While quashing the order of conviction passed in two cheque bounce cases, the Bombay High Court has reiterated that when parties to the offence under Section 138 of the Negotiable Instruments Act enter into a compromise, it should be given effect to under Section 147 at any stage of the proceedings, even after conviction has been finalised by the High Court.

The High Court also held that the compensatory aspect of the remedy shall have priority over the punitive aspect, and the Courts should encourage compounding of offences under the NI Act, when the parties are willing to settle the dispute.

The High Court was considering the applications whereby the applicant sought the quashing and setting aside of the judgment of conviction under Section 138 of the Negotiable Instruments Act, 1881, in view of the settlement arrived at between the parties.

Relying upon the judgment of the Division Bench of the Himachal Pradesh High Court in Chune Ram v. Brikam Chand (2025), the Single Bench of Justice Urmila Joshi Phalke noted, “In its considered opinion, when parties to the offence under Section 138 of the N.I. Act enter into compromise, it should be given effect to under Section 147 of the Act at any stage of the proceedings, even after conviction has been finalized by the High Court. The failure to give effect to such compromise would render the import of Section 147 of the Act meaningless. If this Court does not permit compounding of the offence under Section 138 of the Act through Section 147 of the Act on the ground that the conviction has reached its finality, it would result in grave injustice being committed against the parties, who would be persuaded to continue a proceeding, which neither party of intends or would benefit from.”

“In view of the above observations of the Division Bench of Himachal Pradesh High Court, and in view of the settled principle laid down by the Hon’ble Apex Court that the compensatory aspect of remedy shall have priority over the punitive aspect, and the Courts should encourage compounding of offences under the N.I. Act, when the parties are willing to settle the dispute”, it added.

Advocate P.A. Gupta represented the Applicant, while Advocate Anand Parchure represented the Respondent.

Factual Background

The applicant was the original accused in two criminal complaints filed under Section 138 of the Negotiable Instruments Act, 1881, wherein the orders of conviction were passed against the applicant. The applicant’s appeal, as well as the revision, came to be dismissed. The applicant and non-applicant had approached the High Court with a contention that during the pendency of these revisions, settlement talks were going on. It was brought to the Court’s attention that after dismissal of the revisions, the parties arrived at a settlement. In view of the settlement, it was submitted that the conviction and order of sentence deserved to be quashed.

Reasoning

Referring to Section 147 of the N.I. Act, the Bench explained that it begins with a nonobstante clause and the offence under Section 138 of the N.I. Act is compoundable under Section 147, notwithstanding anything contained in the Code of Criminal Procedure, 1973. Reference was also made to Section 5 of the CrPC/BNSS which provides that nothing contained in the Code of Criminal Procedure shall in the absence of a specific of provision to the contrary, affect any special or local law for the time being in force, or any special jurisdiction or power conferred, or any special form of procedure prescribed, by any other law for the time being in force.

“Thus, the reading of Section 5 of the CrPC/BNSS reveals that Section 147 of the N.I. Act will have an overriding effect over the provisions of Section 320 (9) of Cr.P.C”, it added.

Reliance was also placed upon the judgment in Chune Ram (Supra) wherein it has been held that the inherent power under Section 482 of Cr.P.C./ Section 528 of BNSS is available to be exercised by the High Court for compounding the offence under Section 138 of the N.I. Act only with the explicit consent of the complainant or the person aggrieved.

Thus, allowing the criminal applications, the Bench quashed the conviction and orders of sentence passed against the applicant in view of the settlement. “The applicant is acquitted from both the cases”, it ordered.

Cause Title: Mr Ravi v. Mr. Avinash Shinde (Neutral Citation: 2026:BHC-NAG:4511)

Appearance

Applicant: Advocates P.A. Gupta, Abhijeet Khare

Respondent: Advocate Anand Parchure, Additional Public Prosecutor Nikhil Joshi

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Bombay High CourtJustice Urmila Joshi Phalke

Tulip Kanth

Assistant Editor

Tulip Kanth is an Assistant Editor at Verdictum having over 5 years of experience in the field of legal journalism and editing. She extensively covers judgments of the Supreme Court, High Courts as well as Tribunals. She has previously worked with a legal publishing website where she oversaw the work of other editors and has also created updates on notifications of different Government Ministries. She holds an English Honours Degree from SGTB Khalsa College, Delhi University and has completed her LLB course with specialisation in Corporate Law from Amity University.