Can a Cheque Bounce Case Be Compounded or Quashed?

Yes: compounding a cheque bounce case is allowed at any stage

Section 147 of the Negotiable Instruments Act 1881 says that, notwithstanding anything in the criminal procedure code, every offence punishable under the Act is compoundable. The offence of dishonour of a cheque for insufficient funds, Section 138, is punishable with imprisonment up to two years, or a fine up to twice the cheque amount, or both. Because of Section 147, it does not matter that the general list of compoundable offences in Section 359 BNSS (old Section 320 CrPC) does not mention it.

Compounding means the complainant and the accused tell the court they have settled, and the court records the settlement and closes the case. The legal effect of compounding is an acquittal. If it happens after conviction, the conviction and sentence go as well. That is why many accused prefer to settle even when they believe they have a defence: it ends the risk of jail and of a conviction on record.

Section 138 cases are, at heart, about money. Courts across India, and the Supreme Court repeatedly, have said these cases should be settled wherever the parties are willing, since lakhs of them clog the magistrates' courts. In Delhi, the district courts have dedicated Negotiable Instruments Act courts, many functioning as digital courts, and they routinely refer parties to mediation at an early date.

Compounding is not the only way out. The High Court can also quash a complaint, either on a settlement or because the complaint is legally defective. The two routes are explained below.

Compounding and quashing: what is the difference?

Compounding is done by the court where the case is pending: the magistrate during trial, the Sessions Court during an appeal against conviction, the High Court during a revision, or the Supreme Court. The parties file a joint application or make statements in court, the court verifies the settlement, and the case ends.

Quashing is done only by the High Court, under its inherent powers in Section 528 BNSS (old Section 482 CrPC). It is used in two situations. The first is a settlement where it is more convenient to close the case at the High Court, for example when there are several complaints in different Delhi districts arising from one transaction and the parties want them all closed in one order. The second is where the complaint is bad in law from the start and there is no settlement at all.

For most people, compounding a cheque bounce case before the trial court is quicker and simpler. It needs no new petition, only an application in the existing case. Quashing makes sense where the case is already in the High Court for another reason, where several cases need to be closed together, or where the complaint should never have been filed. Our guide to Section 528 BNSS and the High Court's inherent powers explains how that power works generally.

The provisions that apply

Does the complainant have to agree?

Yes. Compounding is a settlement between the parties, and the Supreme Court held in JIK Industries v. Amarlal V. Jumani (2012) that it requires the complainant's consent. In 2024 it repeated, in Raj Reddy Kallem v. State of Haryana, that courts cannot compel a complainant to agree, and in A.S. Pharma v. Nayati Medical that a High Court cannot use its inherent powers to compound a cheque case without the complainant's consent.

There is one wrinkle. In Raj Reddy Kallem, the accused had paid the complainant more than the cheque amounts over the years, and the Supreme Court, using its special power under Article 142 of the Constitution, closed the case even without consent. That power belongs only to the Supreme Court and is used in exceptional cases. A trial court or the Delhi High Court will not do the same.

So for the accused, payment alone does not end the case. What payment does is change the picture: a trial court that sees the full amount has been offered or deposited is likely to take that into account if it convicts, and complainants who have been paid in full rarely have a reason to keep litigating. In practice, most complainants agree once the money is real.

For a complainant, the right to refuse is a bargaining point, not a reason to refuse forever. A complainant who turns down full payment with reasonable interest and costs can find the court less patient with requests for adjournments.

What compounding costs: the 2010 scheme and its 2025 revision

To encourage early settlement, the Supreme Court in Damodar S. Prabhu v. Sayed Babalal H. (2010) laid down graded costs for compounding. The later the settlement, the higher the percentage of the cheque amount the accused had to deposit, usually with the legal services authority, as a condition of compounding. Settling at the first or second hearing cost nothing extra; settling in the Supreme Court cost the most.

In September 2025, in Sanjabij Tari v. Kishore S. Borcar, the Supreme Court revisited that scheme and revised it downwards. In broad terms, no costs are charged where the accused pays at an early stage of the trial, and the percentage rises gradually if settlement comes later in the trial, in the Sessions Court or the High Court, and highest in the Supreme Court. The percentages are lower than under the 2010 scheme. Check the current figures and how the court where your case is pending is applying them before you budget.

These costs are separate from what the accused pays the complainant. Courts also have discretion to reduce or waive them in a suitable case, for example where the accused is in genuine financial difficulty or the delay was not his fault. Ask for the reduction in the compounding application itself and give reasons.

For the accused, this is a strong reason to settle early. A case settled before the trial gets going costs only the agreed amount. The same case settled after conviction, in the High Court, adds a percentage on top.

