Quashing of Conviction Under Section 138 NI Act Permissible Upon Amicable Settlement and Full Payment

The applicant filed a C-528 application seeking to quash the judgment and order dated 12.04.2024 passed by the 1st Additional Sessions Judge, Kashipur, and the judgment dated 11.12.2023 passed by the Judicial Magistrate in Criminal Complaint Case No. 7414 of 2018.

These orders pertained to a conviction under Section 138 of the Negotiable Instruments Act.

Subsequent to the orders, the parties entered into an amicable settlement where the complainant received the entire cheque amount and filed a joint compounding application supported by affidavits.

Both parties appeared before the Court to verify the voluntary nature of the compromise.

Whether the criminal proceedings and convictions under Section 138 of the Negotiable Instruments Act can be quashed on the basis of a post-conviction compromise between the parties.

Section 147 of the Negotiable Instruments Act, which stipulates that offences under the Act are compoundable.

Damodar S. Prabhu v. Sayed Babalal H. and M/s Meters and Instruments Private Limited v. Kanchan Mehta, which encourages the compounding of Section 138 offences to promote the settlement of commercial disputes, ensure payment of the cheque amount, and reduce unnecessary litigation.

The Court observed that the underlying dispute was purely monetary and that the primary objective of Section 138—restoration of the cheque amount—had been fulfilled as the complainant received the full sum.

The Court verified the authenticity of the compromise by questioning the parties, concluding that it was entered into voluntarily without coercion.

Since the complainant no longer intended to prosecute and the law favors compounding such offences even at the appellate or post-conviction stage to serve the interests of justice, the Court determined that continuing the criminal proceedings would serve no useful purpose.

The Court held that the compromise was genuine and executed of free will.

The C-528 application was allowed; the judgment of the 1st Additional Sessions Judge dated 12.04.2024 and the judgment of the Judicial Magistrate dated 11.12.2023 were set aside, and the proceedings were quashed.