Supreme Court on cheque bounce cases: ‘One can reach deal, avoid jail’

A bench of justices Aravind Kumar and Sandeep Mehta said the offence of dishonour of cheque was mainly a civil wrong.

The Supreme Court said a person can avoid a jail term after being convicted in a cheque bounce case if they reach a compromise with the complainant.

A report by Times of India stated that once a compromise deed is signed between the parties, conviction under Section 138 of Negotiable Instruments Act cannot be sustained.

A bounced cheque loosely refers to a returned check that a bank cannot process because the account holder has non-sufficient funds (NSF) available for payment.

A bench of justices Aravind Kumar and Sandeep Mehta said the offence of dishonour of cheque was mainly a civil wrong.

"This court referred the offence under Section 138 NI 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," the bench said while referring to an earlier verdict of the top court.

The TOI report stated the top court set aside a Punjab and Haryana HC ruling that had refused to quash conviction in a cheque dishonour case after settlement between the parties. According to the top court, when parties enter into an agreement and compound the offence, they do so to save themselves from the process of litigation. The bench said courts then cannot override such compounding and impose its will.

"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 has to be set aside," the bench said.

The bench said although dishonour of cheque entails criminal consequence, the legislature by virtue of section 147 of the NI Act has made it compoundable notwithstanding the provisions of the Code of Criminal Procedure, 1973. “The same can be compounded at any stage of the proceedings especially when the parties have themselves arrived at a voluntary compromise," it said.