Section 138 Compounding • Constitution Bench Benchmark • Section 528 BNSS August 25, 2026 16 Min Read

Compounding Section 138 Cheque Bounce: Why Complainant Consent is Strictly Mandatory & Overruling of Meters and Instruments

Advocate & Legal Consultant • Delhi High Court & District Courts

Strategic Executive Summary

A 5-Judge Constitution Bench in In Re: Expeditious Trial of Cases Under Section 138 of N.I. Act (2021) conclusively held that Meters & Instruments Private Limited is not good law; a Magistrate has no power to discharge an accused or compound the case without the complainant's consent.
Compounding under Section 147 of the Negotiable Instruments Act, 1881 is an inherently bilateral contract; mutual consent of both drawer and payee is an indispensable condition precedent that trial courts cannot dispense with.
Trial courts trying a Section 138 summons case possess no inherent power to drop proceedings, review their own summons, or invoke Section 281 BNSS (Section 258 CrPC), which applies exclusively to police report cases.
Where an accused tenders full restitution (cheque amount, interest, and costs) but the complainant refuses consent out of extortion or vendetta, the Magistrate is powerless, but the High Court can quash proceedings under Section 528 BNSS (Section 482 CrPC).
The Supreme Court in Damodar S. Prabhu (2010) established a graded cost scale for compounding, incentivizing early settlement while affirming that judicial compounding cannot be forced upon an unwilling victim.

Table of Contents

Compounding Section 138 Cheque Bounce: Why Complainant Consent is Strictly Mandatory & Overruling of Meters and Instruments - Urban Rights Legal Consultants

Can a borrower facing criminal prosecution under Section 138 of the Negotiable Instruments Act, 1881 walk into court, tender a Demand Draft for the entire cheque amount with interest, and demand that the Magistrate discharge them, even if the complainant refuses to settle? For years, trial courts routinely relied on Meters and Instruments Private Limited v. Kanchan Mehta to force settlements and close cheque bounce cases. However, in the landmark ruling In Re: Expeditious Trial of Cases Under Section 138 of N.I. Act 1881, a 5-Judge Constitution Bench of the Supreme Court of India conclusively held that Meters and Instruments is not good law. Compounding under Section 147 NI Act is strictly bilateral, requiring mandatory complainant consent. When an unreasonable complainant weaponizes this requirement for extortion, the accused's true legal remedy lies not with the Magistrate, but in invoking the inherent powers of the High Court under Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS).

1. The Unilateral Settlement Dilemma in Cheque Bounce

In Metropolitan Magistrate courts across Delhi NCR—whether inside the busy courtrooms of Saket, Patiala House, Tis Hazari, Rohini, Dwarka, or the district courts in Gurugram and Faridabad—defense advocates frequently encounter a frustrating commercial scenario. A drawer facing prosecution under Section 138 of the Negotiable Instruments Act, 1881 stands before the Magistrate holding a Banker’s Demand Draft covering the entire cheque face value, accrued commercial interest, and reasonable litigation expenses.

The accused tenders the Demand Draft in open court, stating: "Your Honour, I am offering complete financial restitution. I pray that the offence be compounded and the complaint dismissed."

Instead of accepting the payment, the complainant or their counsel vehemently objects: "We refuse to settle. We do not consent to compounding. We demand double the cheque amount, or we insist on sending the accused to prison."

This standoff raises the central jurisprudential question of Negotiable Instruments Act practice: Can a criminal court compel an unwilling complainant to compound a Section 138 offence, or discharge the accused simply because the full cheque amount has been deposited?

The Core Legal Conflict: Consent vs. Restitution

For several years, trial courts were divided. One line of authority held that because Section 138 is primarily a compensatory civil wrong, a court could discharge an accused upon full payment even without complainant consent. However, that approach was definitively rejected by a 5-Judge Constitution Bench of the Supreme Court of India, which established that compounding is strictly bilateral and requires mandatory complainant consent.

2. Meters and Instruments (2018): The Flawed Discharge Doctrine

To understand the current legal framework, one must examine the rise and fall of Meters and Instruments Private Limited v. Kanchan Mehta (2018) 1 SCC 560. In this ruling, a two-judge bench of the Supreme Court attempted to tackle massive judicial docket congestion by conferring broad summary closing powers upon Magistrates.

The Meters & Instruments Doctrine (2018) [Overruled]

The two-judge bench held: "Section 138 is primarily a civil wrong. Though compounding requires consent of both parties, even in the absence of consent, the court, in the interests of justice, on being satisfied that the complainant has been duly compensated, can in its discretion close the proceedings and discharge the accused under Section 143 of the NI Act read with Section 258 CrPC."

