Section 138 conviction quashed upon post-conviction settlement subject to payment of mandatory compounding costs.

The applicant was convicted by the 2nd Add. Chief Judicial Magistrate, Mahesana, in Criminal Case No. 9887/2016 on 29/01/2019

This conviction was subsequently upheld by the 2nd Add. Sessions Judge in Criminal Appeal No. 31 of 2019 vide judgment dated 09/08/2021

The applicant approached the High Court in revision against these concurrent findings. During the pendency of the revision, the applicant and the original complainant (HDFC Bank) amicably resolved the dispute

The authorized representative of the bank filed an affidavit stating the account was closed and expressed no objection to the quashing of the conviction

1. Whether the conviction and sentence passed under the Negotiable Instruments Act can be quashed and set aside based on a settlement arrived at during the revision stage

2. Whether the applicant is liable to pay compounding costs for settling the dispute at a belated stage

The Court primarily applied the principles governing the compounding of offences under the Negotiable Instruments Act, 1881.

It specifically relied on the precedent established by the Hon’ble Supreme Court in Sanjabij Tari v. Kishore S Boarcar & Anr., 2025 INSC 1158.

This precedent mandates that when an accused settles a dispute at a "belated stage" (such as during revision proceedings), they are required to deposit a specific percentage of the cheque amount (in this instance, 7.5%) as costs to the State Legal Services Authority.

The Court noted that the parties had reached a settlement and the complainant’s grievance stood redressed, as evidenced by the affidavit and the complainant’s personal declaration before the Court.

While acknowledging that the settlement rendered further proceedings redundant, the Court observed that the resolution occurred only at the revision stage rather than at the trial or first appeal stage.

To balance the interests of justice and discourage delayed settlements, the Court applied the Sanjabij Tari doctrine, calculating that a cost of 7.5% on the cheque amount of Rs. 2,00,000—totaling Rs. 15,000—was necessary as a condition for quashing the conviction.

The Court directed the applicant to deposit Rs. 15,000 with the Gujarat State Legal Services Authority.

Furthermore, the Court ordered the immediate release of the applicant from custody, provided he is not required in connection with any other case.