The High Court of Punjab and Haryana has ruled that an offence under Section 138 of the Negotiable Instruments Act, 1881, can be compounded at any stage of litigation, including after a conviction has been upheld. In its judgment, the Court set aside a conviction following an amicable settlement between the parties and waived the imposition of compounding costs, citing the prolonged nature of the legal battle.
Background of the Case
The case arose from a judgment of conviction and order of sentence dated November 9, 2017, and November 13, 2017, passed by the Judicial Magistrate Ist Class (JMIC), Faridabad. The petitioner, V.K. Singh, was convicted for the dishonour of a cheque and sentenced to two years of rigorous imprisonment. He was also directed to pay compensation of ₹20,60,002 to the complainant, Shree Nath Enterprises.
The petitioner’s appeal against this conviction was subsequently dismissed for want of prosecution by the Sessions Judge, Faridabad, on December 21, 2017. The petitioner then filed a criminal revision petition before the High Court seeking to set aside these orders.
Arguments of the Parties
The petitioner’s counsel informed the Court that during the pendency of the revision petition, the petitioner had paid the entire fine and compensation amount to the complainant. Reference was made to an order dated December 11, 2024, by the JMIC, Faridabad, which recorded the settlement. The petitioner sought to compound the offence and requested an acquittal based on this amicable resolution.
Counsel appearing for respondent No. 1 (the complainant) confirmed the settlement and the receipt of the full payment. The respondent expressed no objection to the compounding of the offence and the subsequent acquittal of the petitioner.
Court’s Analysis and Cited Precedents
Justice Sumeet Goel analyzed the statutory provisions for compounding under Section 359 of the BNSS, 2023 (formerly Section 320 of Cr.P.C.) and Section 147 of the Negotiable Instruments Act.
The Court relied on the Supreme Court’s judgment in Damodar S. Prabhu vs. Sayed Babalal H. (2010), which established guidelines for a graded scheme of costs to discourage delays in compounding. However, the Court also noted the recent modification of these costs in Sanjabij Tari vs. Kishore S. Borcar (2025), where the Supreme Court reduced the required costs at the High Court stage to 7.5% of the cheque amount.
Regarding the stage of compounding, the Court observed:
“The offence under Section 138 of Negotiable Instruments Act, 1881 can be compounded at all stages of litigation, including when the matter has reached the High Court after having been conclusively dealt with by the Magisterial as also the Sessions Court. In other words, such an offence can be compromised/compounded even after the petitioner-accused has been convicted by the Court of learned Magistrate and his appeal against the same has been dismissed by the learned Sessions Court.”
The Court further discussed the waiver of costs, noting that while costs are typically mandatory, the Court retains the discretion to reduce or waive them based on specific facts. Justice Goel emphasized:
“The exercise of such discretion must be predicated upon exceptional, compelling and accentuating circumstances which, in the considered opinion of the concerned Court seized of the matter, warrant deviation from the general rule of imposition of cost.”
Finally, the Court invoked its inherent powers under Section 528 of the BNSS, 2023, stating that such powers are “intrinsic to the High Court, forming its very life-blood” and are meant to “prevent the process of law/Courts from being obstructed or abused.”
The Decision
The Court held that the factual matrix of the case necessitated the compounding of the offence. It noted that the petitioner had faced the “wrath of criminal litigation since about the year 2011” and, therefore, did not deem it appropriate to “saddle the petitioner with costs.”
The High Court set aside the JMIC’s judgment and the Sessions Judge’s order, formally acquitting the petitioner of all charges.
Case Details Block:
- Case Title: V.K. Singh and another vs. Shree Nath Enterprises and another
- Case No.: CRR-179-2018 (O&M)
- Bench: Justice Sumeet Goel
- Date: April 21, 2026
