Dishonour of Cheque : Compounding of offence allowed on the basis of a compromise

Rajasthan High Court Quashes Conviction in Cheque Bounce Case Following Settlement Conviction under Section 138 of the Negotiable Instruments Act overturned after parties reach compromise; petitioner to pay 7.5% of cheque amount as costs.

In a significant development, the Rajasthan High Court has overturned the conviction of Lalu Ram Dangi in a cheque bounce case following a mutual settlement between the parties involved. The decision, delivered by Justice Sandeep Shah, comes after both parties executed a settlement deed, confirming that the respondent, Madan Lal Singhvi, had received the entire outstanding amount.

The case, originally adjudicated by the Special Judicial Magistrate in Udaipur, had resulted in a one-year simple imprisonment for Dangi, alongside a fine of Rs. 3,40,000. The decision was later upheld by the Sessions Court, Udaipur. However, in light of the compromise, the High Court quashed the previous judgments, emphasizing the provisions of Section 147 of the Negotiable Instruments Act, which allows offences under the Act to be compounded.

The court's decision aligns with the Supreme Court's guidelines on compounding offences under Section 138 of the Negotiable Instruments Act. These guidelines, revisited in multiple cases including Damodar S. Prabhu v. Sayed Babalal H and Sanjabij Tari v. Kishore S. Borcar, outline the imposition of costs at various stages of litigation to deter delayed settlements. Consequently, the High Court ordered Dangi to deposit 7.5% of the cheque amount with the Rajasthan State Legal Services Authority within a month.

Justice Shah highlighted the importance of encouraging settlements in cases of cheque dishonor, noting that such offences are primarily civil wrongs. The court underscored the dual objective of compensatory and punitive elements, ensuring justice is balanced with expediency.

The court's judgment further emphasized the procedural flexibility in cheque dishonor cases, allowing for summary trials and empowering magistrates to close proceedings upon satisfactory compensation to the complainant. This approach is aimed at reducing the burden on the judicial system and ensuring swift justice.

The quashing of Dangi's conviction marks a pivotal moment in the case and reflects the judiciary's commitment to facilitating amicable settlements while upholding legal precedents. The revision petition was allowed, with the court instructing the case record to be returned promptly and a copy of the order sent to the Rajasthan State Legal Services Authority.

Bottom Line:

Compounding of offence under Section 138 of the Negotiable Instruments Act, 1881, allowed on the basis of a compromise between parties, with imposition of cost as per guidelines laid down by the Supreme Court.

Statutory provision(s): Section 138, Section 147, Section 143 of the Negotiable Instruments Act, 1881

Lalu Ram Dangi v. Madan Lal Singhvi, (Rajasthan) : Law Finder Doc Id # 2790221