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Section 147: Offences to be compoundable

Negotiable Instruments Act • Official Statutory Text & Practice Guide

Compounding Right
Settlement at Any Stage
JMFC / MM / Sessions / High Court
Act 1881
Section 146 All 148 Sections of Negotiable Instruments Act Section 148

Legal Commentary & Landmark Judgments: Section 147

Section 147 enacts that every offence punishable under the Negotiable Instruments Act shall be compoundable, establishing that cheque bounce is essentially a regulatory civil wrong wrapped in criminal procedure.

  • Compounding at Any Stage: The offence may be compounded at any stage of proceedings—before the trial Magistrate, Appellate Sessions Court, High Court, or Supreme Court.
  • Consent of Complainant: Compounding generally requires the mutual consent of both parties upon settlement of the debt, though courts can encourage compounding on full deposit.
  • Graded Compounding Costs: The Supreme Court in Damodar S. Prabhu established graded compounding costs (10% before Magistrate, 15% before Sessions Court, 20% before High Court/Supreme Court) to incentivize early settlements.
Key Landmark Precedents:
  • Damodar S. Prabhu v. Sayed Babalal H. (2010) 5 SCC 663: The Supreme Court issued nationwide guidelines establishing graded compounding costs payable to the Legal Services Authority to deter delaying tactics and encourage early dispute settlement.
  • Meters and Instruments Pvt. Ltd. v. Kanchan Mehta (2018) 1 SCC 560: The Supreme Court held that the court may close proceedings even in the absence of the complainant's consent if the accused deposits the full cheque amount along with interest and costs.
  • B.V. Seshaiah v. State of Telangana (2023) 4 SCC 220: Affirmed that compounding under Section 147 operates as a complete acquittal; once parties settle and execute a compromise deed, conviction must be set aside.
Courtroom Practice & Strategic Litigation Guidance:

If a debtor is ready to settle, draft a comprehensive Deed of Compromise and Settlement and file it jointly under Section 147. Under Section 147, compounding results in complete acquittal of the accused, wipes out any conviction or sentence, and closes all pending appellate litigation.

Section 146 All 148 Sections of Negotiable Instruments Act Section 148