Compounding of cheque dishonour offence on voluntary settlement can lead to acquittal and setting aside conviction.

Section 138 NI Act offences may be compounded on the basis of a voluntary settlement between the parties, and compounding can be permitted even in revision. The court noted that Section 147 of the NI Act makes such offences compoundable notwithstanding the Criminal Procedure Code, and that once composition occurs, Section 320 CrPC treats it as an acquittal. Because the parties had amicably settled the dispute and payment was made towards the cheque liability, the basis for sustaining the conviction no longer survived. The conviction and sentence were therefore set aside and the accused was acquitted.

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Issues: Whether the offence under Section 138 of the Negotiable Instruments Act, 1881 could be compounded on the basis of a voluntary settlement between the parties and, if so, whether the conviction and sentence were liable to be set aside.

Analysis: The parties had amicably settled the dispute and the accused had made payment towards the cheque liability. Section 147 of the Negotiable Instruments Act, 1881 makes offences under the Act compoundable notwithstanding the Criminal Procedure Code, and compounding may be permitted in revision. Once composition takes place, Section 320 of the Code of Criminal Procedure, 1973 gives it the effect of acquittal. In view of the voluntary settlement, the basis for sustaining the conviction no longer survived.

Conclusion: The offence was held compoundable on the basis of settlement and the conviction and sentence were set aside; the petitioner was acquitted of the charge under Section 138 of the Negotiable Instruments Act, 1881.

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