Madras HC Acquits Cheque-Bounce Convict After Both Parties Settle For ₹5.5 Lakh

The petitioner was convicted under Section 138 of the Negotiable Instruments Act and sentenced to six months’ simple imprisonment, a fine of ₹5,000, and compensation of ₹50,000.

The appellate court affirmed the conviction; the judgment identifies the appellate decision as dated 22 February 2022, although another passage gives a different date.

While the revision was pending, the parties executed a joint compromise memo providing for full and final settlement of ₹5,50,000, the cheque amount. The petitioner had deposited that sum with the trial court in two instalments, and the respondent agreed to accept it and sought permission to withdraw it.

Section 147 of the Negotiable Instruments Act makes every offence punishable under that Act compoundable, notwithstanding the Code of Criminal Procedure.

The Court also referred to Section 359(6) and (8) of the Bharatiya Nagarik Suraksha Sanhita, 2023, under which a revisional court may permit compounding where authorised, and compounding results in acquittal.

It considered the principles in Damodar S. Prabhu v. Sayed Babalal H., on staged costs for delayed compounding; Meters and Instruments (P) Ltd. v. Kanchan Mehta, on the primarily compensatory object of Section 138 and the possibility of late compounding; and Vinay Devanna Nayak v. Ryot Seva Sahakari Bank Ltd., on setting aside a conviction following settlement.

The Court also cited K. Balachenniappan v. Jeyakrishnan in support of permitting compounding in the circumstances.

The Court accepted that the conviction had been affirmed on appeal but considered the subsequent compromise and the circumstances of the case.

Both parties had voluntarily settled the dispute; the petitioner had deposited the entire cheque amount, and the respondent confirmed that no amount remained due and that he did not wish to continue the case.

Treating the settlement as a sufficient basis to permit compounding in the interests of justice, the Court held that the conviction and sentence could be annulled notwithstanding the prior appellate decision.

It annulled the conviction and sentence and treated the petitioner as acquitted upon compounding.

The respondent was permitted to apply to the trial court to withdraw the deposited ₹5,50,000 within three weeks of receiving the order; upon such application, the trial court was directed to release the amount to him within three weeks.