Compounding & Settlement of Cheque Bounce Cases in 2026: Section 147 NI Act, Sanjabij Tari, Costs, Appeal & Post-Conviction Closure

The Supreme Court’s reportable judgment is available in Sanjabij Tari v. Kishore S. Borcar. For the basic Section 138 filing framework, see our Cheque Bounce Case in India guide.

1. Why Section 147 matters

Section 147 contains a non-obstante clause making every offence punishable under the NI Act compoundable. This reflects the compensatory character of cheque-bounce litigation. The criminal process is used to strengthen the credibility of negotiable instruments, but settlement and payment remain central to the statutory scheme.

2. What Sanjabij Tari changed

The earlier Damodar S. Prabhu guidelines imposed progressively higher costs depending on the stage at which compounding occurred. In Sanjabij Tari, the Supreme Court revisited those percentages because of the enormous pendency of Section 138 cases and the need to incentivise payment before evidence and judgment.

These are judicial guidelines, not a substitute for careful assessment of the settlement terms and the actual stage of the case.

3. Can a cheque-bounce case be settled before summons?

Yes. The parties can settle after receipt of the legal notice and before the complaint is filed, or after filing but before service. Early settlement usually offers the cleanest commercial outcome because litigation cost, appearance and coercive-process risk are minimised.

4. Settlement after summons

Sanjabij Tari places strong emphasis on early payment. The Supreme Court directed that summons in Section 138 cases should inform the accused about early-payment options and also encouraged online payment mechanisms through district courts. In 2026, counsel should treat the first appearance as a serious settlement checkpoint.

5. Payment before defence evidence

This is now the most favourable stage under the revised guideline. Where the accused pays the cheque amount before his or her defence evidence is recorded, the Trial Court may allow compounding without additional cost or penalty. The settlement should nevertheless state clearly whether interest, litigation cost, other civil claims and multiple cheques are also being resolved.

6. Settlement after defence evidence

If payment is made after defence evidence but before the Magistrate pronounces judgment, the Supreme Court’s revised guideline contemplates compounding on payment of an additional 5% of the cheque amount to the Legal Services Authority or another authority considered appropriate by the Court.

7. Settlement after conviction

Conviction does not automatically end the possibility of settlement. Section 147 has repeatedly been applied at appellate and revisional stages. The appellate court can consider a genuine compromise and pass appropriate orders in accordance with the statute and binding precedent.

But a private settlement does not by itself erase a conviction. The parties must obtain a judicial order giving effect to the compromise.

8. Sessions Court and High Court stage

Where the cheque amount is paid while a criminal appeal or revision is pending before the Sessions Court or High Court, Sanjabij Tari states that the court may compound the offence subject to 7.5% of the cheque amount as costs.

This should be coordinated with any existing order under Section 148 NI Act. A statutory appeal deposit is not automatically identical to the settlement amount.

9. Settlement before the Supreme Court

If the cheque amount is tendered at the Supreme Court stage, the revised guideline raises the cost figure to 10%. The policy is obvious: early settlement should be cheaper than settlement after several courts have spent time on the dispute.

10. Is the complainant required to accept only the cheque amount?

Compounding is ordinarily based on settlement between the parties. A complainant may assert that contractual interest, costs or other dues remain outstanding. Sanjabij Tari specifically recognised that situations may arise where the complainant or financial institution demands more than the cheque amount or seeks settlement of the entire loan.

In such circumstances, the Magistrate may explore other lawful disposal routes, including a plea of guilt and sentencing powers under the current criminal procedure framework. The Court cannot simply rewrite the parties’ commercial bargain.

11. Difference between compounding and withdrawal

Compounding extinguishes the criminal offence through a legally recognised compromise. Withdrawal is a different procedural act and its availability depends on the statutory and procedural context. In Section 138 practice, parties should ask the court to record the settlement and pass a clear compounding/closure order rather than rely on ambiguous language.

12. Settlement of multiple cheque cases

A commercial relationship may produce several Section 138 complaints arising from multiple cheques. A settlement must identify every cheque number, complaint number, court and amount. Do not assume that settlement of one complaint automatically disposes of the others.

The Supreme Court has also recognised that multiple distinct cheques can generate separate causes of action. Our security and multiple-cheque guide explains the point.

