Holding

The conviction under Section 138 of the Negotiable Instruments Act is quashed and the accused acquitted, subject to payment of compounding costs of 7.5% of the cheque amount.

Summary

The accused, Nileshkumar Rameshbhai Parmar, was convicted under Section 138 of the Negotiable Instruments Act for issuing a dishonoured cheque and sentenced to one year imprisonment with a compensation order of Rs.7,30,000. He appealed, but the conviction was upheld by the Additional Sessions Judge. Subsequently, the original complainant, Jashwantbhai Dabgar, entered into an amicable settlement, receiving Rs.6,00,000 in addition to amounts already paid, and consented to the quashing of the conviction. Relying on Section 147 of the NI Act and Supreme Court precedents that allow compounding of offences even post‑conviction, the High Court allowed the revision application, set aside the conviction, and ordered the accused to deposit costs equal to 7.5% of the cheque amount before release. The accused was ordered to be released forthwith upon compliance.

Issues considered

Whether a conviction under Section 138 of the Negotiable Instruments Act can be quashed on the basis of a post‑conviction settlement between the parties.
Whether the offence under Section 138 is compoundable under Section 147 of the NI Act notwithstanding the provisions of the Code of Criminal Procedure.
What costs, if any, are payable by the accused when the offence is compounded after conviction.

Legislation cited

Negotiable Instruments Act, 1881s. 138, s. 147

Subjects

Negotiable Instruments ActSection 138Compounding of offencesCriminal revisionSettlementQuashing of convictionCompounding costs

Judgment

R/CR.RA/1689/2026 ORDER DATED: 04/08/2026

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

R/CRIMINAL REVISION APPLICATION (AGAINST CONVICTION -
NEGOTIABLE INSTRUMENT ACT) NO. 1689 of 2026
==========================================================
NILESHKUMAR RAMESHBHAI PARMAR
Versus
STATE OF GUJARAT
==========================================================
Appearance:
MR DURGESHKUMAR R RAWAL(13653) for the Applicant(s) No. 1
MR MAYANK P SHAH(13933) for the Applicant(s) No. 1
MR SOAHAM M JOSHI, APP for the Respondent(s) No. 1
==========================================================
CORAM:HONOURABLE MS. JUSTICE S.V. PINTO

Date : 04/08/2026

ORAL ORDER

1. Learned advocate Mr. Tulan U. Vaishnav submits

that he has instructions to appear on behalf of the respondent

No.2 – original complainant and seeks permission to le his

appearance.

Registry to accept.

2. Rule. Learned APP waives service of rule for the

respondent No.1-State and learned advocate Mr. Tulan U.

Vaishnav for the respondent No.2.

3. Learned advocate Mr. Mayank P. Shah for the

applicant and learned advocate Mr. Tulan U. Vaishnav for the

respondent No.2 – original complainant, jointly submit that

the matter is amicably settled between the parties and the

Page 1 of 11
R/CR.RA/1689/2026 ORDER DATED: 04/08/2026

present application be taken up for nal hearing and be

disposed of accordingly.

4. In view of the above submissions made by the

learned advocates for the respective parties, the matter is

taken up for nal hearing.

5. By way of the present application, the applicant –

accused has prayed to quash and set aside the judgment and

order of conviction passed by the learned Additional Sessions

Judge, Court No.23, City Civil & Sessions Court, Ahmedabad

in Criminal Appeal No. 336 of 2024 dated 16.05.2026

con rming the judgment and order passed by the learned

Additional Chief Metropolitan Magistrate, N.I. Act, Court

No.32, Ahmedabad in Criminal Case No. 91588 of 2018 dated

30.03.2024, whereby, the present applicant - accused was

sentenced simple imprisonment for one year and ordered to

pay an amount of Rs.7,30,000/- as compensation to the

complainant within three months, and in default, simple

imprisonment for three months for the o9ence under Section

138 of the Negotiable Instruments Act, 1881.

6. Heard learned advocate Mr. Mayank P. Shah for

the applicant, learned APP Mr. Soaham M. Joshi for the

Page 2 of 11
R/CR.RA/1689/2026 ORDER DATED: 04/08/2026

respondent No.1 – State and learned advocate Mr. Tulan U.

Vaishnav for the respondent No.2 – original complainant.