How to settle a cheque bounce case at each stage

Before the magistrate. The easiest time is at the first appearance after summons, or when the court refers the parties to mediation. Delhi's district courts have mediation centres at each court complex, and cheque cases are often sent there. If a settlement is reached, the mediator records it in a signed agreement, the court accepts it, and the case is either compounded at once or kept for the instalments.

During trial. Settlement remains possible at every stage of the trial, including after evidence has been recorded. The parties file a joint compounding application. Lok Adalats held in Delhi courts also take up many cheque cases, and our guide on getting a case settled in Lok Adalat explains how that works.

After conviction. An appeal against conviction goes to the Sessions Court. Settling there leads to compounding and acquittal, even though the magistrate convicted. Money deposited under Section 148 is usually adjusted towards the settlement amount.

In the High Court. If the Sessions Court upholds the conviction, a revision lies to the Delhi High Court, where compounding is again possible. The High Court also hears quashing petitions at the summons stage, and many of those end in settlement through the Delhi High Court Mediation and Conciliation Centre; the guide on mediation in criminal cases at the Delhi High Court explains how sessions run. Our page on cheque bounce appeals and revisions in the Delhi High Court covers that stage in detail.

In the Supreme Court. Settlement remains open even there, with the highest compounding costs.

When the High Court quashes a cheque bounce complaint without a settlement

Quashing without consent is limited to legal defects that appear from the record. The common ones are a demand notice that was never sent or was sent after the 30-day period; a complaint filed before the 15-day payment period expired, which the Supreme Court held in Yogendra Pratap Singh v. Savitri Pandey (2014) is not maintainable; a complaint filed late with no application to condone delay; and a complaint against a company's officers where the company itself has not been made an accused, contrary to Aneeta Hada v. Godfather Travels (2012).

Directors are the largest group who succeed. A non-executive or independent director, a director who resigned before the cheque was issued, or a director against whom the complaint makes no specific averment of being in charge of the business, can often get the complaint quashed as against him. Company records filed with the Registrar of Companies, such as Form DIR-12 showing the resignation date, are the usual proof.

Defences about the debt itself are a different matter. Once the signature on the cheque is admitted, the law presumes under Section 139 that it was issued for a legally enforceable debt, as explained in Rangappa v. Sri Mohan (2010). Arguments that the cheque was only security, that the debt was smaller, or that the loan was never given are for the trial, where the accused can rebut the presumption with evidence. The Supreme Court has also held that a security cheque can attract Section 138 if the debt has become due by the date of presentation.

Because a trial court cannot recall its own summoning order in a summons case, the challenge to summons is usually brought in the High Court. The guide on challenging a summoning order in a complaint case sets out that route.

Which court hears your case

A Section 138 complaint is filed where the payee's bank branch, to which the cheque was presented for collection, is located, under Section 142(2) of the NI Act as amended in 2015. If you presented the cheque at your bank branch in Connaught Place, the case will be in the New Delhi district court at Patiala House; if at a branch in Rohini, the North-West district court at Rohini, and so on.

The High Court that deals with the case is the one with territorial control over the trial court. A complaint pending in any Delhi district comes to the Delhi High Court. A complaint filed in Gurugram goes to the Punjab and Haryana High Court, and one in Ghaziabad or Noida to the Allahabad High Court. Where several cheques from one transaction are the subject of complaints in different courts, Section 142A allows later complaints to be transferred to the court where the first was filed.

For detailed help with a cheque case at the trial stage, including notices and complaints, our sister site chequebouncelawyer.com covers that ground. This guide concentrates on closing the case.

Steps to settle a cheque bounce case

This sequence works for most settlements, whichever court the case is in.

1. Work out the real figure

   List the cheque amount, any part payments, any interim compensation already deposited and a reasonable sum for interest and costs. Settlements fail when one side thinks only of the cheque amount and the other of everything spent on litigation.

2. Open talks through lawyers or mediation

   Ask the trial court to refer the case to mediation, or approach the other side through counsel. Mediation gives a neutral record and the agreement carries the court's weight.

3. Put the terms in writing

   The settlement should state the total, the payment dates, the mode of payment (demand draft, RTGS or post-dated cheques), what happens on default, and that the case will be compounded once payment is complete. Both sides sign; the mediator signs too if it was mediated.

4. Place it before the court

   File the settlement with a joint application. The court records statements of both sides, often in person or by video. If payment is in instalments, the case is usually adjourned for each instalment rather than compounded at once.

5. Pay any compounding costs

   Deposit the costs fixed by the court, if any, and file the receipt. Ask for reduction or waiver in the application if there is a reason.

