The High Court expressly permits compounding of offences under Section 138 of the Negotiable Instruments Act even after conviction and dismissal of appeal, reaffirming the Supreme Court’s precedents in Damodar S. Prabhu and K. Subramanian. The decision affirms that courts may reduce compounding fees in suitable cases, and establishes clear binding precedent for all subordinate courts in cheque dishonour matters.
Summary
| Category | Data |
|---|---|
| Case Name | CR.R/601/2025 of Sandeep Kumar Vs Dalip Chand Sharma |
| CNR | HPHC010613452025 |
| Date of Registration | 15-10-2025 |
| Decision Date | 15-10-2025 |
| Disposal Nature | Disposed Off |
| Judgment Author | Hon’ble Mr. Justice Sushil Kukreja |
| Court | High Court of Himachal Pradesh |
| Bench | Single Bench – Hon’ble Mr. Justice Sushil Kukreja |
| Precedent Value |
|
| Overrules / Affirms |
|
| Type of Law |
|
| Questions of Law |
|
| Ratio Decidendi |
The High Court held that in view of Section 147 of NI Act, offences under the Act are compoundable, notwithstanding anything in CrPC. Compounding can be accepted even after conviction and dismissal of appeal if parties settle and the complainant has no objection. The judgment affirms that courts may exercise discretion to reduce the compounding fee in appropriate cases, recording reasons. The rationale relies on Supreme Court authorities, which distinguish the special nature of NI Act proceedings and encourage early disposal of cheque dishonour cases through settlement. This maximises justice for parties and reduces court burden. |
| Judgments Relied Upon |
|
| Logic / Jurisprudence / Authorities Relied Upon by the Court |
|
| Facts as Summarised by the Court |
The accused borrowed Rs. 2,00,000 by cheque, which was dishonoured due to insufficient funds. After statutory demand and non-payment, a complaint under Section 138 NI Act was filed. The trial and appellate courts convicted the accused. During revision, parties settled the dispute: the complainant received full compensation and had no objection to compounding. The accused, citing poverty, sought reduction in compounding fee. |
Practical Impact
| Category | Impact |
|---|---|
| Binding On | All subordinate courts in Himachal Pradesh |
| Persuasive For | Other High Courts, Supreme Court |
| Follows |
|
What’s New / What Lawyers Should Note
- Reiterates that compounding under Section 138 NI Act is permissible even after conviction and dismissal of appeal, if parties settle and the complainant consents.
- Courts retain discretion to reduce the standard compounding fee in appropriate cases, provided reasons are recorded.
- The binding precedent clarifies that special statutory provisions of Section 147 NI Act override Section 320(9) CrPC regarding compounding.
- Lawyers can cite this authority to seek compounding post-conviction and to request reduction of compounding fees on genuine grounds.
- Concrete application of Supreme Court guidelines for compounding in cheque dishonour cases – especially for settlements reached at revision or appellate stages.
Summary of Legal Reasoning
- The High Court examined the statutory provision under Section 147 of the Negotiable Instruments Act, which allows compounding of offences “notwithstanding anything contained in the Code of Criminal Procedure, 1973”.
- Relying on Damodar S. Prabhu v. Sayed Babalal H., the Court reiterated that Section 147 overrides Section 320(9) CrPC and compounding under the NI Act is governed by its own special procedure, not the general CrPC restrictions.
- The Court cited K. Subramanian v. R. Rajathi, holding that compromise after conviction—even at the revision stage—can be permitted, and proceedings closed based on a genuine settlement.
- The Court referenced the graded system for compounding fees (10% at trial, 15% at revision/appeal, and 20% at Supreme Court) but recognised judicial discretion to reduce the amount based on the litigant’s financial condition, recording reasons in writing.
- The Court found that as the accused had fully compensated the complainant, who had no objection, and as the settlement was genuine, prayer for compounding could not be refused post-conviction.
- Accordingly, the conviction and sentence were set aside, and the compounding fee was reduced in view of the petitioner’s financial status.
Arguments by the Parties
Petitioner
- Parties have settled the dispute; entire compensation has been paid to the complainant.
- Sought compounding of offence post-conviction, in light of the settlement.
- Requested reduction of compounding fee given his poor financial condition.
Respondent (Complainant)
- Confirmed full and voluntary receipt of compensation.
- Stated he had no objection to the compounding and acquittal of the accused.
Factual Background
The petitioner borrowed Rs. 2,00,000 from the complainant and issued a cheque as security. The cheque was dishonoured for insufficient funds. Statutory notice was issued but payment was not made, leading to a complaint under Section 138 of the Negotiable Instruments Act. The trial court convicted the accused and imposed imprisonment and compensation; the appellate court affirmed the conviction. During revision proceedings before the High Court, the parties settled the matter. The full compensation was paid, and the complainant had no objection to compounding the offence.
Statutory Analysis
- Section 147, Negotiable Instruments Act: The court interpreted this as an enabling, non-obstante provision allowing compounding of all offences under the Act irrespective of Section 320 CrPC restrictions.
- Section 320, CrPC: Reiterated that the scheme of the CrPC for compounding does not strictly apply to the NI Act, in view of Section 147’s special override.
- Compounding Fee Guidelines: Court discussed and applied the Supreme Court’s prescribed graded system for compounding fees, noting scope for judicial reduction in appropriate circumstances.
Dissenting / Concurring Opinion Summary
No dissenting or concurring opinions were delivered or noted in the judgment.
Procedural Innovations
- The Court reaffirmed the procedural precedent that compounding under Section 138 NI Act may be allowed at the revision stage or after conviction.
- Exercised judicial discretion to reduce the compounding fee based on the specific financial context of the accused, with reasons recorded.
Alert Indicators
- ✔ Precedent Followed – The judgment follows and applies Supreme Court precedent (Damodar S. Prabhu; K. Subramanian), reaffirming existing law.