Post-conviction settlement of Negotiable Instruments Act offence warrants quashing of conviction subject to compounding costs.

The applicant was convicted under the Negotiable Instruments Act by the Additional Chief Judicial Magistrate, Mahesana, in Criminal Case No. 913 of 2018 on 19.10.2022. This conviction was subsequently upheld by the 5th Additional Sessions Judge, Mahesana, in Criminal Appeal No. 330 of 2022 on 04.11.2023.

During the pendency of the revision application before the High Court, the applicant and the respondent No. 2 (complainant) reached an amicable settlement.

The complainant appeared via Power of Attorney and expressed no objection to quashing the conviction.

1. Whether a conviction under the Negotiable Instruments Act can be quashed by the High Court in revision after a settlement is reached between the parties.

2. Whether the applicant should be liable for costs even if the conviction is set aside due to a belated settlement.

Section 147 of the Negotiable Instruments Act, which stipulates that every offence punishable under the Act is compoundable.

The court also relied on the Supreme Court precedents Damodar S. Prabhu v. Sayed Babalal H. (2010) and Sanjabij Tari v. Kishore S Boarcar Anr. (2025), which establish that compounding can occur at any stage, provided the accused pays graded costs to the legal services authority when a settlement is reached at a late stage in the litigation.

The court observed that since the dispute is primarily private and commercial in nature, and the parties have voluntarily entered into a settlement, no fruitful purpose would be served by continuing the criminal proceedings.

The court noted that compounding is permissible even at the revision stage under Section 147 of the NI Act.

Because the applicant waited until the matter reached the High Court to settle—thereby consuming significant judicial time—the court determined that a token cost of ₹10,000 must be imposed as per the guidelines laid down in Damodar S. Prabhu to discourage late settlements.

The applicant was directed to deposit ₹10,000 as costs with the Gujarat State Legal Services Authority within one week; the court ordered the immediate release of the applicant from jail and the discharge of his bail bond.