Holding

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

Summary

Zakirbhai Ganibhai Mankad was convicted under Section 138 of the Negotiable Instruments Act and sentenced to one year imprisonment and a fine. He filed a criminal revision and a misc application seeking to quash the conviction, alleging an amicable settlement with the complainant, Shankarbhai Solanki, who received a cash payment of Rs.1,50,000 and a deposit of Rs.1,00,000. Both parties consented to the compromise, and the complainant filed an affidavit confirming the settlement and his willingness to have the conviction set aside. The Court examined the compoundability of offences under Section 138, relying on Section 147 of the Act and several Supreme Court precedents permitting post‑conviction compounding. It allowed the revision, quashed the conviction, ordered the applicant to pay costs equal to 7.5% of the settlement, and directed the return of the deposited amount to the complainant, thereby acquitting the applicant.

Issues considered

Whether a post‑conviction compromise under Section 138 of the Negotiable Instruments Act can be treated as a valid compounding of the offence.
Whether the High Court may set aside a conviction and sentence on the basis of a settlement between the parties.
What costs, if any, are payable by the accused when a settlement is effected at the revision stage.

Legislation cited

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

Subjects

Negotiable Instruments ActSection 138Compounding of offenceCriminal revisionSettlementAcquittalHigh Court of GujaratCosts

Judgment

R/CR.RA/2371/2026 ORDER DATED: 11/08/2026

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

R/CRIMINAL REVISION APPLICATION (AGAINST CONVICTION -
NEGOTIABLE INSTRUMENT ACT) NO. 2371 of 2026
With
CRIMINAL MISC.APPLICATION (FOR SUSPENSION OF SENTENCE) NO.
1 of 2026
In R/CRIMINAL REVISION APPLICATION NO. 2371 of 2026
==========================================================
ZAKIRBHAI GANIBHAI MANKAD
Versus
STATE OF GUJARAT & ANR.
==========================================================
Appearance:
MR MOHAMMEDASAD M KADIWALA(12733) for the Applicant(s) No. 1
MS. C.M. SHAH, APP for the Respondent(s) No. 1
==========================================================

CORAM:HONOURABLE MS. JUSTICE S.V. PINTO

Date : 11/08/2026

ORAL ORDER

ORDER IN CRIMINAL REVISION APPLICATION:

1. Learned advocate Mr. Smit Vaghela submits that he

has instructions to appear on behalf of the respondent no. 2

and seeks permission to file his appearance.

Registry to accept the same.

2. Rule, learned APP waives service of rule for the

respondent-State. Learned advocate Mr. Smit Vaghela for

the respondent no. 2 waives service of rule for the

respondent no. 2.

3. Learned advocates jointly submit that the matter is

amicably settled between the parties as the applicant has

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given the entire agreed amount to the respondent no. 2 and

therefore, the present application be taken up for final

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 final 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 5 th Additional

Sessions Judge, Banaskantha at Deesa in Criminal Appeal

No. 45/2026 dated 22.07.2026 confirming the judgment

and order passed by the learned Additional Chief Judicial

Magistrate, Deesa in Criminal Case No. 3722/2024 dated

30.01.2026, whereby, the present applicant - accused was

sentenced simple imprisonment for one year and fine of of

Rs. 5,00,000/-, and in default, simple imprisonment for six

months for the offence under Section 138 of the Negotiable

Instruments Act, 1881.

6. Heard learned advocate Mr. M.M. Kadiwala for the

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applicant, learned advocate Mr. Smit Vaghela for the

respondent no. 2 and learned APP Ms. C.M. Shah for the

respondent – State.

7. Learned advocate Mr. M.M. Kadiwala for the applicant

submits that the dispute between the parties has been

amicably settled and the respondent no.2 – original

complainant has received the settlement amount and does

not wish to prosecute the matter further. The compromise

has been entered into voluntarily, without any coercion,

undue influence 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

8. Learned advocate Mr. Smit Vaghela submits that the

respondent no. 2 – original complainant – Solanki

Shankarbhai Naranji is present in-person before this Court.

Learned advocate produces the affidavit filed by the

respondent no. 2 which is taken on record. Learned

advocate submits that the applicant has deposited an

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amount of Rs. 1,00,000/- before the Sessions Court,

Banaskantha at Deesa vide receipt no. 5156578 dated

27.02.2026 and the amount may be disbursed in favour of

the respondent no. 2.

9. Learned APP Ms. C.M. Shah 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 is present

in-person before this Court, and on inquiry, submits that

the dispute between them has been settled amicably and

the entire settlement amount of has been received and he

does not wish to prosecute the matter further. He admits to

the contents of the affidavit and submits that the

compromise has been entered into his own free will without

any fear, threat and coercion.

11. The affidavit filed by the respondent no. 2 – original

complainant reads as under:

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“I, Shankarbhai son of Naranji Solanki, aged about 58
years, residing at: Behind Deepak Hotel, Kant Road, Deesa,
Taluka: Deesa, District: Banaskantha, the respondent No. 2 –
original complainant herein, do hereby state on oath and declare
as under:-

1. It is respectfully stated that, I am the original complainant
in Criminal Case No. 3722 of 2024 filed before the Court of the
Learned Additional Chief Judicial Magistrate, Deesa, for the
commission of an offence punishable under Section 138 of the
Negotiable Instruments Act, 1881.