Following Meters and Instruments, trial courts across India began entertaining unilateral discharge applications. Defaulters would tender the cheque amount and demand the termination of proceedings over the complainant’s bitter objections. Complainants argued that this denied them their day in court, deprived them of legitimate damages, and allowed affluent borrowers to treat criminal courts as revolving-door settlement counters without incurring genuine penal consequences.

3. 5-Judge Constitution Bench: In Re Expeditious Trial (2021)

Recognizing the profound procedural distortions created by Meters and Instruments, a 5-Judge Constitution Bench of the Supreme Court of India took up the issue in In Re: Expeditious Trial of Cases Under Section 138 of N.I. Act 1881, (2021) 16 SCC 116 (decided on 16 April 2021).

The Constitution Bench—headed by Chief Justice S.A. Bobde and comprising Justices L. Nageswara Rao, B.R. Gavai, A.S. Bopanna, and S. Ravindra Bhat—conducted an exhaustive review of statutory trial procedure and authoritatively declared that Meters and Instruments is NOT GOOD LAW.

Landmark Ratio: In Re: Expeditious Trial (2021) 16 SCC 116

The 5-Judge Constitution Bench conclusively ruled:
1. Section 258 CrPC Does Not Apply: Section 258 CrPC (now Section 281 BNSS), which empowers a Magistrate to stop proceedings in summons cases, applies strictly to cases instituted "otherwise than upon complaint" (i.e., police report cases). It has zero application to Section 138 complaint cases.
2. No Implied Power of Discharge: Section 143 of the NI Act does not confer any implied power on a Magistrate to discharge the accused or drop proceedings midway through a trial upon unilateral monetary deposit.
3. No Inherent Power to Recall Summons: Reaffirming the landmark Constitution Bench ruling in Adalat Prasad v. Rooplal Jindal (2004) 7 SCC 338, a Judicial Magistrate has no inherent or review jurisdiction to recall process or dismiss a complaint without a full statutory trial.
4. Compounding Requires Bilateral Consent: An offence under Section 138 can only be compounded if the victim/complainant explicitly agrees. The trial court has zero authority to force compounding on an unwilling complainant.

The Constitution Bench firmly established that procedural speed cannot override statutory criminal procedure. A Metropolitan Magistrate or JMIC has no legal authority to terminate a cheque bounce prosecution against the complainant's wishes, no matter how much money the accused tenders in court.

4. Damodar Prabhu & JIK Industries: The Bilateral Imperative

The Constitution Bench’s ruling in In Re: Expeditious Trial brought Section 138 compounding back into alignment with two earlier foundational Supreme Court judgments:

Damodar S. Prabhu v. Sayed Babalal H. (2010) 5 SCC 663 (3-Judge Bench):
The Supreme Court framed guidelines to encourage early settlement by establishing a graded cost scale for compounding under Section 147 NI Act:
- Trial Court Stage: Compounding permitted without imposing costs if settlement occurs early; 10% costs of cheque amount if settled at later trial stages.
- Sessions / Appellate Court Stage: 15% costs of cheque amount deposited to the State Legal Services Authority.
- High Court / Supreme Court Stage: 20% costs of cheque amount.
Crucially, Justice K.G. Balakrishnan clarified that while the graded cost scale regulates the financial terms of compounding, compounding itself presupposes mutual agreement between the parties.
JIK Industries Ltd. v. Amarlal V. Jumani (2012) 3 SCC 255:
The Supreme Court ruled that the non-obstante clause in Section 147 of the NI Act makes offences compoundable, but does not dispense with the core procedural principles of Section 359 BNSS (formerly Section 320 CrPC). Compounding is fundamentally a contract—a bilateral agreement between the wrongdoer and the victim to settle the grievance. A unilateral scheme of arrangement, corporate restructuring, or deposit of money cannot substitute for the complainant's express consent.

5. The Complainant Extortion Trap & Section 528 BNSS Quashing

While the Constitution Bench’s decision protects complainants from being shortchanged, it creates an acute practical dilemma in Delhi NCR district courts: the weaponization of Section 138 for extortion or personal vendetta.

