Compounding of cheque dishonour offence after conviction is permissible on genuine settlement, leading to quashing of sentence.

An offence under Section 138 of the Negotiable Instruments Act, 1881 may be compounded even after conviction where the parties have genuinely settled the dispute, and Section 147 operates as a special enabling provision with a non obstante clause. On the facts, the complainant-bank had no objection, the loan account was closed, and there was no impediment to accepting the compromise. The conviction and sentence were therefore quashed on compounding, and the accused was acquitted. The Court also applied the graded cost principle for late compounding while reducing the amount in light of the circumstances.

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Issues: Whether the offence under Section 138 of the Negotiable Instruments Act, 1881 could be compounded after conviction on the basis of a settlement arrived at between the parties under a One Time Settlement scheme, and whether the conviction and sentence were liable to be quashed.

Analysis: The parties had settled the dispute and the complainant-bank had no objection to compounding. Section 147 of the Negotiable Instruments Act, 1881 is a special enabling provision with a non obstante clause and permits compounding of offences under the Act. The settled position is that compromise may be accepted even after recording of conviction. In view of the amicable settlement and closure of the loan account, there was no impediment to permitting compounding. The Court also applied the graded cost principle for late compounding, while reducing the amount having regard to the circumstances of the case.

Conclusion: The offence was permitted to be compounded, the conviction and sentence were quashed, and the accused was acquitted of the charge under Section 138 of the Negotiable Instruments Act, 1881.

Ratio Decidendi: An offence under Section 138 of the Negotiable Instruments Act, 1881 may be compounded even after conviction when the parties have genuinely settled the dispute, and the conviction and sentence can then be set aside on compounding.

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