Cheque Bounce Case Compromise Process in India: How to Settle a Section 138 Case Step by Step

A cheque bounce case can be settled at any stage because the offence is compoundable under Section 147, Negotiable Instruments Act, 1881. The parties agree on payment, sign a compromise deed, and file a joint compounding application before the court, which records the settlement and acquits the accused. Under the Supreme Court’s 2025 guidelines, settling before defence evidence costs nothing extra.

Key Takeaways

• Every offence under the Negotiable Instruments Act, 1881, including cheque bounce under Section 138, is compoundable under Section 147, so the parties can settle at any stage of the case.
• Compounding is done by filing a joint application before the court where the case is pending, and the court records the settlement and acquits the accused.
• In Sanjabij Tari v. Kishore S. Borcar (2025), the Supreme Court reduced the cost of compounding to nil before defence evidence, 5% after it, 7.5% in appeal or revision before a Sessions Court or High Court, and 10% before the Supreme Court.
• Compounding ordinarily needs the complainant’s consent (JIK Industries Ltd. v. Amarlal V. Jumani, 2012), but a court may close proceedings if the accused pays the cheque amount with interest and costs (Meters and Instruments Pvt. Ltd. v. Kanchan Mehta, 2018).
• A settlement can also be reached in a Lok Adalat or through mediation, and a Lok Adalat award is final and binding.
• Once a compromise is recorded and fresh cheques are issued under it, the complainant cannot pursue both the original complaint and a new complaint on the settlement cheques (Gimpex Pvt. Ltd. v. Manoj Goel, 2021).

Introduction

Most cheque bounce cases in India end not with a judgment but with a compromise. For the payee, settlement means getting paid faster. For the accused, it means ending a criminal case without the risk of conviction.

But a compromise has to be done correctly. A verbal promise, a partly paid amount or a settlement that is not recorded in court can leave both sides worse off.

This guide explains when and how a cheque bounce case can be settled, the costs at each stage, the documents needed, a sample compromise application, and what happens if one side breaks the settlement.

Can a Cheque Bounce Case Be Compromised?

Yes. Section 147 of the NI Act makes every offence under the Act compoundable, so a cheque bounce case can be settled at any stage, from the first hearing to the Supreme Court.

What the law says

(a) The statute: Section 147 provides that, “notwithstanding anything contained in the Code of Criminal Procedure, 1973, every offence punishable under this Act shall be compoundable”. Once the offence is compounded, the effect is an acquittal of the accused.

(b) What courts have held: In Damodar S. Prabhu v. Sayed Babalal H. (2010), the Supreme Court introduced graded costs to encourage early compounding. In Sanjabij Tari v. Kishore S. Borcar (2025), it reduced those costs. In JIK Industries Ltd. v. Amarlal V. Jumani (2012), it held that compounding ordinarily requires the complainant’s consent.

(c) Practical advice: Settle as early as possible. The cost of compounding rises at each stage, and an early settlement saves both sides advocate fees and time.

The law at a glance

Ways to Compromise a Cheque Bounce Case

A case can be settled directly between the parties, through court-annexed mediation, or in a Lok Adalat. The court must record the settlement in each case.

How Much Does It Cost to Compromise a Cheque Bounce Case?

After Sanjabij Tari (2025), the cost depends only on the stage at which the case is settled, and is nil if settled before defence evidence.

The cost is usually deposited with the Legal Services Authority, not paid to the complainant. The court can reduce or waive the cost in suitable cases. The cheque amount itself, or whatever amount the parties agree, is paid to the complainant.

The Supreme Court also directed district courts to set up online and UPI payment facilities so that the accused can pay the cheque amount directly, making early settlement easier.

Cheque Bounce Compromise Process: Step by Step

Agree the terms, put them in writing, make the payment, and file a joint application so the court records the compromise and closes the case.

1. Open talks. Either side, usually through advocates, proposes settlement terms. The court may also encourage settlement at the first hearing.
2. Agree the amount and schedule. Decide the total amount, whether it is paid at once or in instalments, and how (bank transfer, demand draft or court’s online facility).
3. Adjust payments already made. Deduct any interim compensation under Section 143A or deposit under Section 148 already paid.
4. Sign a compromise deed. Record the terms, payment details, the consequences of default, and the agreement to compound all related cases.
5. Make the payment, or the first instalment, through banking channels and keep proof.
6. File a joint application for compounding under Section 147 of the NI Act before the court where the case is pending, signed by both parties and their advocates.
7. Appear before the court. Both parties usually appear in person and confirm the settlement. The court may record their statements.
8. Pay the compounding cost, if any, to the Legal Services Authority.
9. Court records the compromise and acquits the accused. For instalment settlements, the court may keep the case pending until the last payment, or record the terms and dispose of it.
10. Collect certified copies of the order, and return or receive the original cheque as agreed.

