Section 138 NI Act | Compounding Permitted Even at Revisional Stage with Reduced Fee in Special Circumstances: HP High Court

Himachal Pradesh High Court allowed a criminal revision petition filed by Diwan Chand, acquitting him of charges under Section 138 of the Negotiable Instruments Act, 1881, following a compromise with the complainant. Justice Sushil Kukreja quashed the petitioner’s conviction and sentence, citing the principles laid down by the Supreme Court in Damodar S. Prabhu v. Sayed Babalal H., (2010) 5 SCC 663.

The Court also directed the petitioner to pay a reduced compounding fee of ₹5,000/- considering his financial condition and ordered his immediate release from custody, provided no other case was pending against him.

The complainant, Sunder Singh, alleged that the petitioner, Diwan Chand, borrowed ₹2,48,000/- in January 2018, promising repayment within 21 days. When the petitioner failed to repay, he issued a cheque dated May 22, 2018, which was dishonoured due to insufficient funds. Despite receiving a legal notice, the petitioner did not make the payment.

The complainant filed a case under Section 138 of the NI Act. The Judicial Magistrate First Class, Anni, convicted the petitioner, sentencing him to six months' simple imprisonment and ordering compensation of ₹2,48,000/-. The Sessions Judge, Rampur Bushahr, affirmed the conviction on appeal. Aggrieved, the petitioner filed this criminal revision.

The petitioner and the complainant entered into a compromise, evidenced by a deed dated November 21, 2024. The complainant expressed no objection to the compounding of the offence and acquittal of the petitioner.

The Court noted that Section 147 of the NI Act permits compounding of offences under the Act, overriding Section 320(9) of the Code of Criminal Procedure (CrPC). Citing K. Subramanian v. R. Rajathi (2010) 15 SCC 352, the Court emphasized that compounding is permissible even after a judgment of conviction.

The Supreme Court’s decision in Damodar S. Prabhu prescribes a graded scheme for compounding fees, requiring 15% of the cheque amount at the revisional stage. However, the Court exercised its discretion under Damodar S. Prabhu to reduce the fee to ₹5,000/-, considering the petitioner’s financial condition and specific circumstances.

The petitioner was undergoing the sentence imposed by the trial court in Model Central Jail, Kanda. Upon quashing the conviction and sentence, the Court directed the jail authorities to release the petitioner immediately, provided he was not required in any other case.

The High Court quashed the conviction and sentence, ordered the compounding of the offence, and directed the petitioner to deposit a token compounding fee of ₹5,000/- with the H.P. State Legal Services Authority within four weeks.

Date of Decision: January 2, 2025