Compounding of cheque dishonour offence permitted after settlement, with sentence set aside and deposited amount refunded

An offence under section 138 of the Negotiable Instruments Act, 1881 may be compounded when the parties settle their dispute during the pendency of proceedings, as permitted by section 147. Where settlement is accepted and the respondent agrees to compounding, the conviction and sentence based on the settled dispute can be set aside. Any amount deposited pursuant to the trial court's direction may also be ordered to be refunded to the appellant, since the basis for retaining it no longer survives after compounding.

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Issues: Whether the offence under section 138 of the Negotiable Instruments Act, 1881 could be compounded on the basis of settlement between the parties, and whether the amount deposited toward fine was liable to be returned to the appellant.

Analysis: The parties had settled their dispute during the pendency of the appeal, and the respondent expressed willingness to compound the offence. In view of section 147 of the Negotiable Instruments Act, 1881, compounding of offences under the Act is permissible when the dispute has been resolved between the parties. Since the conviction had resulted in a sentence that stood affected by the subsequent settlement, the sentence was liable to be set aside. The amount deposited pursuant to the trial court's direction was also directed to be returned to the appellant.

Conclusion: The offence was permitted to be compounded, the sentence was set aside, and the deposited amount was directed to be refunded to the appellant.

Ratio Decidendi: An offence under section 138 of the Negotiable Instruments Act, 1881 may be compounded under section 147 when the parties settle their dispute during the pendency of proceedings.

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