Can High Courts Compound Offences under Section 138 NI Act at All Stages—Including After Conviction and Dismissal of Appeal—and Exercise Discretion on Costs? (Affirms and Updates Supreme Court Guidelines; Binding Precedent)

The High Court of Punjab and Haryana clarifies that offences under Section 138 of the Negotiable Instruments Act, 1881, may be compounded at any stage, even after conviction and dismissal of appeal, pursuant to Supreme Court directives (Damodar S. Prabhu, M/s New Win Export, Sanjabij Tari). The judgment reaffirms judicial discretion on waiving compounding costs in exceptional cases and serves as a binding authority on subordinate courts in the jurisdiction.

Summary

Practical Impact

What’s New / What Lawyers Should Note

• Reiterates that Section 138 NI Act offences can be compounded at any litigation stage—including after conviction and unsuccessful appeal.
• Clarifies that the High Court can use its inherent powers to quash convictions based on a genuine compromise, provided public interest is preserved.
• Refines the application of the compounding cost guidelines: discretion to reduce or waive costs exists but must be exercised sparingly, based on compelling and exceptional circumstances with detailed reasoning.
• Reaffirms that mere fact of settlement is insufficient for routine waiver of costs; Courts must articulate special reasons.
• The court’s order is contingent on binding compliance with the settlement terms, with possible recall and punitive consequences for breach.

Summary of Legal Reasoning

• The Court began by noting the application for compounding following an authentic settlement between accused and complainant.
• It referred to Damodar S. Prabhu (2010 SC), which established guidelines for graded costs for compounding Section 138 offences, aiming to deter delay.
• The judgment cited M/s New Win Export (2024 SC), reiterating that the compensatory element should take precedence and courts should encourage compounding when parties are amenable.
• It then discussed the updated guidelines from Sanjabij Tari (2025 SC), noting the tweak in percentages of costs payable at various stages while compounding, and affirmed that Courts retain discretion to waive/reduce such costs in suitable cases.
• The statutory framework of Section 147 NI Act (compounding), Section 320 CrPC (compounding generally), and Section 528 BNSS (inherent power) was analyzed, concluding that compounding is permissible post-conviction and appeal if parties settle and justice would not be undermined.
• The Court explained that waiving of compounding costs is not a routine remedy but must be justified by exceptional circumstances, and detailed reasons must be recorded when departing from the norm.
• On facts, settlement was genuine, long pendency and first-offender status were established, and complainant raised no objection. Costs were waived after due reasoning.
• Conviction, sentence, and further proceedings were set aside, with orders to ensure continued compliance with the settlement terms.

Arguments by the Parties

Petitioner

• Petitioner and complainant entered into an amicable settlement dated 09.06.2022.
• Requested compounding of offence and acquittal in view of the settlement.

Respondent Nos. 2 & 3 (Complainant)

• Confirmed the genuineness of the settlement/compromise.
• Raised no objection to compounding or acquittal of petitioner.

State

• No recorded objection cited in the text of the judgment.

Factual Background

The petitioner was convicted under Section 138 of the Negotiable Instruments Act by the Sub-Divisional Judicial Magistrate, Samana, and his appeal was dismissed by the Sessions Judge, Patiala. During the pendency of a criminal revision before the High Court, the petitioner and complainant entered into a genuine settlement dated 09.06.2022. The terms of compromise were verified, and the complainant supported the compounding and acquittal. The petitioner had already been incarcerated for 18 days, had faced litigation since around 2014, and was a first-time offender.

Statutory Analysis

• Section 138 NI Act (Dishonour of cheque): Offence at core of litigation.
• Section 147 NI Act (Compounding): Provides for compounding of offences under the Act but lacks a specific procedural framework.
• Section 528 BNSS, 2023 (Inherent powers of High Court): Recognized as source for High Court’s authority to quash proceedings/conviction post-compromise when compelling justice reasons exist.
• Supreme Court Guidelines (Damodar S. Prabhu, Sanjabij Tari): Detailed cost structure for compounding at different stages, with discretion to reduce/waive costs on exceptional reasoning.

Dissenting / Concurring Opinion Summary

No dissenting or concurring opinions recorded in the judgment.

Procedural Innovations

• Judicial confirmation that High Court’s inherent powers under Section 528 BNSS, 2023 (analogous to Section 482 CrPC) include discretion to reduce/waive compounding costs, with written reasons.
• Set procedural precedent for requiring compliance with settlement terms, backed by threat of recall and punitive consequences for breach.

Alert Indicators

• ✔ Precedent Followed – The judgment affirms and follows existing Supreme Court guidelines and updates them as per recent SC judgments.