Post-conviction compromise under Section 138 permits compounding and quashing of the conviction.

The applicant was convicted under Section 138 of the Negotiable Instruments Act, 1881, by the Judicial Magistrate First Class, Dallirajhara, in Criminal Case No. 1357 of 2023 and sentenced to three months’ simple imprisonment, along with compensation of ₹3,50,000 and one month’s additional simple imprisonment in default of payment.

The Sessions Judge, Balod, dismissed the applicant’s criminal appeal and affirmed the conviction and sentence by order dated 25 August 2026.

During the pendency of the proceedings, the applicant and the respondent entered into a compromise agreement dated 29 August 2026. The applicant had deposited ₹70,000 before the trial Court and paid the remaining ₹2,80,000 in cash to the respondent, thereby discharging the cheque amount in full.

The respondent did not dispute the settlement and confirmed that the inter se dispute had been resolved.

Whether the conviction and sentence under Section 138 of the Negotiable Instruments Act can be set aside when the parties have voluntarily settled the dispute and the complainant has received the cheque amount in full?

Whether the applicant, whose conviction was set aside pursuant to the compromise, was entitled to immediate release from custody on bail?

Section 147 of the Negotiable Instruments Act, 1881 makes offences under the Act compoundable notwithstanding the provisions of the Code of Criminal Procedure, and compounding may be permitted at any stage where the parties have voluntarily compromised the dispute.

Relying on B.V. Seshaiah v. State of Telangana, the Court noted that courts should not override a voluntary settlement entered into by the parties to bring the litigation to an end.

The Court further relied on Gian Chand Garg v. Harpal Singh, 2025 SCC OnLine SC 2317, which held that once the complainant accepts the settlement amount in full and final satisfaction, proceedings under Section 138 cannot continue and the concurrent conviction may be set aside.

The Court also followed Parsharvanath Weld Wires Pvt. Ltd. & Anr. v. State of Chhattisgarh & Anr., Criminal Appeal No. 2904 of 2026, as reaffirming the same principle.

The Court found that the parties had voluntarily resolved the dispute and that the respondent had received the entire cheque amount through the payment of ₹70,000 before the trial Court and ₹2,80,000 in cash.

Since the complainant’s grievance had been fully redressed and the respondent did not contest the settlement, the statutory objective of the Section 138 proceedings had been fulfilled.

Applying Section 147 of the Negotiable Instruments Act and the principles laid down in Gian Chand Garg, B.V. Seshaiah, and Parsharvanath Weld Wires, the Court held that the offence could be compounded at the revision stage and that continuation of the conviction would not be justified after full settlement.

As the applicant remained incarcerated pursuant to the conviction, the Court also directed her release upon execution of a personal bond.

The applicant was directed to be released forthwith on executing a personal bond of ₹25,000 before the concerned Judicial Magistrate First Class.