Cheque dishonour conviction can be quashed on settlement, with late compounding allowed subject to prescribed costs.

Section 138 NI Act convictions may be quashed where the cheque dispute has been amicably settled and the complainant consents, because such offences are compoundable under Section 147 and inherent jurisdiction may be used to secure the ends of justice. The Gujarat High Court also applied the settled late-compounding framework and permitted compounding before it subject to payment of costs calculated at 15% of the cheque amount, payable within the stipulated time. The conviction and consequential criminal proceedings were therefore set aside on compromise and compliance with the prescribed compounding costs.

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Issues: (i) Whether the conviction under Section 138 of the Negotiable Instruments Act, 1881 could be quashed in exercise of inherent powers after the parties had amicably settled the dispute. (ii) Whether compounding at the stage of proceedings before the High Court could be permitted subject to payment of costs.

Issue (i): Whether the conviction under Section 138 of the Negotiable Instruments Act, 1881 could be quashed in exercise of inherent powers after the parties had amicably settled the dispute.

Analysis: The dispute had been settled between the complainant and the accused, and the complainant had filed an affidavit stating that he had no objection if the conviction were set aside. The offence under Section 138 is compoundable under Section 147 of the Negotiable Instruments Act, 1881. In view of the settled position that cheque dishonour matters are amenable to compounding and that inherent powers may be invoked to secure the ends of justice, the conviction and consequential proceedings were liable to be interfered with.

Conclusion: The conviction was quashed and set aside in favour of the petitioner.

Issue (ii): Whether compounding at the stage of proceedings before the High Court could be permitted subject to payment of costs.

Analysis: The Court applied the settled guidelines governing compounding at a later stage, under which compounding before the High Court attracts a cost component calculated as a percentage of the cheque amount. Since the cheque amount was Rs. 5,00,000/-, the applicable cost was 15% payable to the Gujarat State Legal Services Authority.

Conclusion: Compounding was permitted on deposit of Rs. 75,000/- within the stipulated time.

Final Conclusion: The criminal conviction arising from the cheque dishonour complaint was annulled on the basis of compromise, and the petitioner was directed to satisfy the stipulated compounding costs.

Ratio Decidendi: A conviction under Section 138 of the Negotiable Instruments Act, 1881 may be quashed in exercise of inherent jurisdiction where the parties have amicably settled the dispute and the offender complies with the prescribed compounding costs.

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