Cheque dishonour and cheating claims fail where full repayment is made and no dishonest intent from inception is shown.

Cheque dishonour proceedings under Section 138 of the Negotiable Instruments Act may be brought to an end where the drawer has fully repaid the principal and paid additional compensation, even if the complainant refuses to consent to compounding, because continued prosecution after substantial monetary satisfaction serves no useful purpose. In a separate aspect, allegations under Sections 406, 420 and 120B of the Indian Penal Code in a commercial supply dispute were held insufficient where the record did not show dishonest intention from the inception; failure to supply machinery and retention of advance money, without more, did not establish cheating. The FIR and connected criminal proceedings were quashed.

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Issues: (i) Whether proceedings under Section 138 of the Negotiable Instruments Act, 1881 could be brought to an end after full repayment and additional compensation despite the complainant's refusal to consent to compounding; (ii) Whether the FIR and connected criminal proceedings under Sections 406, 420 and 120B of the Indian Penal Code, 1860 disclosed the ingredients of cheating and criminal liability.

Issue (i): Whether proceedings under Section 138 of the Negotiable Instruments Act, 1881 could be brought to an end after full repayment and additional compensation despite the complainant's refusal to consent to compounding.

Analysis: Section 147 of the Negotiable Instruments Act, 1881 makes cheque dishonour offences compoundable, but compounding ordinarily rests on consent of the complainant. The settlement between the parties had earlier failed on account of delayed payment, yet the appellant later paid the entire principal amount and an additional sum towards delay. The Court noted the compensatory character of Section 138 proceedings and that continued prosecution, after full monetary satisfaction and substantial compliance, would serve no useful purpose. Although the complainant declined to compromise, the Court held that, in the peculiar facts and in order to do complete justice, the proceedings could still be terminated.

Conclusion: The proceedings under Section 138 of the Negotiable Instruments Act, 1881 were quashed and the conviction and sentence were set aside in favour of the appellant.

Issue (ii): Whether the FIR and connected criminal proceedings under Sections 406, 420 and 120B of the Indian Penal Code, 1860 disclosed the ingredients of cheating and criminal liability.

Analysis: The dispute arose from a commercial transaction for supply of machinery and the record did not show an intention to cheat from the inception. The failure to supply the machine and the retention of advance money, by themselves, were treated as insufficient to establish the requisite dishonest intention for cheating. The Court viewed the transaction as essentially civil in nature and found no basis for sustaining the criminal case on the alleged offences.

Conclusion: The FIR-based criminal proceedings were quashed in favour of the appellant.

Final Conclusion: The impugned order was set aside, all pending criminal proceedings and connected appeals against the appellant were terminated, and the deposited demand drafts were directed to be handed over to the complainant.

Ratio Decidendi: In cheque dishonour matters, once the complainant has been fully compensated and the dispute is essentially monetary, the Court may invoke its power to secure complete justice and terminate the proceedings even if the complainant withholds consent; a commercial breach without dishonest intention from the inception does not by itself constitute cheating.

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