7. Learned advocate Mr. Mayank P. Shah for the

applicant submits that the dispute between the parties has

been amicably settled and the respondent No.2 – original

complainant has received the entire settlement amount and

does not wish to prosecute the matter further. The

compromise has been entered into voluntarily, without any

coercion, undue in;uence or pressure and, therefore, the

respondent No.2 has no objection if the impugned judgment

and order of conviction as well as all other consequential

proceedings arising pursuant thereto are quashed against the

applicant – accused. Learned advocate further submits that

the applicant at present is in custody undergoing the

sentence.

8. Learned advocate Mr. Tulan U. Vaishnav for the

respondent No.2 – original complainant submits that the

respondent No.2, Jashwantbhai Dabgar, - original

complainant has appeared through online mode and has

produced a copy of a9idavit of the respondent No.2 – original

complainant, which is taken on record.

Page 3 of 11
R/CR.RA/1689/2026 ORDER DATED: 04/08/2026

9. Learned APP Mr. Soaham M. Joshi for the

respondent No.1 – State submits that the impugned judgment

and order of sentence is just and proper; however,

considering the fact that the dispute between the parties is

amicably settled, necessary order may be passed.

10. The respondent No.2 – original complainant has

appeared through online mode, and on inquiry, submits that

the dispute between them has been settled amicably and the

entire settlement amount has been received and he does not

wish to prosecute the matter further. He admits to the

contents of the a9idavit and submits that the compromise has

been entered into of his own free will without any fear, threat

and coercion.

11. The a9idavit led by the respondent No. 2 –

original complainant reads as under:

“I, Jashwantbhai Dabgar, S/o. Ramanbhai Dabgar,
aged about 66 Years, Hindu, Occupation:
Retired, Residing at: B/5, Girivrund Society,
Opp. Kubreshwar Mahadev, Naroda Road,
Ahmedabad-382345, do hereby solemnly
a9irm that;
1. I am the Respondent No. 2 herein, being the
Original Complainant in Criminal Case No.
91588 of 2018, and I am conversant with the
facts of the case and competent to a9irm this
A9idavit.

Page 4 of 11
R/CR.RA/1689/2026 ORDER DATED: 04/08/2026

2. I had led a Complaint under Section 138 of
the Negotiable Instruments Act, 1881 against
the Applicant herein, Nileshkumar
Rameshbhai Parmar, before the Learned
Additional Chief Metropolitan Magistrate,
Court No. 32, Ahmedabad, in respect of the
dishonour of Cheque No. 038286 dated
August 20, 2018, drawn by the Applicant in
my favour for an amount of Rs. 7,00,000/-
(Rupees Seven Lakh Only), which was
returned unpaid vide Bank Memo dated
August 23, 2018 with the remark "Payment
Stopped by Drawer". The said Complaint was
registered as Criminal Case No. 91588 of
2018.
3. By Judgment and Order dated March 30,
2024, the Learned Magistrate convicted the
Applicant for the o9ence punishable under
Section 138 of the Negotiable Instruments
Act, 1881 and sentenced him to undergo
simple imprisonment for a period of one (01)
year, together with a direction to pay
compensation of Rs. 7,30,000/- (Rupees Seven
Lakh Thirty Thousand Only) to me, in default
whereof to undergo further simple
imprisonment for a period of three (03)
months. Being aggrieved thereby, the
Applicant preferred Criminal Appeal No. 336
of 2024 before the Learned Additional
Sessions Judge, Ahmedabad City, in the
course of which the Applicant deposited 20%
of the cheque amount, i.e., Rs. 1,46,000/-
(Rupees One Lakh Forty-Six Thousand Only),
on May 31, 2024 and July 12, 2024, which
amount was withdrawn by me pursuant to
Order dated October 16, 2024.
4. The aforesaid Criminal Appeal No. 336 of
2024 came to be dismissed by the Learned
Additional Sessions Judge vide Order dated
May 16, 2026, upholding the conviction and
sentence recorded by the Learned Trial Court.
Being aggrieved thereby, the Applicant has
preferred the present Criminal Revision
Application No. 1689 of 2026 before this

