Offences under Section 138 NI Act may be compounded at any stage, including after conviction, upon settlement.

The petitioner-company and its Directors sought quashing of Complaint Case Nos. 8034/2019 and 8032/2019, instituted by the respondent under Section 138 of the Negotiable Instruments Act, 1881 (“NI Act”), and pending before the JMFC-01, Patiala House Courts, Delhi.

During the proceedings, the parties entered into a settlement agreement dated 17 August 2026.

A related commercial suit, CS (COMM) 946/2022, was also disposed of and withdrawn pursuant to the settlement on 21 August 2026.

The petitioners had already been convicted in the cheque-dishonour complaints, and the matters were listed for arguments on sentence on 14 September 2026.

The respondent confirmed the settlement and acknowledged receipt of the entire settlement amount before the High Court.

Whether proceedings under Section 138 of the NI Act could be compounded and quashed after the petitioners’ conviction, when the parties had entered into a voluntary settlement.

Whether, in view of the settlement and the respondent’s confirmation of receipt of the full settlement amount, the complaints, convictions, and consequential proceedings ought to be quashed.

Section 147 of the NI Act makes offences under the Act compoundable notwithstanding the provisions of the Code of Criminal Procedure, 1973.

The Court relied on Gian Chand Garg v. Harpal Singh & Anr., SLP (Criminal) No. 8050 of 2025, decided on 11 August 2025, wherein the Supreme Court held that an offence under Section 138 of the NI Act may be compounded at any stage of the proceedings, including after conviction, particularly where the parties have voluntarily settled the dispute.

The Court also applied its inherent jurisdiction to quash the criminal proceedings in accordance with the confirmed settlement.

The underlying complaints concerned compoundable offences under Section 138 of the NI Act.

Although the petitioners had been convicted and the cases had reached the stage of arguments on sentence, the subsequent settlement did not bar compounding.

Applying Gian Chand Garg, the Court held that the stage of the proceedings, including post-conviction proceedings, was not determinative where the parties had voluntarily resolved the dispute.

The respondent’s appearance through counsel, express affirmation of the settlement, and confirmation of receipt of the entire settlement amount established that the settlement was concluded and voluntarily accepted.

Accordingly, continuation of the complaints and the convictions was unwarranted.

Complaint Case Nos. 8034/2019 and 8032/2019, the orders of conviction passed therein, and all proceedings emanating from them were quashed in view of the settlement between the parties.

All pending applications were also disposed of.