The Madurai Bench of the Madras High Court, in a significant ruling, has held that an offence under Section 138 of the Negotiable Instruments Act, 1881 (NI Act) can be compounded at any stage, including during a revision proceeding, even after a conviction has been upheld by an appellate court. Justice Shamim Ahmed ruled that Section 147 of the NI Act, being a special provision, has an overriding effect on the general provisions for compounding offences contained in the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS). The court consequently set aside the conviction and sentence of a petitioner after the parties entered into a compromise.
Background of the Case
The case originated from a judgment by the District Munsif cum Judicial Magistrate, Peraiyur, in S.T.C.No.643 of 2016, where the petitioner, K. Balachenniappan, was convicted for an offence under Section 138 of the NI Act. He was sentenced to one year of simple imprisonment and a fine of Rs. 2,000.
Aggrieved by the trial court’s decision, Mr. Balachenniappan filed a criminal appeal (C.A.No.34 of 2022) before the IV Additional District Sessions Judge, Madurai. On April 5, 2025, the appellate court dismissed the appeal, confirming the conviction and sentence. Subsequently, Mr. Balachenniappan moved the Madras High Court by filing the present Criminal Revision Petition.
During the pendency of the revision petition, the parties, with the intervention of elders, decided to settle the dispute amicably. The petitioner agreed to pay a total sum of Rs. 2,00,000 to the respondent, Jeyakrishnan, in a full and final settlement.
Arguments of the Parties
The counsel for the petitioner argued that since the parties had entered into a compromise, the court should permit the compounding of the offence under Section 147 of the NI Act. It was submitted that this provision would have an overriding effect on Section 359 of the BNSS. The counsel emphasized that “the object of Negotiable Instruments Act is primarily compensatory and not punitive.” Citing the Supreme Court’s judgment in Damodar S. Prabhu vs. Sayed Babalal H, the petitioner’s counsel argued that compounding should be encouraged at any stage to secure the ends of justice.
The counsel for the respondent acknowledged the receipt of the full settlement amount, including Rs. 1,60,000 paid via demand draft, and consented to the compounding of the offence, stating that he had no further claims against the petitioner.
Mr. M. Karunanithi, the learned Government Advocate (Criminal Side), assisting the court, opposed the compromise. He argued that since the conviction had already been confirmed on merits by the appellate court, allowing the parties to compound the offence at the revision stage would amount to a “gross misuse of the process of law.”
Court’s Analysis and Observations
The central question framed by the court was: “Whether the order passed by the Appellate Court confirming the conviction of the trial court under section 138 of Negotiable Instruments Act can be nullified by the High Court on the basis of compromise entered between the parties.”
Justice Shamim Ahmed began his analysis by examining the relevant legal provisions, namely Section 147 of the NI Act and Section 359 of the BNSS. The court highlighted the non-obstante clause in Section 147, which states, “Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), every offence punishable under this Act shall be compoundable.”
The court observed that this clause gives the NI Act, a special law, precedence over the general law of criminal procedure. It stated, “the special law would prevail over general law.”
The judgment emphasized the legislative intent behind the amendments to the NI Act, which was to “encourage the culture of use of cheques and enhancing the credibility of the instrument.” The court noted that making the offence compoundable was a key objective of the Negotiable Instruments (Amendment & Miscellaneous Provisions) Act, 2002.
Quoting from a legal commentary, the court observed that for the complainant in a cheque dishonour case, the priority is recovery of money, not retribution. “The complainant’s interest lies primarily in recovering the money rather than seeing the drawer of the cheque in jail. The threat of jail is only a mode to ensure recovery,” the court noted. Therefore, the “compensatory aspect of the remedy which should be given priority over the punitive aspect.”
The court concluded that parties are at liberty to compound a Section 138 offence at any stage, even after dismissal of an appeal or revision. It reasoned that the nature of the offence does not change merely because the litigation has progressed to an advanced stage.
Decision of the Court
Based on this reasoning and in view of the amicable settlement reflected in the Joint Memorandum of Compromise, the High Court allowed the petition.
The court ordered: “The impugned judgment passed in C.A.No.34 of 2022, dated 05.04.2025 by the learned Additional District Sessions Judge, Madurai, confirming the conviction and sentence made in S.T.C. No. 643 of 2016 on the file of the learned District Munsif-cum-Judicial Magistrate, Peraiyur are hereby modified.”
The conviction and sentence were annulled, and the petitioner was “treated as acquitted on account of compounding of the offence with the complainant/person affected.”
