Oral Order

1. Rule. Learned APP waives service of rule for the respondent No.1-State and learned advocate Mr. Kush N. Bavishi for the respondent No.2.

2. Learned advocate Mr. Vatsal D. Ruparel for the applicant and learned advocate Mr. Kush N. Bavishi for the respondent no.2 jointly submit that the matter is amicably settled between the parties and the present application be taken up for final hearing and be disposed of accordingly.

3. In view of the above submissions made by the learned advocates for the respective parties, the matter is taken up for final hearing.

4. By way of the present application, the applicant - accused has prayed to quash and set aside the judgment and order of conviction passed by the learned Additional Sessions Judge, Jamnagar in Criminal Appeal No. 522 of 2024 dated 06.12.2025 confirming the judgment and order passed by the learned 5th Additional Senior Civil Judge & Additional Chief Judicial Magistrate, Jamnagar in Criminal Case No. 3180 of 2024 dated 04.12.2024, whereby, the present applicant - accused was sentenced simple imprisonment for one year and fine of Rs.2,50,000/-, and in default, simple imprisonment for six months for the offence under Section 138 of the Negotiable Instruments Act, 1881.

5. Heard learned advocate Mr. Vatsal D. Ruparel for the applicant, learned APP Mr. Krutik A. Parikh for the respondent - State and learned advocate Mr. Kush N. Bavishi for the respondent no.2.

6. Learned advocate Mr. Vatsal D. Ruparel for the applicant submits that the dispute between the parties has been amicably settled and the respondent no.2 - original complainant has received the entire settlement amount and does not wish to prosecute the matter further. The compromise has been entered into voluntarily, without any coercion, undue influence or pressure and, therefore, the respondent no.2 has no objection if the impugned judgment and order of conviction as well as all other consequential proceedings arising pursuant thereto are quashed against the applicant - accused.

7. Learned advocate Mr. Kush N. Bavishi for the respondent no.2 - original complainant submits that the respondent no.2 - original complainant has appeared through online mode and has produced a copy of affidavit of the respondent no.2 - original complainant, which is taken on record.

8. Learned APP Mr. Krutik A. Parikh for the respondent no.1 - State submits that the impugned judgment and order of sentence is just and proper; however, considering the fact that the dispute between the parties is amicably settled, necessary order may be passed.

9. The respondent no.2 - original complainant is appearing through online mode, and on inquiry, submits that the dispute between them has been settled amicably and the entire settlement amount has been received and she does not wish to prosecute the matter further. She admits to the contents of the affidavit and submits that the compromise has been entered into her own free will without any fear, threat and coercion.

10. The affidavit filed by the respondent no. 2 - original complainant reads as under:

          "1. I say and submit that I've filed private complaint u/s 138 Ni Act viz. Criminal Case No. 3180 of 2024 in which by order dated 4.12.2024 the applicant came to be convicted u/s 138 of NI Act by by Ld. Chief Judicial Magistrate. The said order of conviction came to be challenged by the applicant before the sessions court by way of filing Criminal Appeal No. 522 of 2024 and after hearing the parties, the sessions court please to confirmed the conviction order and asked the applicant to serve the sentence, being aggrieved, the applicant preferred captioned revision application before this Hon'ble Court and now settlement arrived between the parties, for which I'm filing this affidavit in support of revision application.

          2. I say and submit that as the dispute is resolved between the parties and entire due is clear by applicant and therefore now I've no objection if the proceeding is to be quashed against applicant and therefore this Hon'ble court may please to consider the case of the petitioner as prayed by petitioner in the interest of justice.

          3. It is further submitted that since now there is no any dispute with myself and Petitioner and account has been cleared and settled therefore, I've decided not to proceed further against the Petitioner herein. Therefore, considering the above stated fact I've no any objection, if the present application is allowed by quashing and setting aside the order of conviction passed Ld. CJM, Jamnagar in Criminal Case No. 3180 of 2024 for the offences punishable U/s. 138 of NI Act and confirmed by the sessions court in Criminal Appeal No. 522 of 2024."

11. Section 147 of the N.I.Act makes offences under the Act compoundable notwithstanding anything contained in the Code of Criminal Procedure. The Hon'ble Supreme Court in Damodar S. Prabhu v. Sayed Babalal H., (2010) 5 SCC 663, recognized that the primary object of proceedings under Section 138 N.I. Act is compensatory in nature and encouraged compounding even at later stages subject to payment of appropriate costs.

12. Recently, in Gian Chand Garg v. Harpal Singh and Another, 2025 SCC OnLine SC 2317, the Hon'ble Supreme Court has observed in Para Nos. 5 to 10 as under :

          "5. Be that as it may, at the outset, it is apposite to advert to settled position of law enunciated by this Court with regard to nature of proceedings under Section 138 of N.I.Act and the legal consequences that ensues upon a compromise being entered into between the parties.