Consider a frequent commercial reality: an entrepreneur suffers a temporary liquidity crisis resulting in a ₹15 Lakh cheque bounce. Within months, the entrepreneur recovers financially and approaches the complainant offering a Demand Draft for ₹18 Lakhs (covering the full principal, 18% annual interest, and legal costs). The complainant, aware that the Magistrate cannot force compounding, maliciously refuses, demanding ₹45 Lakhs under threat of sending the entrepreneur to Tihar or Bhondsi Jail.

Is the accused helpless? Absolutely not.

The Constitutional Safety Valve: Section 528 BNSS (Section 482 CrPC)

While the Judicial Magistrate has no inherent powers to drop proceedings, the High Court possesses plenary inherent powers under Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (formerly Section 482 CrPC) to prevent the abuse of the process of any court and to secure the ends of justice.

The Supreme Court and the Delhi High Court have consistently held that criminal courts cannot be used as instruments of extortion or private vendetta. In landmark authorities including Sunil Todi v. State of Gujarat (2022) 16 SCC 762, Gimpex Ltd. v. Manoj Goel (2022) 11 SCC 705, and M.N. Ojha v. Alok Kumar Srivastav (2009) 9 SCC 682, the jurisprudence is firmly settled:

Where the drawer establishes complete bona fide willingness to pay the full cheque amount along with reasonable interest and litigation costs, and the complainant's refusal to compound is demonstrably unreasonable, vindictive, or an attempt to extract unconscionable ransom, the High Court will intervene. Exercising its powers under Section 528 BNSS, the High Court will direct the deposit of the tendered Demand Draft in court, compensate the complainant, and quash the Section 138 criminal complaint to prevent abuse of the judicial process.

6. Legal Framework Comparison: Magistrate vs. High Court Powers

Navigating the legal terrain after the Constitution Bench ruling requires a precise understanding of the distinct powers exercisable at each tier of the judiciary:

Legal Dimension	Meters & Instruments (2018) [Overruled]	In Re: Expeditious Trial (2021) [Constitution Bench]	High Court Quashing (Section 528 BNSS)
Court Exercising Power	Metropolitan Magistrate / JMIC (Trial Court).	Metropolitan Magistrate / JMIC (Trial Court).	High Court of Delhi / High Court of P&H.
Complainant Consent Required?	No. Magistrate could unilaterally discharge over objection.	Strictly Mandatory. Magistrate cannot compound without consent.	Dispensed with if refusal is extortionate, vindictive, or abusive.
Statutory Provision Invoked	Section 143 NI Act read with Section 258 CrPC.	Section 147 NI Act read with Section 359 BNSS (320 CrPC).	Section 528 BNSS (Section 482 CrPC Inherent Powers).
Current Legal Status	Overruled & Not Good Law; void ab initio.	Binding Law of the Land under Article 141 of the Constitution.	Established Jurisprudence; recognized equitable remedy.
Relief Granted	Discharge / Dropping of proceedings.	Compounding acquittal (if agreed) or full trial (if refused).	Quashing of the criminal complaint and summoning order.

7. Courtroom Execution Playbook: Tendering Demand Drafts & Filing 528 BNSS

If you are an accused willing to pay the full cheque amount but facing an unreasonable complainant in Delhi NCR, your defense counsel must execute a disciplined three-stage procedural protocol:

Stage 1: Formal Tender Before the Metropolitan Magistrate
Do not make casual oral settlement offers. Prepare a formal written application under Section 147 NI Act. Attach a photocopy of a Banker’s Demand Draft drawn in favor of the complainant for:
- 100% of the cheque face value;
- Commercial interest calculated at 9% to 12% per annum from the date of dishonour; and
- Reasonable litigation costs (typically ₹25,000 to ₹50,000).
Stage 2: Securing a Verbatim Judicial Order Sheet
Present the Demand Draft in open court during the hearing. Insist that the Magistrate record the tender verbatim in the official order sheet:

"Accused is present with counsel and has tendered Demand Draft No. [XXXXXX] dated [DD/MM/YYYY] drawn on [Bank Name] for an amount of ₹[Amount] towards the full cheque amount, interest, and litigation costs. Notice of tender given to Complainant. Complainant categorically refuses to accept the Demand Draft and declines to compound the offence."

Obtain an urgent certified copy of this order sheet. It serves as your primary exhibit proving bona fide restitution.
Stage 3: Drafting & Filing the Section 528 BNSS Quashing Petition
Approach the High Court of Delhi or Punjab & Haryana High Court under Section 528 BNSS (formerly Section 482 CrPC) praying for the quashing of the complaint and summoning order:
- Plead the civil origin and commercial character of the dispute;
- Annex the certified copy of the order sheet demonstrating the open-court tender;
- Place on record the Demand Draft or deposit the sum with the Registrar General of the High Court; and
- Cite Sunil Todi, Gimpex Ltd., and relevant High Court precedents establishing that continuing the criminal prosecution when complete financial restitution has been offered amounts to weaponizing the criminal process for unlawful extortion.