Instalment settlements

If payment is in instalments, protect both sides by:

• Recording the schedule in the compromise deed and before the court
• Asking the court to keep the case pending until the final instalment, or to record that the complainant may revive proceedings on default, as the court permits
• Using post-dated cheques or bank transfers for each instalment, and keeping receipts

Documents Required for Compromise

• Compromise or settlement deed, signed by both parties
• Joint application for compounding under Section 147
• Proof of payment (bank statement, UTR or transaction reference, demand draft copy)
• Proof of payment of compounding cost, if applicable
• Identity proof of both parties
• Board resolution or authority letter, if a company is a party
• Vakalatnamas of both advocates
• Copies of interim compensation or appeal deposit orders, if any amounts are being adjusted

Sample Joint Application for Compounding

Adapt this format to your court and facts; your advocate will check local requirements.

IN THE COURT OF THE [JUDICIAL MAGISTRATE FIRST CLASS / METROPOLITAN MAGISTRATE], [CITY]

Complaint Case No. [number] of [year]

[Name of complainant] … Complainant
Versus
[Name of accused] … Accused

JOINT APPLICATION FOR COMPOUNDING OF OFFENCE UNDER SECTION 147 OF THE NEGOTIABLE INSTRUMENTS ACT, 1881

The complainant and the accused jointly submit as follows:

1. That the complainant filed the above complaint under Section 138 of the Negotiable Instruments Act, 1881 in respect of Cheque No. [number] dated [date] for ₹[amount], drawn on [bank and branch].
2. That the parties have amicably settled the matter. Under a settlement deed dated [date], the accused has agreed to pay, and the complainant has agreed to accept, a total sum of ₹[amount] in full and final settlement of all claims arising from the said cheque [and the underlying transaction].
3. That the accused has paid ₹[amount] to the complainant by [mode] on [date] (reference no. [number]) [and the balance shall be paid as per the schedule in the settlement deed].
4. That the complainant has received the said amount and has no further claim against the accused in respect of the said cheque, and does not wish to prosecute the accused further.
5. That the offence under Section 138 is compoundable under Section 147 of the Negotiable Instruments Act, 1881. The case is at the stage of [stage], and the parties undertake to pay any compounding cost directed by this Court.

PRAYER

It is therefore prayed that this Court may be pleased to permit the compounding of the offence, record the compromise between the parties, and acquit the accused in the above case.

Complainant: [signature] | Accused: [signature]
Advocate for Complainant: [signature] | Advocate for Accused: [signature]
Place: [city] | Date: [date]

Worked Example: Settling a Case in Instalments

This example shows a settlement recorded correctly before the court.

Arvind Rao, a wholesaler in Hyderabad, files a Section 138 complaint against a retailer, Sameer Khan, over a cheque for ₹4,00,000 that bounced in March 2026.

Because the interim compensation was adjusted and the settlement was recorded before defence evidence, neither side paid any compounding cost.

What If the Complainant Refuses to Compromise?

The complainant’s consent is usually needed, but the court has options if the accused has paid or offers to pay in full.

• Payment with interest and costs: In Meters and Instruments Pvt. Ltd. v. Kanchan Mehta (2018), the Supreme Court held that a court may close the proceedings if the accused pays the cheque amount with interest and costs, even without the complainant’s consent, because the offence is primarily compensatory.
• Probation: In Sanjabij Tari (2025), the Supreme Court said that where the complainant refuses to compound despite payment, the court can consider suggesting a plea of guilty and extending the benefit of the Probation of Offenders Act, 1958 or similar provisions.
• Court’s discretion: These options depend on the facts and the stage of the case.

What If the Accused Breaks the Settlement?

If the accused defaults on a compromise, the complainant’s remedy depends on how the settlement was recorded.

• Case kept pending till final payment: The complainant can ask the court to proceed with the original case.
• Fresh cheques issued under the settlement: If they bounce, they give rise to a new cause of action. In Gimpex Pvt. Ltd. v. Manoj Goel (2021), the Supreme Court held that the complainant cannot pursue both the original complaint and a new complaint on the settlement cheques at the same time.
• Lok Adalat award: It is executable as a civil court decree.
• Settlement deed: It can be enforced in civil proceedings.