          6. This court in M/s. Meters and Instruments Private Limited & Anr. v. Kanchan Mehta, 2018 (1) SCC 560 held that the nature of offence under section 138 of the N.I.Act is a mainly a civil wrong and has been made specifically compoundable by section 147 of the N.I.Act which was inserted by the 2002 amendment to the said Act. The relevant observations have been extracted for reference:

          "This Court has noted that the object of the statute was to facilitate smooth functioning of business transactions. The provision is necessary as in many transactions' cheques were issued merely as a device to defraud the creditors. Dishonor of cheque causes incalculable loss, injury and inconvenience to the Vide the Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988 payee and credibility of business transactions suffers a setback. At the same time, it was also noted that nature of offence under Section 138 primarily related to a civil wrong and the 2002 amendment specifically made it compoundable."

          7. It is also apposite to reiterate the observations in P. Mohanraj & Ors. v. M/s. Shah Brothers Ispat Pvt. Ltd. (2021) 6 SCC 258 wherein this court referred the offence under section 138 N.I.Act as a "Civil Sheep" in "Criminal Wolf's Clothing" which meant issues agitated by the parties under the said provision are of private nature which are brought within the sweep of criminality jurisdiction in order to strengthen the credibility of the negotiable instruments.

          8. Further in M/s. Gimpex Private Limited v. Manoj Goel (2021) SCC OnLine SC 925 this court took into consideration the effect of settlement arrived between the parties and observed that:

          "38. When a complainant party enters into a compromise agreement with the accused, it may be for a multitude of reasons - Higher Compensation, faster recovery of money, uncertainty of trial and strength of complaint, among others. A complainant enters into a settlement with open eyes and undertakes the risk of the accused failing to honour the cheques issued pursuant to the settlement, based on certain benefits that the settlement agreement postulates. Once parties voluntarily entered into such an agreement and agree to abide by the consequence of non-compliance of the settlement agreement, they cannot be allowed to reverse the effects of the agreement by pursuing both the original complaint and the subsequent complaint arising from such non-compliance. The Settlement agreement subsumes the original complaint......"

          9. In B.V. Seshaiah v. State of Telangana & Anr. (2023) SCC OnLine SC 96 this court was of the view that when parties enter into an agreement and compound the offence, they do so to save themselves from the process of litigation and when such a step is taken by the parties, the law very well allows them to do so. Hence, the courts cannot override such compounding and impose its will.

          10. Therefore, it is very clear that although dishonour of cheque entails criminal consequence, the legislature by virtue of section 147 of the N.I.Act has made it compoundable notwithstanding the provisions of the Code of Criminal Procedure, 1973 and the same can be compounded at any stage of the proceedings especially when the parties have themselves arrived at a voluntary compromise."

13. Further, in Sanjabij Tari v. Kishore S. Borcar and Another (Criminal Appeal No. 1755 of 2010, decided on 25.09.2025), the Hon'ble Supreme Court modified the earlier guidelines relating to compounding costs and observed that where payment is made before the Sessions Court or High Court in revision/appeal, compounding may be permitted on payment of 7.5% of the cheque amount by way of costs.

14. So far as the objection that post-conviction compromise may dilute the rigour of criminal process is concerned, the same does not survive in view of the law laid down in Gian Chand Garg (supra), wherein the Hon'ble Supreme Court specifically held that compounding under Section 138 N.I. Act can be permitted even after conviction and that such exercise does not violate the statutory scheme but rather advances the object of ensuring payment and reducing unnecessary litigation.

15. Accordingly, the present application is allowed.

16. The judgment and order of conviction passed by the learned Additional Sessions Judge, Jamnagar in Criminal Appeal No. 522 of 2024 dated 06.12.2025 confirming the judgment and order passed by the learned 5th Additional Senior Civil Judge & Additional Chief Judicial Magistrate, Jamnagar in Criminal Case No. 3180 of 2024 dated 04.12.2024 under Section 138 of the N.I.Act are hereby quashed and set aside on the basis of compromise between the parties.

17. However, as the settlement has been arrived at the stage of proceedings before this Court, the applicant shall deposit costs equivalent to 7.5% of the cheque amount with the Gujarat High Court Legal Services Committee within a period of seven days from the date of his release and shall place proof of such deposit on record.

18. Subject to deposit of the aforesaid costs, the offence shall stand compounded and the applicant shall stand acquitted of the charge under Section 138 of the N.I.Act.

19. Rule made absolute.