6. Get the final order

   Once the last payment clears, the court compounds the offence and acquits the accused. Get a copy of the order and, if bail bonds were furnished, ask for their discharge.

If there are connected cases, such as a civil recovery suit or a second cheque complaint, settle them together and record that in the same agreement. Leaving one alive is a common source of fresh disputes.

Time and cost at each stage

Documents for compounding or quashing

Writing a settlement that holds

Most failed settlements fail on instalments. The accused agrees to a figure he cannot pay on time, the complainant agrees because he wants some money, and three months later both are back in court, angrier than before. A shorter schedule that is realistic beats a longer one that is hopeful.

Use demand drafts or bank transfers, not fresh cheques, where possible. If post-dated cheques are part of the deal, the agreement should say what happens if one bounces. Write the default clause clearly: for example, that on default the complainant may ask the court to proceed with the trial, and that payments already made will be adjusted.

A mediated settlement accepted by the court has real force. The Delhi High Court, in Dayawati v. Yogesh Kumar Gosain (2017), held that such a settlement in a cheque case can be enforced, and that a party who wilfully breaks an undertaking given to the court can face contempt proceedings. That is a strong reason for the accused to agree only to what he can pay.

When Advocate B.K. Singh drafts a settlement for a complainant, he keeps the final compounding order back until the last payment has cleared, and asks the court to list the case on each instalment date. The case stays alive as security; once the money is in, closing it takes one hearing.

For the complainant: getting paid before you agree

A complainant's bargaining power is the pending case. Do not sign anything that says 'full and final settlement' or 'no objection to compounding' until the money has actually reached your account. Statements made in court that you have been paid are hard to undo.

Use the tools the Act gives you. During trial, ask for interim compensation under Section 143A; it can be up to 20 per cent of the cheque amount and is recoverable as a fine. If the accused is convicted and appeals, insist on the deposit under Section 148 before the appeal is heard. Money in court is a strong incentive for the accused to settle.

If the accused is acquitted, the Supreme Court in Celestium Financial (2025) treated a cheque bounce complainant as a victim who can appeal against acquittal without first seeking special leave; which court hears that appeal depends on the trial court and should be checked. Our page on cheque bounce cases in the Delhi High Court covers appeals and revisions from the complainant's side as well.

Directors, partners and accused living abroad

Where a company is the drawer, the settlement should be signed on behalf of the company under a board resolution, and should cover all the directors and officers named. Directors who were wrongly named can settle together with the company or pursue quashing separately; doing both at once is usually unnecessary.

In a partnership, the firm and the partners responsible for its business are liable. A partner who had retired before the cheque was issued, with a registered retirement deed or notice to the bank, has a strong ground for quashing as against him.

Accused persons living abroad can settle without travelling. The settlement can be signed before a notary or the Indian embassy, payment made by bank transfer, and the court asked to exempt personal appearance or allow appearance by video for recording the statement. Delhi courts generally permit this where the identity of the party is properly verified. An unattended cheque case can lead to warrants and even proclamation, so do not let it drift because you are outside India.

Mistakes that cost money or time

• Waiting for conviction before talking. Settlement after conviction costs more, both in compounding costs and in what the complainant will accept.
• Agreeing to an unrealistic schedule. A default after a court-recorded settlement can lead to the trial resuming and, if an undertaking was given, contempt.
• Skipping hearings while talks are on. The magistrate can issue a warrant if the accused is absent without exemption. Keep attending until the case is closed.
• Paying without paperwork. Cash or informal payments are hard to prove. Pay by bank transfer or demand draft and record each payment in court.
• Running two remedies on one point. Filing a quashing petition on the same grounds already raised in a revision invites dismissal. When Advocate B.K. Singh takes over a cheque file, he first lists every pending case between the parties, civil and criminal, so the settlement or petition covers them all.
• Leaving connected cases open. A civil recovery suit or a second complaint left pending after one case is compounded is an invitation to fresh litigation.

What to do this week

If you are the accused, find out the next date and the stage of the case from the court's case status, decide what you can pay and by when, and ask for mediation at the next hearing; compounding a cheque bounce case at this early stage usually costs nothing beyond the agreed amount. If you think the complaint is legally defective, for instance because you resigned as director before the cheque was issued, collect the documents that prove it.

If you are the complainant, check that interim compensation has been sought, keep the original cheque, return memo and notice papers safe, and decide what figure you would accept. Settlement through the court is usually faster than trial, but only on terms that protect your money. Where several cases between the same parties need to be closed together, our page on quashing a case after compromise explains how the High Court handles it.

For advice on your papers, or for updates on how compounding costs and settlement rules are being applied, contact Advocate B.K. Singh.