Statutory Authorities & Legal References

Negotiable Instruments Act, 1881 (Section 138 - Dishonour of cheque, Section 143 - Power of Court to try cases summarily, & Section 147 - Offences to be compoundable)
Bharatiya Nagarik Suraksha Sanhita, 2023 (Section 359 - Compounding of offences, Section 281 - Power to stop proceedings in certain cases, & Section 528 - Inherent powers of High Court) [formerly Sections 320, 258, & 482 CrPC]
Supreme Court 5-Judge Constitution Bench Landmark Judgment in In Re: Expeditious Trial of Cases Under Section 138 of N.I. Act 1881, (2021) 16 SCC 116 (Holding Meters & Instruments Not Good Law)
Supreme Court 3-Judge Bench in Damodar S. Prabhu v. Sayed Babalal H. (2010) 5 SCC 663 (Graded Cost Scale for Compounding)
Supreme Court 2-Judge Bench in JIK Industries Ltd. v. Amarlal V. Jumani (2012) 3 SCC 255 (Bilateral Consent Requirement in Compounding)
Supreme Court Landmark Rulings in Sunil Todi v. State of Gujarat (2022) 16 SCC 762 & Gimpex Ltd. v. Manoj Goel (2022) 11 SCC 705 (Inherent Powers to Prevent Abuse of Process)
Constitution Bench Ruling in Adalat Prasad v. Rooplal Jindal (2004) 7 SCC 338 (No Inherent Power in Subordinate Criminal Courts to Review or Recall Process)

Disclaimer: This article is published strictly for academic and educational purposes under the Advocates Act, 1961. It does not constitute formal legal advice, solicitation, or advertisement under Rule 36 of the Bar Council of India Rules, nor does it create an advocate-client relationship. For case-specific legal counsel, readers should consult an independent advocate.

Can a Magistrate dismiss a Section 138 complaint if the accused deposits the cheque amount without complainant consent?

No. The 5-Judge Constitution Bench in In Re: Expeditious Trial of Cases Under Section 138 of N.I. Act 1881 (2021) 16 SCC 116 authoritatively held that Meters and Instruments Private Limited is not good law. A Judicial Magistrate has no statutory power under Section 143 NI Act or Section 281 BNSS (Section 258 CrPC) to drop proceedings or discharge an accused without the complainant's express consent.

Why did the Supreme Court overrule Meters and Instruments v. Kanchan Mehta?

The Constitution Bench held that Section 258 CrPC (Section 281 BNSS) applies strictly to police report cases and cannot be applied to private complaint cases under Section 138 NI Act. Furthermore, subordinate criminal courts have no inherent power to review or recall summons. Compounding under Section 147 NI Act is by definition a bilateral agreement, and trial courts cannot usurp the legislative framework to force settlements upon unwilling victims.

What is the graded cost scale for compounding laid down in Damodar S. Prabhu?

In Damodar S. Prabhu v. Sayed Babalal H. (2010) 5 SCC 663, the Supreme Court ruled that to encourage early resolution: (1) no cost is imposed if compounding occurs at the earliest stage before the trial court, but 10% costs of the cheque amount are imposed if compounded at later trial stages; (2) 15% costs of the cheque amount must be deposited if compounded before the Sessions or Appellate Court; and (3) 20% costs are mandated if compounded before the High Court or Supreme Court.

What is the legal remedy if a complainant refuses to settle out of greed or extortion?

If the accused has tendered full restitution—including the entire cheque amount, commercial interest, and reasonable litigation costs—and the complainant maliciously refuses consent to extort exorbitant sums, the accused can approach the High Court under Section 528 BNSS (formerly Section 482 CrPC). The High Court has inherent power to quash the criminal complaint to prevent the criminal justice system from being weaponized as a tool of extortion.

Can a cheque bounce case be compounded after conviction in appeal?

Yes. Under Section 147 of the Negotiable Instruments Act, an offence under Section 138 can be compounded at any stage of litigation, including during the pendency of a Criminal Appeal before the Sessions Court, a Criminal Revision before the High Court, or a Special Leave Petition before the Supreme Court, subject to payment of the graded costs specified in Damodar S. Prabhu.