2. It is respectfully stated that vide judgment and order dated
30.01.2026, the Learned Additional Chief Judicial Magistrate,
Deesa, was pleased to convict the present applicant (original
accused) and sentence him to undergo simple imprisonment for a
period of one year, along with an order to pay a compensation of
Rs. 5,00,000/-(Rupees Five Lakhs Only). The said judgment and
order was confirmed by the Learned 5th Additional Sessions
Judge, Banaskantha at Deesa, vide judgment and order dated
22.07.2026 in Criminal Appeal No. 45 of 2026.

3. It is respectfully submitted that the applicant (original
accused) has preferred the above referred Criminal Revision
Application challenging the aforesaid judgments and orders of
conviction. And is further submitted that along with the said
Revision Application, the applicant has also preferred the present
Criminal Misc. Application seeking suspension of sentence and to
be released on bail pending the final disposal of the Revision
Application.

4. It is respectfully stated that during the pendency of the
present proceedings, an amicable settlement has been arrived at
between myself and the applicant (original accused) outside the
Court. The dispute, has been resolved on the following agreed
terms:

A. The applicant has paid an amount of Rs. 1,50,000/-
(Rupees One Lakh Fifty Thousand Only) in cash.

B. The deponent, shall be permitted to withdraw the
deposit amount of Rs. 1,00,000/- (Rupees One Lakh Only),
which was deposited by the present applicant before the
Learned Sessions Court, Banaskantha at Deesa.

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C. The remaining outstanding amount shall be paid by the
applicant to deponent in regular, agreed-upon instalments.

5. It is respectfully submitted that in view of the aforesaid
amicable settlement and the part-payment received. The
grievance against the applicant stands entirely redressed.

6. It is respectfully submitted that considering the totality of
the facts and circumstances of the case, the deponent have no
objection whatsoever if this Honourable Court is pleased to allow
the present Criminal Misc. Application by suspending the
sentence imposed upon the applicant and releasing him on bail.

7. It is further stated that the deponent herein has no
objection if this Honourable Court is pleased to allow the
captioned Criminal Revision Application, and quash and set aside
the impugned judgment and order of conviction dated 30.01.2026
passed by the Learned Additional Chief Judicial Magistrate,
Deesa, in Criminal Case No. 3722 of 2024 (as confirmed by the
impugned judgment and order dated 22.07.2026 passed by the
Learned 5th Additional Sessions Judge, Banaskantha at Deesa,
in Criminal Appeal No. 45 of 2026), and consequently acquit the
applicant.

8. What is stated hereinabove is true and correct to the best of
my personal knowledge, information, and belief, and I believe the
same to be true.

Solemnly affirmed at Ahmedabad on this the 11th day of August,
2026.

12. Section 147 of the N.I.Act makes offences 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

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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
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 offence under section 138 of the
N.I.Act is a mainly a civil wrong and has been made
specifically 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 suffers
a setback. At the same time, it was also noted that
nature of offence under Section 138 primarily related
to a civil wrong and the 2002 amendment specifically
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 offence
under section 138 N.I.Act as a “Civil Sheep” in “Criminal

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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 effect 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
benefits that the settlement agreement postulates.
Once parties voluntarily entered into such an
agreement and agree to abide by the consequence of
non-compliance of the settlement agreement, they
cannot be allowed to reverse the effects 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 offence,
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.”

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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 modified 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% by way of cost.

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

Supreme Court specifically 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. Thus, permitting the

present compromise does not offend the principles laid

down in Damodar S. Prabhu (Supra) or Sanjabij Tari

(Supra); rather, the same is subject to payment of costs in

terms of the modified guidelines.

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16. Accordingly, the present application is allowed.

17. The judgment and order of conviction passed by the

learned 5th Additional Sessions Judge, Banaskantha at

Deesa in Criminal Appeal No. 45/2026 dated 22.07.2026

confirming the judgment and order passed by the learned

Additional Chief Judicial Magistrate, Deesa in Criminal

Case No. 3722/2024 dated 30.01.2026 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 settlement amount

before the District Service Legal Authority, Banaskantha @

Palanpur by any mode, within a period of four weeks from

the date of his release and shall place proof of such deposit

on record.

19. Subject to deposit of the aforesaid costs, the offence

shall stand compounded and the applicant shall stand

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

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20. The respondent no. 2 is permitted to withdraw the

amount of Rs. 1,00,000/- deposited by the applicant before

the Additional Sessions Court, Banaskantha at Deesa vide

receipt no. 5156578 dated 27.02.2026. The Additional

Sessions Court, Banaskantha at Deesa, is directed to

release the said amount of Rs. 1,00,000/- to the respondent

no. 2 – original complainant, upon due verification.

21. Rule is made absolute to the aforesaid extent. Direct

service is permitted.

ORDER IN CRIMINAL MISC. APPLICATION:

In view of the above, the present application does not

survive and is disposed of accordingly.

(S. V. PINTO,J)
VASIM S. SAIYED

Original copy of this order has been signed by the Hon'ble Judge.
Digitally signed by: VASIM SHABBIR SAIYED(HC01902), PRIVATE SECRETARY, at High Court of Gujarat on 11/08/2026 18:57:58

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