Punjab & Haryana HC Quashes Section 138 Convictions After Mediation Settlement, Waives Compounding Costs

Justice Sumeet Goel quashed two cheque-bouncing convictions from 2019 following a mediation settlement, applying revised Supreme Court guidelines on compounding costs and waiving them entirely given over a decade of criminal litigation.

The Punjab and Haryana High Court at Chandigarh has set aside two Section 138 Negotiable Instruments Act, 1881 convictions against petitioner Subhash Chander, arising from complaint cases filed in 2014 at Sonipat, after the parties executed a compromise deed before the Mediation and Conciliation Centre at Sonipat on 22 May 2026. Justice Sumeet Goel, sitting singly, disposed of both criminal revision petitions — CRR-3029-2025 and CRR-3061-2025 — by a common oral order dated 3 August 2026. The bench acquitted Chander in both cases and, exercising its discretion under the Supreme Court's guidelines, declined to impose compounding costs given that the petitioner had faced criminal proceedings since approximately 2014.

Convictions Below and the Route to the High Court

The Judicial Magistrate First Class, Sonepat convicted Subhash Chander on 7 March 2019 in two separate complaint cases — COMA/6802/2014 and COMA/6803/2014 — for offences punishable under Section 138 of the Negotiable Instruments Act, 1881. In the first case, he was sentenced to rigorous imprisonment of one year and six months and directed to pay compensation of Rs 5,10,000 to the complainant. In the second, the sentence was the same period of rigorous imprisonment, with compensation of Rs 1,55,000.

Chander challenged both convictions before the Additional Sessions Judge, Sonipat. That court dismissed his appeals on 11 November 2025. He then filed the two criminal revision petitions before the High Court, seeking to have the appellate order and the original conviction set aside in each case.

During the pendency of the revision petitions, the parties approached the Mediation and Conciliation Centre at Sonipat. They signed a compromise deed on 22 May 2026, a copy of which was placed on record in CRR-3061-2025. Counsel for the petitioner, Mr Parveen Sharma, submitted that since the dispute had been amicably resolved, the offence ought to be compounded and Chander acquitted.

Counsel for respondent-complainant Sunil Kumar ratified the settlement and confirmed its genuineness. He added that a demand draft of Rs 1,55,000, which Chander had deposited with the Registry of the High Court pursuant to an order of 6 April 2026 passed in CRR-3061-2025, should be released to the complainant immediately.

The Legal Framework: Compounding at the Revision Stage

Justice Goel placed the application for compounding within the framework established by three Supreme Court decisions.

The first is the three-Judge Bench ruling in Damodar S. Prabhu v. Sayed Babalal H., AIR 2010 (SC) 1907, which introduced a graded cost structure to discourage delayed compounding. Under those guidelines, compounding before a Sessions Court or High Court in revision or appeal attracted costs of 15 per cent of the cheque amount, rising to 20 per cent before the Supreme Court. The judgment also reserved discretion in the court to reduce or waive costs where facts and circumstances warrant, provided reasons are recorded.

The second is M/s New Win Export & Anr. v. A. Subramaniam, 2024 INSC 535, in which the Supreme Court reiterated that dishonour of a cheque is a regulatory offence enacted in the public interest to preserve the reliability of negotiable instruments, and that courts should encourage compounding where parties are willing, keeping the compensatory aspect of the remedy ahead of the punitive aspect.

The third and most recent is Sanjabij Tari v. Kishore S. Borcar and another, 2025 INSC 1158, in which the Supreme Court revisited and reduced the cost percentages in the earlier guidelines. Under the revised scheme, compounding before a Sessions Court or High Court in revision or appeal now attracts costs of 7.5 per cent of the cheque amount, and compounding before the Supreme Court attracts 10 per cent. The court clarified that the discretion to waive costs — preserved since Damodar S. Prabhu — was not disturbed by the revision.

Reading Section 147 of the Negotiable Instruments Act, 1881 alongside Section 359 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (the successor to Section 320 of the Code of Criminal Procedure, 1973) and Section 528 of the BNSS, 2023, Justice Goel concluded that a Section 138 offence can be compounded at any stage of litigation, including after the accused has been convicted by the Magistrate and had his appeal dismissed by the Sessions Court. The revision stage before the High Court is expressly within the scope of permissible compounding.

On the Discretion to Waive Costs

Justice Goel set out the governing principle on cost waiver with some precision. Waiver is not to be invoked as a matter of ordinary course. It must rest on exceptional, compelling, and accentuating circumstances. The court exercising that discretion must record clear, cogent, and reasoned findings setting out the special factors that justify the deviation from the general rule of imposition of costs.

The bench also addressed the scope of Section 528 of the BNSS, 2023 — the inherent powers provision of the High Court. Where a dispute is personal in nature and a genuine compromise has been reached, the High Court may invoke those inherent powers to quash a conviction, provided the compromise does not impinge on public interest or undermine the cause of justice. Justice Goel characterised these inherent powers as “incidental replete powers” without which the court would be compelled to witness the process of law being abused for the purposes of injustice.

Applying those principles to the present facts, the bench noted that the compromise deed reflected the parties' intent to resolve their dispute in its entirety. Compounding was therefore appropriate.

On costs, Justice Goel considered that Chander had faced the burden of criminal litigation since approximately 2014 — a period of over a decade spanning the trial court, the Sessions Court, and the High Court. Taking the entirety of the attending facts and circumstances into account, the court declined to impose compounding costs.

Directions and Outcome

Justice Goel allowed both criminal revision petitions and passed the following directions:

The conviction and sentence dated 7 March 2019 passed by the learned Judicial Magistrate First Class, Sonepat and the appellate order dated 11 November 2025 passed by the learned Additional Sessions Judge, Sonipat, in both revision petitions, are set aside. Subhash Chander stands acquitted of the charges framed against him in each case.

Both parties remain bound by the terms of the settlement deed dated 22 May 2026. In the event of non-compliance, the aggrieved party may seek recall of the order upon showing sufficient cause, with the court noting that an erring party may be saddled with exemplary punitive measures.

The Registry is directed to return the demand draft of Rs 1,55,000 deposited by Chander. He is required to revalidate it and deliver it to respondent Sunil Kumar within 15 days of the demand draft being released. Chander must thereafter file an affidavit confirming compliance with the Registrar (Judicial) of the High Court. If this is not done, both petitions shall be deemed dismissed without further reference to the court.

Ms Sushma Suman, Advocate, who appeared as legal aid counsel for the respondent in CRR-3061-2025, was also appointed as legal aid counsel in the second petition. The Secretary of the Legal Services Committee, Punjab and Haryana High Court, Chandigarh, was directed to pay a lump sum of Rs 10,000 as further remuneration to her.

No order as to costs was made. Pending applications, if any, stand disposed of.