Conviction Under Section 138 of NI Act can be Compounded at Appellate Stage: Himachal Pradesh HC

Parties are free to bury the hatchet and compound cheque bounce offences even after conviction has been upheld by the appellate court, providing a crucial exit ramp for litigants to resolve disputes through settlement at any stage of the proceedings. The Himachal Pradesh High Court has ruled that statutory bars do not prevent the acquittal of an accused if the full compensation amount is paid, even when the petitioner is already in custody following the dismissal of previous appeals.

In a significant exercise of revisional jurisdiction, Justice Chirag Bhanu Singh heard a petition seeking to compound offences after the accused had been arrested to serve his sentence. The Court examined whether the settlement of the entire compensation amount could override concurrent findings of conviction by the lower courts.

Compounding of Offences and Judicial Precedents

The Court observed that the petitioner had been sentenced to six months of simple imprisonment and ordered to pay Rs. 2,00,000/- as compensation. Despite the conviction being upheld by the Additional Sessions Judge, the parties reached an amicable settlement during the pendency of the revision petition. The petitioner paid Rs. 1,60,000/- directly and had previously deposited Rs. 40,000/- with the trial court.

To support the decision to allow compounding at this late stage, the Court relied on K.M. Ibrahim versus K.P. Mohammed and another ( "2010 (1) SCC 798": 2009 CaseBase(SC) 590) and Anil Kumar Haritwal versus Alka Gupta ( "2004 (4) SCC 366": 2004 CaseBase(SC) 1224). These precedents establish that the golden thread of the law allows for setting aside convictions once a matter is compromised and payments are made in full.

The Court, in its reasoning, observed: "The Hon’ble Supreme Court thus, has categorically gone on to hold that Section 147 of the N.I. Act, does not in any way bar the parties from compounding an offence under the provisions of Section 138 of the N.I. Act, even at the appellate stage of the proceedings."

The Court has following directions:

"The parties are allowed to compound the offence and as a sequel, the judgments of the learned Courts below, are quashed and set-aside. The accused is acquitted of the charges. Since the petitioner is in custody, he be released forthwith, if not required in any other case, release warrants be issued accordingly. The amount of Rs. 40,000/- lying deposited with the learned trial Court is directed to be released in favour of the respondent-Bank."

Background

The dispute originated from a complaint filed by the respondent-bank. The Additional Chief Judicial Magistrate, Rampur Bushahr, originally convicted the petitioner. This conviction was subsequently upheld by the Additional Sessions Judge on June 12, 2026. While the revision petition was pending before the High Court, the petitioner was arrested on October 12, 2026. However, through subsequent negotiations, the petitioner agreed to pay the full compensation of Rs. 2,00,000/-. Upon confirming that the respondent-bank had received the bulk of the payment and agreed to the release of the remaining amount deposited with the trial court, the High Court exercised its power to allow the compounding application and set aside the lower courts' judgments.

Case Details:
Case No.: Cr.MP No.4771 of 2026 with Cr. Revision No.608 of 2026
Neutral Citation: 2026:HHC:46272
Case Title: Beer Singh Versus H.P. State Co-operative Bank
Appearances:
For the Petitioner(s): Mr. Rahul Kaundal, Advocate.
For the Respondent(s): Mr. Haminder Singh Chandel, Advocate.

Source: 2026 CaseBase(HP) 9479