Cheque Bounce Law Is to Recover Money, Not to Fill Jails:  Punjab & Haryana High Court Wipes Out Conviction After Post-Conviction Compromise

“Continuation of Proceedings Will Not Serve Any Fruitful Purpose Whatsoever”, In a decisive reaffirmation of the settlement-centric character of cheque dishonour prosecutions, the Punjab and Haryana High Court has held that once the entire liability stands satisfied and the complainant has no subsisting grievance, insisting on sustaining a conviction would defeat the very object of the Negotiable Instruments Act.

Justice Anoop Chitkara set aside the conviction under Section 138 of the Negotiable Instruments Act, 1881, on the basis of a post-conviction compromise, observing that “continuation of these proceedings will not serve any fruitful purpose whatsoever.”

The petitioner had already been convicted by the Trial Court and his conviction was affirmed by the Sessions Court. During pendency of the revision before the High Court, the parties entered into a compromise dated 01.10.2018. The complainant candidly stated before the Court that “nothing is due” and that he had no objection if the conviction and sentence were set aside.

“The Legislative Intention Is Not to Make People Suffer Incarceration Only Because Their Cheques Bounced”

Justice Chitkara underscored the foundational philosophy behind Section 138 prosecutions. The Court observed that “the jurisprudence behind the Negotiable Instruments Act, 1881 is that the business transactions are to be honoured,” and clarified that “the legislative intention is not to make people suffer incarceration only because their cheques bounced.”

Describing the penal provision as a mechanism to secure recovery of legally enforceable debt, the Court noted that the “penal teeth are with an end object of recovery.” Once that object is achieved through settlement and payment, the punitive dimension may justifiably yield to reconciliation.

Inherent Powers Can Be Invoked Even After Conviction

Addressing the scope of judicial power, the Court held that there is no statutory embargo preventing the High Court from exercising inherent jurisdiction even after conviction, particularly when the offence is compoundable and parties have amicably resolved their dispute.

Relying upon a long line of precedents where post-conviction compromises were accepted, the Court invoked its powers under Section 482 CrPC read with Section 147 of the NI Act and the relevant provisions of the Bharatiya Nagarik Suraksha Sanhita, 2023, to “disrupt the prosecution” and quash the conviction.

The Court concluded that in the peculiar facts of the case, allowing the conviction to survive despite full settlement would amount to an unnecessary continuation of criminal process.

Compounding Allowed, But Not Without Cost – “15% Is the Settled Norm”

Applying the binding principles laid down in Damodar S. Prabhu v. Sayed Babalal, the Court held that compounding of offence must be accompanied by payment of 15% of the cheque amount to the Legal Services Authority.

The cheque in question was for Rs. 8,75,000/-. The Court calculated 15% thereof as Rs. 1,31,250/- and made the compounding conditional upon deposit of the said amount on or before 31.03.2026 with the concerned wing of the High Court Legal Aid.

In a firm caution, the Court directed that failure to deposit the amount within the stipulated time would result in the “entire order, including compounding, automatically standing recalled” under Sections 403 and 528 of the BNSS, 2023, and the matter would be listed for hearing on merits.

Financial Hardship? Court Leaves Window Open

Balancing strict compliance with equitable considerations, the Court observed that if it is “beyond the petitioner’s financial capacity to pay the 15% amount,” he may approach the Court with full disclosure of bank accounts, fixed deposits, DEMAT holdings, jewellery, precious articles and cash-in-hand. Upon analysing the petitioner’s paying capacity, the Court may consider reducing or dispensing with the compounding cost.

The bail bonds were ordered to stand discharged subject to compliance with the deposit condition.

Conviction Set Aside, Petitioner Acquitted

Allowing the petition, the Court set aside the judgment of conviction and order of sentence dated 02.02.2015 and acquitted the petitioner of the charge under Section 138 of the Negotiable Instruments Act, subject to compliance with the compounding cost condition.

The ruling once again reinforces that cheque dishonour cases are fundamentally designed to ensure repayment and commercial credibility, not to perpetuate incarceration after full settlement. As the Court echoed the timeless sentiment from Shakuntala Sawhney v. Kaushalya Sawhney, justice finds its “finest hour” when parties who have fallen apart “bury the hatchet.”

Date of Decision: 27 February 2026