Supreme Court Quashes NI Act Conviction After Post-Sentence Settlement, Orders Immediate Release
A bench of Justices Aravind Kumar and Prasanna B. Varale quashed a cheque-dishonour conviction after the accused paid Rs. 30 lakh to the complainant and compounded the offence under Section 147 of the NI Act.
The Supreme Court on 27 May 2026 quashed the conviction and sentence of the director of Parsharvanath Weld Wires Pvt Ltd in a Section 138 cheque-dishonour case, after the parties reached a settlement and the accused paid Rs. 30 lakh to the complainant. The Court accepted the compounding of the offence under Section 147 of the Negotiable Instruments Act and directed the Jail Superintendent, Central Jail, Raipur to release the director forthwith. The lower courts and the High Court had each refused to give effect to the settlement on the ground that a final judgment cannot be reviewed. The Supreme Court, relying on its earlier ruling in Gian Chand Garg v. Harpal Singh and Another, held that the compromise had to be accepted.
How the Case Reached the Supreme Court
The dispute began with Criminal Complaint Case No. 143/2012, filed by the second respondent against Parsharvanath Weld Wires Pvt Ltd and its director for an offence under Section 138 of the Negotiable Instruments Act.
After trial, the Judicial Magistrate First Class convicted the appellants by judgment dated 6 May 2014, sentencing them to one year of simple imprisonment and directing payment of Rs. 28 lakh as compensation to the complainant under Section 357(3) of the Code of Criminal Procedure, 1973, with a default sentence of six months.
The Sessions Judge affirmed this conviction in Criminal Appeal No. 137/2014 by judgment dated 7 January 2015. A revision before the High Court of Chhattisgarh in Criminal Revision No. 111/2015 also failed, with the High Court dismissing it and affirming the concurrent findings by judgment dated 12 August 2024.
On 23 April 2026, the director of the company — appellant No. 2, Hemant Jain — was taken into custody to undergo the sentence.
Settlement Reached Two Days After Custody, Then Rejected Below
Within two days of Hemant Jain being taken into custody, the parties entered into a settlement on 25 April 2026. Under the settlement, the complainant agreed to compound the offence on receipt of Rs. 30 lakh as full and final payment. The accused paid this amount by demand draft, which the complainant duly acknowledged.
An application was then filed before the JMFC seeking to give effect to the compounding under Section 147 of the NI Act. The JMFC rejected it. The High Court, in CRMP No. 1328/2026, affirmed the rejection by order dated 11 May 2026, taking the position that a judgment already rendered cannot be reviewed.
The appellants then approached the Supreme Court by way of Special Leave Petition, which was converted into Criminal Appeal No. 2904/2026.
Court's Reasoning: Compounding Permissible Even After Conviction
The bench of Justice Aravind Kumar and Justice Prasanna B. Varale found the position taken by the courts below to be unsustainable. The Court applied the law laid down in Gian Chand Garg v. Harpal Singh and Another, reported at 2025 SCC OnLine SC 2317, which had addressed the permissibility of compounding a Section 138 offence even at a post-conviction stage.
The Court said it had “no hesitation to accept the compromise entered into and compound the offence.” The grievance of the complainant had been fully satisfied through the demand draft payment of Rs. 30 lakh. The statutory right to compound under Section 147 of the NI Act was not extinguished merely because the conviction had attained finality at the High Court level.
The refusal by the JMFC and the High Court to act on the settlement — on the ground that a judgment cannot be reviewed — was set aside as legally incorrect in light of the settled position in Gian Chand Garg.
Direction for Immediate Release
The Court noted from the custody certificate dated 1 May 2026 that Hemant Jain had been in custody since 23 April 2026. Counsel for the appellants submitted that he continued to be in jail as of the date of hearing.
Having quashed the conviction and sentence, the Court directed the Jail Superintendent, Central Jail, Raipur (Chhattisgarh) to release Hemant Jain, son of Nandlal Jain, forthwith. The Jail Superintendent was also directed to forward a mail to the Registry of the Supreme Court confirming compliance with this direction.
Outcome
The appeal was allowed. The impugned order dated 11 May 2026 passed by the High Court of Chhattisgarh at Bilaspur in CRMP No. 1328/2026 was set aside. The order of conviction and sentence against the appellants was quashed. All pending applications were disposed of.