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Issues: (i) Whether the conviction and consequential proceedings in a cheque dishonour case could be quashed after the parties settled the dispute and the complainant received the agreed amount; (ii) Whether the Court should impose costs while permitting such compounding.
Issue (i): Whether the conviction and consequential proceedings in a cheque dishonour case could be quashed after the parties settled the dispute and the complainant received the agreed amount.
Analysis: The dispute arose from an offence under the Negotiable Instruments Act, which is compoundable by virtue of the statutory scheme. The parties placed the settlement on record, the complainant confirmed receipt of the settled amount, and there was no objection to quashing. The Court relied on the settled principle that offences under Section 138 of the Negotiable Instruments Act can be compounded, and that inherent jurisdiction can be exercised to bring the dispute to an end even after conviction where the matter is essentially private in character and a settlement has been reached.
Conclusion: The conviction order and subsequent proceedings were quashed and set aside, and the application was allowed.
Issue (ii): Whether the Court should impose costs while permitting such compounding.
Analysis: The Court applied the guideline-based approach for delayed compounding in cheque dishonour matters and treated costs as a condition for giving effect to the settlement. In view of the cheque amount and the surrounding circumstances, a reduced deposit was directed instead of the higher standard percentage.
Conclusion: The applicant was directed to deposit costs of Rs. 50,000/- with the Gujarat State Legal Services Authority within four weeks.
Final Conclusion: The dispute was finally brought to an end by permitting compounding on settlement, setting aside the conviction and related proceedings, and making the relief operative upon compliance with the costs direction.
Ratio Decidendi: A cheque dishonour prosecution may be quashed in exercise of inherent jurisdiction where the parties have amicably settled the matter and the complainant has received the amount, since the offence is compoundable and the Court may impose appropriate costs while permitting compounding.
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