Practical advice: For instalment settlements, ask the court to keep the case pending until the final payment, rather than closing it on a promise.

Rights of Both Parties in a Compromise

The complainant

• Agree to compound or refuse, subject to the court’s powers described above
• Insist that the settlement is recorded before the court
• Revive proceedings or enforce the settlement on default, depending on how it was recorded

The accused

• Propose settlement at any stage
• Have interim compensation and appeal deposits adjusted
• Be acquitted once the offence is compounded
• Seek closure by paying with interest and costs if the complainant unreasonably refuses

Common Mistakes in Cheque Bounce Compromises

• Settling verbally without a written deed.
• Paying in cash without receipts.
• Withdrawing the complaint before payment is complete.
• Not adjusting interim compensation already paid.
• Not recording the settlement in court, leaving the case technically pending.
• Ignoring other cases. If several cheques or cases are involved, the settlement should cover all of them.
• Delaying settlement, which increases compounding costs at each stage.

Key Court Rulings on Compromise

FAQs

1. Can a cheque bounce case be compromised?
Yes. Under Section 147 of the Negotiable Instruments Act, 1881, every offence under the Act is compoundable. The parties can settle at any stage, from the trial court to the Supreme Court, and once the court records the compromise, the accused is acquitted.

2. What is the process to compromise a cheque bounce case?
The parties agree on the amount and payment terms, sign a settlement deed, make the payment, and file a joint application for compounding under Section 147 before the court where the case is pending. Both parties usually appear before the court, which records the settlement and acquits the accused.

3. How much does it cost to settle a cheque bounce case?
Under Sanjabij Tari v. Kishore S. Borcar (2025), there is no extra cost if the case is settled before defence evidence is recorded. After that, the cost is 5%, then 7.5% in appeal or revision before a Sessions Court or High Court, and 10% before the Supreme Court, usually paid to the Legal Services Authority.

4. Can a cheque bounce case be settled without the complainant’s consent?
Ordinarily, compounding needs the complainant’s consent. However, the Supreme Court held in Meters and Instruments v. Kanchan Mehta (2018) that a court may close the proceedings if the accused pays the cheque amount with interest and costs, and in 2025 allowed courts to consider probation where the complainant unreasonably refuses.

5. Can a cheque bounce case be settled in Lok Adalat?
Yes. Cheque bounce cases are frequently settled in National Lok Adalats. The case is referred to the Lok Adalat, the parties agree terms, and an award is passed. Under the Legal Services Authorities Act, 1987, the award is final, binding and not appealable.

6. Can a cheque bounce case be settled in instalments?
Yes. Record the instalment schedule in the settlement deed and before the court. To protect the complainant, the court may keep the case pending until the last instalment is paid. Pay each instalment through banking channels and keep receipts.

7. Is interim compensation adjusted in a compromise?
Yes, usually. Any interim compensation paid under Section 143A or deposit made under Section 148 can be adjusted against the settlement amount. Mention the amounts already paid in the settlement deed and the compounding application so the court records the adjustment.

8. What happens if the accused does not pay after a compromise?
It depends on how the settlement was recorded. If the court kept the case pending, the complainant can ask it to proceed. If fresh cheques issued under the settlement bounce, they create a new cause of action, but the complainant cannot pursue both the original and the new complaint (Gimpex v. Manoj Goel, 2021).

9. Is the accused acquitted after compromise?
Yes. Under the criminal procedure law, the compounding of an offence has the effect of an acquittal of the accused. Once the court permits compounding, the accused does not carry a conviction for the cheque bounce offence.

10. Can a cheque bounce case be compromised after conviction?
Yes. Section 147 allows compounding at any stage, including during an appeal or revision. The compounding cost at that stage is 7.5% of the cheque amount before a Sessions Court or High Court, and 10% before the Supreme Court. On compounding, the conviction is set aside.

Conclusion

A cheque bounce case can be settled at any stage under Section 147 of the NI Act, and settling early is the cheapest and fastest route for both sides. Agree the terms in a written deed, pay through banking channels, adjust any interim compensation, and file a joint compounding application so the court records the settlement and acquits the accused. For instalment deals, keep the case pending until the last payment. For advice on your specific situation, consult a qualified advocate.

Disclaimer: This article and the sample application are general legal information for awareness and are not legal advice. Compromise procedures can vary between courts. The outcome of any case depends on its specific facts. Please consult a qualified advocate before acting on any information here.