Madras HC Acquits Jailed Cheque-Bounce Convict After Complainant Accepts ₹90,000 Settlement

In brief

The question

1. Whether the High Court could set aside the appellate judgment confirming a conviction under Section 138 of the Negotiable Instruments Act on the basis of a settlement reached between the parties.

The court held

The High Court allowed compounding in accordance with the parties’ settlement and disposed of the revision.

It also directed

It set aside the conviction and sentence imposed by the courts below and treated the petitioner as acquitted on account of compounding.

The Court also ordered his immediate release from jail without conditions.

01Facts

The petitioner was convicted under Section 138 of the Negotiable Instruments Act, 1881, and sentenced to one year’s simple imprisonment by the Metropolitan Magistrate, Fast Track Court, Egmore, Chennai.

pp. 2–3

The appellate court dismissed his appeal and confirmed the conviction.

pp. 2–3

While the revision was pending, the parties entered into a full and final settlement dated 29 October 2026.

pp. 3–4

The respondent acknowledged receipt of a demand draft for ₹90,000 and stated that he had no objection to the petitioner’s acquittal.

pp. 3–4

02Issues

i.1. Whether the High Court could set aside the appellate judgment confirming a conviction under Section 138 of the Negotiable Instruments Act on the basis of a settlement reached between the parties.

p. 10 · ¶ 17

ii.2. Whether the offence could be compounded at the revision stage after the conviction had been affirmed on appeal.

pp. 9–10 · ¶ 15, 17

03Law Applied

Section 147 of the Negotiable Instruments Act makes every offence under that Act compoundable, notwithstanding the general criminal procedure.

p. 12 · ¶ 18

Section 359(5)–(6) of the Bharatiya Nagarik Suraksha Sanhita, 2023, permits compounding with the court’s leave where a conviction and appeal are involved, and authorises a High Court exercising revisional jurisdiction to allow compounding; under Section 359(8), compounding results in acquittal.

pp. 10–12 · ¶ 18

The Court also referred to the graded-cost guidelines for delayed compounding in Damodar S. Prabhu v. Sayed Babalal H. and to decisions recognising the compensatory character of Section 138 proceedings and the availability of settlement, including M/s Meters and Instruments (P) Ltd. v. Kanchan Mehta and Vinay Devanna Nayak v. Ryot Seva Sahakari Bank Ltd.

pp. 5–9 · ¶ 8–11

It further stated that the High Court’s inherent powers should be exercised sparingly to secure the ends of justice and prevent miscarriage of justice.

p. 12 · ¶ 19

Provisions in the judgment · 15 · Linked ones open on LawLens

Bharatiya Nagarik Suraksha Sanhita, 2023 Section 438 Section 442 Section 359

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

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

Indian Penal Code, 1860 Section 64

Bharatiya Nyaya Sanhita, 2023 Section 3 Section 190

04Reasoning

The Court accepted that the conviction had been affirmed on appeal but considered the parties’ subsequent settlement, the respondent’s confirmation that the full settlement amount had been received, and his lack of interest in continuing the case.

pp. 3–4, 12–13 · ¶ 4–6, 20–23

Applying Section 147 of the Negotiable Instruments Act and the revisional power to permit compounding, the Court concluded that the settlement could be given effect to despite the stage of proceedings.

p. 13 · ¶ 23

It relied on its earlier decision in K. Balachenniappan v. Jeyakrishnan and held that permitting compounding in the circumstances would secure the ends of justice.

p. 13 · ¶ 23