Section 138 proceedings may be quashed under Section 482 upon voluntary settlement and full payment.

The petitioner sought quashing of the revisional order dated 5 November 2018, by which the Additional Sessions Judge-VIII, Saran dismissed Criminal Revision No. 179 of 2018 and upheld the cognizance order dated 16 May 2018 passed by the A.C.J.M.-VIII, Saran for an offence under Section 138 of the Negotiable Instruments Act, 1881 (“NI Act”).

The complainant alleged that the petitioner had received various amounts totalling approximately Rs. 8.50 lakhs for business and related purposes and subsequently issued a cheque for Rs. 8.75 lakhs, which was dishonoured. After a statutory notice allegedly went unanswered, Complaint Case No. 3145 of 2017 was instituted.

During the pendency of the quashing petition, the parties voluntarily settled the dispute before the Patna High Court Mediation Centre under a Memorandum of Agreement dated 23 November 2023. The petitioner agreed to pay Rs. 4 lakhs in full and final settlement.

The complainant acknowledged realization of Rs. 4,01,206 through a demand draft, bank transactions, and adjustment towards building materials supplied by the petitioner’s establishment.

Whether the criminal proceedings arising from the cheque-dishonour complaint under Section 138 of the NI Act could be quashed under Section 482 of the Code of Criminal Procedure, 1973, after the parties had voluntarily settled the dispute and the settlement amount had been paid?

Whether continuation of the proceedings, despite the complainant’s acceptance of the settlement and expressed unwillingness to pursue the matter, would amount to an abuse of the process of law?

The Court applied Section 138 of the NI Act, which criminalises dishonour of a cheque for insufficiency of funds or related reasons, and Section 147 of the NI Act, which makes offences under the NI Act compoundable.

The Court further applied the inherent jurisdiction under Section 482 of the Code of Criminal Procedure, 1973, which may be exercised to secure the ends of justice and prevent abuse of the process of any court.

The Court recognised that proceedings under Section 138 are primarily compensatory in nature and that, where the parties have voluntarily settled the dispute and the agreed amount has been paid, continuation of the criminal case ordinarily serves no useful purpose.

The Court found that the parties had entered into a voluntary and duly signed settlement before the High Court Mediation Centre, with the agreed payment expressly described as full and final settlement of the dispute.

Although the settlement contemplated payment of Rs. 4 lakhs, the material on record showed that the complainant had in fact realised Rs. 4,01,206, thereby satisfying the settlement condition.

The complainant, who was present before the Court, did not dispute the settlement or receipt of the amount and stated that no dispute remained between the parties.

Since the offence under Section 138 of the NI Act is compoundable under Section 147 and the dispute had been fully resolved, the Court held that continuation of the prosecution would not advance the ends of justice and would instead constitute an abuse of process warranting exercise of jurisdiction under Section 482 CrPC.

Accordingly, the Court quashed the revisional order dated 5 November 2018, the cognizance order dated 16 May 2018, and all consequential criminal proceedings against the petitioner arising from Complaint Case No. 3145 of 2017 and Trial No. 986 of 2018.

The application was allowed, and the trial court records were directed to be returned, if available.