Cheque Dishonour Cases: SC Favours Settlement Over Conviction

Case Title: Gian Chand Garg Versus Harpal Singh & Anr.

Introduction

In this case, the Supreme Court highlighted that once the complainant signs a compromise deed and accepts the amount of settlement as received, the case cannot continue for cheque dishonour under Section 138 of the Negotiable Instruments Act, 1881. 

The Court set aside the High Court’s order, which dismissed the accused’s application to expect alteration of his conviction after the parties had settled their disputes.

Justice Aravind Kumar and Justice Sandeep Mehta highlighted that the clauses of the Negotiable Instruments Act, 1881 permit compounding of cheque dishonour cases, and the criminal proceedings serve no further purpose once the complainant voluntarily accepts the money. 

Supreme Court: Cheque dishonour cases can be settled once the complainant accepts full payment.

Background of the case

This ruling deals with Cheque dishonour under Section 138 of the Negotiable Instruments Act, 1881. The conviction was upheld by the appellate and revisional courts, as the trial court had convicted the accused.

The parties reached a compromise after the High Court dismissed the accused’s revision petition. The complainant signed a compromise deed, confirming receipt of the entire defaulted amount as a full and final settlement. 

The accused approached the High Court for modification of its earlier order that held conviction on him. The High Court also held that such an application is not maintainable and hence, rejected his plea. 

The issue before the court

The only question put before the Supreme Courts was:

• Can a conviction under Section 138 NI Act continue once the complainant has signed a compromise deed and accepted the full settlement amount? 

Supreme Court’s ruling

The Supreme Court set aside the conviction and allowed the appeal. It was held that: 

“Once the complainant has signed the compromise deed accepting the amount in full and final settlement of the default sum, the proceedings under Section 138 of the NI Act cannot hold water. Therefore, the concurrent conviction rendered by the Courts below must be set aside.” 

The court highlighted that Section 147 of the Negotiable Instruments Act, 1881 is related to the cheque dishonour offence, which is compoundable according to Indian Law. This clearly states that such matters can be settled between both the parties without extending the criminal proceedings.  

Continuing the criminal proceedings served no purpose, as the complainant had willingly and without compulsion accepted the full amount in the settlement. 

Reliance on earlier judgment

To draw the conclusion, the court emphasized the previous ruling in M/s. Gimpex Private Limited v. Manoj Goel (2021). In this ruling, the court noticed that once the parties deliberately and willingly enter a settlement, they cannot later chase both the original complaints and a new complaint arising from non-compliance of the settlement terms. 

The same parameter is applied to this case, as claimed by the court. 

Significance of Section 147 of the Negotiable Instruments Act, 1881 in Cheque Dishonour Cases

Section 147 of the Negotiable Instruments Act, 1881 deals with cheque dishonour cases. This judgement highlights the encouraged settlement under the same Act. Unlike many other criminal cases which are unable to compromise, Section 138 offences are resolvable, as they are related to financial disputes and not crimes against society.

The Supreme Court affirmed that the courts should encourage settlement where possible.

The High Court’s view: 

The High Court said that the application was not maintainable and, hence, refused to alter the conviction. The Supreme Court did not agree to this approach.

Once the complainant had deliberately settled the dispute and expected the money, there was no point in keeping the conviction alive, explained by the Supreme Court.

Rather than keeping the parties stuck in a long procedure, we should encourage settlement in such cases of cheque dishonour.

Key points of the Judgement: 

• Even after conviction the parties can legally settle such disputes.

• The conviction cannot continue once the complainant signs a compromise and receives the full amount.

• The key is voluntary compromise.

• When the parties have genuinely solved the disputes, technical objections such as “non-maintainability" should not prevent justice.

Way Forward

The Supreme Court stated that if the parties have already settled the matter mutually, and the complainant has received the complete amount, then there is no point in continuing the conviction. The aim of the cheque dishonour cases is that the money owed is paid and the trust is maintained.

The Court reduces unnecessary cases in the criminal courts and encourages the people to solve their disputes peacefully by allowing settlement and ending the cases.

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