Page 5 of 11
R/CR.RA/1689/2026 ORDER DATED: 04/08/2026

Hon'ble High Court, wherein the Applicant is
presently in judicial custody since August 01,
2026. Pursuant to discussions held between
the families of the parties, an amicable
settlement has since been arrived at between
the Applicant and myself, and I am a9irming
this Consent A9idavit in furtherance of the
said settlement.
5. I, the Original Complainant/Respondent No. 2
herein, do hereby a9irm and con rm the
aforesaid settlement and consent to the
settlement amount of Rs. 6,00,000/- (Rupees
Six Lakh Only), over and above the amount of
Rs. 1,46,000/-already deposited by the
Applicant and withdrawn by me as stated in
Paragraph 3 above, in full and nal settlement
of all claims arising out of the aforesaid
transaction.
6. I hereby acknowledge receipt of the aforesaid
sum of Rs. 6,00,000/- (Rupees Six Lakh Only)
paid by the Applicant through NEFT/RTGS
transfer into my bank account, the copy of the
transfer con rmation /receipt being annexed
hereto and marked as ANNEXURE-A.
7. In view of the receipt of the full and nal
settlement amount as aforesaid, I have no
objection whatsoever to the release of the
Applicant and to the setting aside or quashing
of the conviction and sentence passed by the
Learned Magistrate, Court No. 32, in Criminal
Case No. 91588 of 2018, as upheld by the
Learned Additional Sessions Judge,
Ahmedabad City, in Criminal Appeal No. 336
of 2024, and I have no objection to this
Hon'ble Court allowing Criminal Revision
Application No. 1689 of 2026 and acquitting
the Applicant of the charge under Section 138
of the Negotiable Instruments Act, 1881.
8. I hereby a9irm and declare that, upon receipt
of the aforesaid settlement amount, no dues,
claims, or demands whatsoever remain
outstanding or payable by the Applicant to me
arising out of Criminal Case No. 91588 of

Page 6 of 11
R/CR.RA/1689/2026 ORDER DATED: 04/08/2026

2018, Criminal Appeal No. 336 of 2024, or the
present Criminal Revision Application No.
1689 of 2026, or out of the underlying
transaction between the parties, and I shall
not initiate or pursue any further civil,
criminal, or other proceedings against the
Applicant in respect thereof.
9. The contents of this A9idavit have been read
over and explained to me in Gujarati, my
regional language, and having understood the
same, I have a9irmed this A9idavit voluntarily
and without any coercion, threat, undue
in;uence, or inducement from any person.
10. The contents of this A9idavit are true and
correct to the best of my knowledge,
information, and belief, and nothing material
has been concealed therefrom.”

12. Section 147 of the N.I.Act makes o9ences under

the Act compoundable notwithstanding anything contained in

the Code of Criminal Procedure. The Hon’ble Supreme Court

in Damodar S. Prabhu v. Sayed Babalal H., (2010) 5 SCC

663, recognized that the primary object of proceedings under

Section 138 N.I. Act is compensatory in nature and

encouraged compounding even at later stages subject to

payment of appropriate costs.

13. Recently, in Gian Chand Garg v. Harpal Singh

and Another, 2025 SCC OnLine SC 2317, the Hon’ble

Supreme Court has observed in Para Nos. 5 to 10 as under :

“5. Be that as it may, at the outset, it is apposite to advert to

Page 7 of 11
R/CR.RA/1689/2026 ORDER DATED: 04/08/2026

settled position of law enunciated by this Court with regard
to nature of proceedings under Section 138 of N.I.Act and
the legal consequences that ensues upon a compromise
being entered into between the parties.

6. This court in M/s. Meters and Instruments Private
Limited & Anr. v. Kanchan Mehta, 2018 (1) SCC 560
held that the nature of o9ence under section 138 of the
N.I.Act is a mainly a civil wrong and has been made
speci cally compoundable by section 147 of the N.I.Act
which was inserted by the 2002 amendment to the said Act.
The relevant observations have been extracted for reference:

“This Court has noted that the object of the statute was
to facilitate smooth functioning of business
transactions. The provision is necessary as in many
transactions’ cheques were issued merely as a device
to defraud the creditors. Dishonor of cheque causes
incalculable loss, injury and inconvenience to the Vide
the Banking, Public Financial Institutions and
Negotiable Instruments Laws (Amendment) Act, 1988
payee and credibility of business transactions su9ers a
setback. At the same time, it was also noted that
nature of o9ence under Section 138 primarily related
to a civil wrong and the 2002 amendment speci cally
made it compoundable.”

