Offences under Section 138 NI Act are compoundable at the revisional stage to secure ends of justice.

The Petitioner, proprietor of M/s. Sri Varun Enterprises, allegedly borrowed ₹25,75,765/- from the Respondent and issued a cheque which was returned with the endorsement "Exceeds Arrangement"

The Trial Court (Metropolitan Magistrate FTC-II, Egmore) convicted the Petitioner under Section 138 of the Negotiable Instruments (NI) Act, sentencing her to six months SI and a compensation of ₹25,75,765/-

This conviction was confirmed by the Principal Sessions Judge, Chennai, in C.A.No.632 of 2023

During the pendency of the present Revision Case, the parties were referred to mediation and entered into a Settlement Agreement dated 06.04.2026, where the Respondent agreed to receive a total of ₹12,00,000/- as full and final settlement, which has been paid

1. Whether the order passed by the Appellate Court confirming the conviction of the trial court under Section 138 of the Negotiable Instruments Act can be nullified by the High Court on the basis of a compromise entered between the parties at the revisional stage

Section 147 of the Negotiable Instruments Act, which contains a non-obstante clause making every offence under the Act compoundable

Section 320(6) of the Cr.P.C., which allows a High Court in exercise of its revisional powers to permit compounding

The guidelines established in Damodar S. Prabhu v. Sayed Babalal H. (2010), regarding the graded scheme for compounding post-conviction

M/s Meters and Instruments Private Limited v. Kanchan Mehta (2017), which emphasized the compensatory nature of Section 138 over its punitive aspect

Vinay Devanna Nayak v. Ryot Seva Sahkari Bank Ltd. which affirmed that acquittal is proper upon post-conviction settlement

The Court reasoned that Section 147 of the NI Act, being a special law, overrides the general provisions of Section 320 of the Cr.P.C. due to its non-obstante clause

Although the litigation reached the revisional stage, the Court held that the primary object of Section 138 is to ensure the recovery of money (compensatory) rather than retribution (punitive)

The Court noted that even after a conviction is upheld by an appellate court, the High Court possesses inherent and revisional powers to record a compromise to prevent miscarriage of justice and "secure the ends of justice"

Since the parties voluntarily settled for ₹12,00,000/- and the amount was duly paid and acknowledged, the Court found it fit to exercise its discretion to allow compounding to provide "justice at the door step"

The Criminal Revision Case was disposed of in terms of the Settlement Agreement dated 06.04.2026. The Court annulled the conviction and sentence passed by the Trial Court and the First Appellate Court, and the Revision Petitioner was officially treated as acquitted on account of the compounding of the offence