Settlement in cheque dishonour cases can justify quashing under inherent powers, subject to prescribed compounding costs.

A conviction under Section 138 of the Negotiable Instruments Act can be quashed in exercise of inherent powers under Section 482 of the Code of Criminal Procedure where the parties have settled the dispute amicably. Because the offence is compoundable under Section 147 of the Act, the High Court may permit compounding at the post-conviction stage on payment of the prescribed costs. Applying Supreme Court guidelines, the Court treated deposit of 15% of the cheque amount with the Gujarat State Legal Services Authority as sufficient, and the conviction with consequential proceedings was quashed.

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Issues: Whether the conviction under Section 138 of the Negotiable Instruments Act, 1881 could be quashed in exercise of inherent powers under Section 482 of the Code of Criminal Procedure, 1973 on the basis of an amicable settlement between the parties and on payment of the prescribed compounding costs.

Analysis: The dispute had been settled amicably and the complainant had no objection to quashing of the conviction. The offence under Section 138 of the Negotiable Instruments Act, 1881 is compoundable under Section 147 of that Act. The Court relied on the guidelines governing compounding laid down by the Supreme Court, according to which compounding at the High Court stage may be permitted on payment of 15% of the cheque amount as costs. In the circumstances, exercise of inherent jurisdiction was held appropriate to bring the dispute to a quietus.

Conclusion: The conviction and all consequential proceedings were quashed and set aside, and compounding of the offence was permitted on deposit of 15% of the cheque amount with the Gujarat State Legal Services Authority.

Ratio Decidendi: A conviction under Section 138 of the Negotiable Instruments Act, 1881 may be quashed after settlement by exercising inherent powers under Section 482 of the Code of Criminal Procedure, 1973, since the offence is compoundable under Section 147 of the Act, subject to payment of the prescribed compounding costs.

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