4 Jan 2010

Cheque bouncing offences can be compounded: Supreme Court

Paving the way for earlier settlement of cheque-bouncing cases, the Supreme Court has declared that the offence under Section 138 of the Negotiable Instruments Act relating to the bouncing of cheques can be compounded. This would imply that even though criminal proceedings have commenced against a person for bouncing of cheque, the same can be dropped in the event of the defaulter compromising with the complainant upon payment of the default amount. In fact even if a defaulter has been convicted, the conviction can be set-aside in terms of the compounding provision. 

The Supreme Court declared the law as under;
9. The object of Section 320 Cr.P.C., which would not in the strict sense of the term apply to a proceeding under the Negotiable Instruments Act, 1881, gives the parties to the proceedings an opportunity to compound offences mentioned in the table contained in the said section, with or without the leave of the court, and also vests the court with jurisdiction to allow such compromise. By virtue of Sub-Section (8), the Legislature has taken one step further in vesting jurisdiction in the Court to also acquit the accused/convict of the offence on the same being allowed to be compounded. Inasmuch as, it is with a similar object in mind that Section 147 has been inserted into the Negotiable Instruments Act, 1881, by amendment, an analogy may be drawn as to the intention of the Legislature as expressed in Section 320(8) Cr.P.C., although, the same has not been expressly mentioned in the amended section to a proceeding under Section 147 of the aforesaid Act.
12. It is true that the application under Section 147 of the Negotiable Instruments Act was made by the parties after the proceedings had been concluded before the Appellate Forum. However, Section 147 of the aforesaid Act does not bar the parties from compounding an offence under Section 138 even at the appellate stage of the proceedings. Accordingly, we find no reason to reject the application under Section 147 of the aforesaid Act even in a proceeding under Article 136 of the Constitution.

Post Script Rejoinder

After this decision was passed by the Supreme Court, in another decision guidelines for compounding of the cheque-bouncing cases were made by the Court. We have covered the same in a subsequent post and recommend the reader to have a look so as to have a cumulative understanding of the issue.

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