7. It is also apposite to reiterate the observations in P.
Mohanraj & Ors. v. M/s. Shah Brothers Ispat Pvt. Ltd.
(2021) 6 SCC 258 wherein this court referred the o9ence
under section 138 N.I.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.

8. Further in M/s. Gimpex Private Limited v. Manoj Goel
(2021) SCC OnLine SC 925 this court took into
consideration the e9ect of settlement arrived between the
parties and observed that:

“38. When a complainant party enters into a compromise
agreement with the accused, it may be for a multitude
of reasons - Higher Compensation, faster recovery of
money, uncertainty of trial and strength of complaint,
among others. A complainant enters into a settlement
with open eyes and undertakes the risk of the accused
failing to honour the cheques issued pursuant to the
settlement, based on certain bene ts that the
settlement agreement postulates. Once parties
voluntarily entered into such an agreement and agree

Page 8 of 11
R/CR.RA/1689/2026 ORDER DATED: 04/08/2026

to abide by the consequence of non-compliance of the
settlement agreement, they cannot be allowed to
reverse the e9ects of the agreement by pursuing both
the original complaint and the subsequent complaint
arising from such non-compliance. The Settlement
agreement subsumes the original complaint……”

9. In B.V. Seshaiah v. State of Telangana & Anr. (2023)
SCC OnLine SC 96 this court was of the view that when
parties enter into an agreement and compound the o9ence,
they do so to save themselves from the process of litigation
and when such a step is taken by the parties, the law very
well allows them to do so. Hence, the courts cannot override
such compounding and impose its will.

10. Therefore, it is very clear that although dishonour of cheque
entails criminal consequence, the legislature by virtue of
section 147 of the N.I.Act has made it compoundable
notwithstanding the provisions of the Code of Criminal
Procedure, 1973 and the same can be compounded at any
stage of the proceedings especially when the parties have
themselves arrived at a voluntary compromise.”

14. Further, in Sanjabij Tari v. Kishore S. Borcar

and Another (Criminal Appeal No. 1755 of 2010, decided

on 25.09.2025), the Hon’ble Supreme Court modi ed the

earlier guidelines relating to compounding costs and observed

that where payment is made before the Sessions Court or

High Court in revision/appeal, compounding may be permitted

on payment of 7.5% of the cheque amount by way of costs.

15. So far as the objection that post-conviction

compromise may dilute the rigour of criminal process is

concerned, the same does not survive in view of the law laid

down in Gian Chand Garg (supra), wherein the Hon’ble

Page 9 of 11
R/CR.RA/1689/2026 ORDER DATED: 04/08/2026

Supreme Court speci cally held that compounding under

Section 138 N.I. Act can be permitted even after conviction

and that such exercise does not violate the statutory scheme

but rather advances the object of ensuring payment and

reducing unnecessary litigation.

16. Accordingly, the present application is allowed.

17. The judgment and order of conviction passed by

the learned Additional Sessions Judge, Court No.23, City Civil

& Sessions Court, Ahmedabad in Criminal Appeal No. 336 of

2024 dated 16.05.2026 con rming the judgment and order

passed by the learned Additional Chief Metropolitan

Magistrate, N.I. Act, Court No.32, Ahmedabad in Criminal

Case No. 91588 of 2018 dated 30.03.2024 under Section 138

of the N.I.Act are hereby quashed and set aside on the basis

of compromise between the parties.

18. However, as the settlement has been arrived at the

stage of proceedings before this Court, the applicant shall

deposit costs equivalent to 7.5% of the cheque amount with

the Gujarat State Legal Services Authority within two weeks

of his release and shall place proof of such deposit on record.

Page 10 of 11
R/CR.RA/1689/2026 ORDER DATED: 04/08/2026

19. Subject to deposit of the aforesaid costs, the

o9ence shall stand compounded and the applicant shall stand

acquitted of the charge under Section 138 of the N.I.Act. As

the applicant is in custody undergoing the sentence, he shall

be released forthwith.

20. Rule made absolute.

21. Direct service is permitted.

(S. V. PINTO,J)
ROHAN SONI
Original copy of this order has been signed by the Hon'ble Judge.
Digitally signed by: ROHAN SONI(HC02356), ENGLISH STENO GRADE-II\, at High Court of Gujarat on 04/08/2026 18:40:21

Page 11 of 11