Compounding of cheque dishonour offence after conviction allowed on settlement, with conviction and sentence set aside.

Section 147 of the Negotiable Instruments Act, 1881 permits compounding of an offence under Section 138 even after conviction, and the Court may consider the stage of proceedings and the circumstances while fixing compounding costs. Where the parties had settled the dispute under a one-time settlement, the complainant bank issued a no dues certificate, and the account stood closed, the Court accepted the compromise, imposed a reduced token compounding fee, and set aside the conviction and sentence. The accused was consequently acquitted of the cheque dishonour charge.

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Issues: Whether a conviction under Section 138 of the Negotiable Instruments Act, 1881 could be compounded after conviction on the basis of an amicable settlement and whether the consequential sentence and conviction were liable to be set aside.

Analysis: The matter was settled between the parties under a One Time Settlement, the complainant bank issued a no dues certificate, and the account stood closed. In view of Section 147 of the Negotiable Instruments Act, 1881, the offence under the Act is compoundable notwithstanding the Code of Criminal Procedure, 1973. The Court relied on the Supreme Court's guidance that compounding may be permitted even after conviction and that the Court may, depending on the stage and circumstances, modulate the compounding costs. Taking note of the settlement and the petitioner's financial condition, the Court accepted compounding and directed payment of a reduced token compounding fee.

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

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