The Supreme Court has held that an offence under Section 138 of the Negotiable Instruments Act can be compounded even after the conviction has been affirmed by the appellate and revisional courts, setting aside the conviction and sentence of a company and its director following a post-conviction settlement with the complainant.
A Bench of Justice Aravind Kumar and Justice Prasanna B. Varale was hearing an appeal filed by Parsharvanath Weld Wires Pvt. Ltd. and its director Hemant Jain against a judgment of the Chhattisgarh High Court which had refused to permit compounding of the offence on the ground that it could not review a final judgment rendered by a coordinate bench.
The case arose from a cheque dishonour complaint filed in 2012. Following trial, the accused were convicted under Section 138 of the Negotiable Instruments Act and Hemant Jain was sentenced to one year’s simple imprisonment. The trial court also directed payment of ₹28 lakh as compensation to the complainant. The conviction was affirmed by the Sessions Court and subsequently by the High Court in revision proceedings.
After Hemant Jain was taken into custody on April 23, 2026 to undergo the sentence, the parties entered into a settlement on April 25, 2026. Under the settlement, the complainant agreed to compound the offence upon receiving ₹30 lakh from the accused towards full and final settlement of all claims. The amount was duly paid and acknowledged by the complainant.
Although the parties jointly sought compounding before the trial court and later approached the High Court, the High Court declined relief, holding that once the conviction had attained finality, it could not exercise inherent powers to virtually review or nullify a final judgment passed by a coordinate bench. The High Court treated the plea as an impermissible attempt to reopen concluded proceedings.
The Supreme Court disagreed. Referring to its recent decision in Gian Chand Garg v. Harpal Singh, 2025 SCC OnLine SC 2317, the Court held that
where parties have voluntarily settled the dispute and the complainant has accepted the agreed amount in full satisfaction of the claim, the offence can be compounded under Section 147 of the Negotiable Instruments Act notwithstanding the stage of the proceedings.
Accepting the compromise, the Court allowed the appeal, set aside the Chhattisgarh High Court’s order, and quashed the conviction and sentence imposed upon the appellants. The Bench observed that in light of the settlement and the statutory scheme permitting compounding, there was no reason to continue the criminal proceedings.
Taking note of the fact that Hemant Jain had been in custody since April 23, 2026, the Court directed the Superintendent of Central Jail, Raipur to release him forthwith and report compliance to the Registry of the Supreme Court.
