results in acquittal.

pp. 12–13 · ¶ 18

The Court also referred to Damodar S. Prabhu v. Sayed Babalal H., which sets out a graded costs framework for delayed compounding, and to authorities recognising the compensatory purpose of Section 138 proceedings and permitting settlement-based resolution, including Meters and Instruments Private Limited v. Kanchan Mehta and Vinay Devanna Nayak v. Ryot Seva Sahkari Bank Limited

pp. 6–10 · ¶ 9–12

Provisions in the judgment · 13 · Linked ones open on LawLens

Negotiable Instruments Act, 1881 Section 138 Section 139 Section 143 Section 147

Code of Criminal Procedure, 1973 Section 258 Section 357 Section 431 Section 264 Section 482

Indian Penal Code, 1860 Section 64

Bharatiya Nagarik Suraksha Sanhita, 2023 Section 359

Bharatiya Nyaya Sanhita, 2023 Section 3 Section 190

04Reasoning

The Court accepted that the appeal had already been dismissed and the conviction and sentence affirmed, but considered the parties’ subsequent settlement and the complainant’s voluntary consent to compound the offence. It held that Section 147 permitted compounding and, relying also on its prior decision in K. Balachenniappan v. Jeyakrishnan, concluded that the settlement justified allowing compounding in the interests of justice

pp. 13–15 · ¶ 19–24

As the respondent had accepted the agreed settlement and had no further claim, the Court directed that the ₹1,00,000 deposited with the Trial Court be released to him upon application

p. 16 · ¶ 28