13. What if the settlement is by instalments?

Instalment settlements are common. They should specify:

• total admitted settlement amount;
• amount paid immediately;
• each instalment date and amount;
• payment mode and bank details;
• whether compounding occurs immediately or only after final payment;
• what happens if one instalment is delayed;
• whether previous concessions stand withdrawn on material default;
• how Section 148 deposits are adjusted;
• status of civil suits, arbitration or recovery proceedings;
• return or cancellation of original cheques after final payment.

14. Should the complaint be compounded immediately on signing settlement?

That depends on risk allocation. A complainant accepting a long instalment plan may prefer the complaint to remain pending until full payment, while the accused may seek immediate closure. The safer drafting solution depends on the payment schedule, security and court’s willingness to pass staged orders.

15. Default after settlement

A settlement should not merely say “case will be withdrawn.” It should define the consequence of default. Depending on how the settlement is structured and recorded, breach may result in continuation of the existing complaint, enforcement of a court-recorded settlement, revival clauses, or other civil remedies.

The exact consequence depends on the wording of the judicial order. Never assume that a failed private settlement automatically revives a proceeding already finally compounded.

16. Compounding and Section 148 deposit

Where an appellant has deposited 20% or more under Section 148, the settlement should state whether the deposit is to be released to the complainant, refunded, adjusted against settlement consideration or retained until compliance. The appellate court’s order is essential.

17. Compounding and Section 143A interim compensation

Any interim compensation paid under Section 143A should also be accounted for. The settlement should show the gross cheque amount, Section 143A payment already received, further amount payable and final balance. This avoids double recovery disputes.

18. What Sanjabij Tari says about modern Section 138 procedure

The judgment went beyond compounding costs. It directed broader procedural changes, including dasti and electronic summons, complainant affidavits of service, online payment options, a standard complaint synopsis, early identification of the accused’s defence, stricter use of summary trial and active monitoring of NI Act pendency. These directions reinforce a settlement-oriented and front-loaded procedure.

19. Can compounding happen even very late?

Section 147 does not prescribe an early cut-off. Courts have permitted compounding at appellate and later stages. Delay, however, affects cost and judicial discretion. The later the settlement, the more important it becomes to place complete payment proof and unambiguous consent before the court.

20. Post-conviction compromise: what should be filed?

1. joint application or appropriate compounding petition;
2. signed settlement deed;
3. payment proof;
4. identity and authority documents where parties are companies;
5. statement on whether any balance survives;
6. details of Section 148 deposit;
7. request for setting aside conviction/compounding in accordance with law;
8. undertaking regarding withdrawal of connected proceedings, if agreed.

21. Sanjabij Tari costs are not the cheque amount itself

The 5%, 7.5% and 10% figures are additional compounding costs at specified later stages. They are not a substitute for payment of the cheque amount. Lawyers should keep the principal settlement consideration and judicial compounding cost conceptually separate.

22. Frequently asked questions

Can a Section 138 case be settled after conviction?

Yes. Section 147 allows compounding and courts have repeatedly recognised settlement at appellate and revisional stages, subject to an appropriate judicial order.

What are the current Supreme Court compounding percentages?

Under Sanjabij Tari, no additional cost may be imposed if payment is made before defence evidence; 5% after defence evidence but before trial judgment; 7.5% before Sessions Court/High Court in revision or appeal; and 10% at the Supreme Court stage.

Does paying the cheque amount automatically close the case?

No. Payment should be placed before the court and a formal order of compounding or lawful disposal obtained.

Can one settlement cover several cheque cases?

Yes, but each cheque and complaint should be expressly identified and the closure mechanism for each court case should be stated.

Can the complainant demand interest and legal costs?

The parties can negotiate broader commercial settlement terms. The Supreme Court guideline on compounding costs does not erase other contractual or legally sustainable claims by itself.

23. Conclusion

The 2025 Sanjabij Tari judgment materially changed Section 138 settlement strategy. In 2026, the cheapest and cleanest compounding window is before defence evidence. Once the matter reaches judgment, appeal or the Supreme Court, the cost percentage rises. Parties should therefore evaluate settlement early and draft it with the same care as a final decree: identify every cheque, every pending case, every deposit, every instalment and the exact consequence of default.