Section 138 NI Act Cannot Be Compounded Without Complainant’s Consent: Punjab & Haryana High Court Reaffirms Mandatory Requirement Under Section 147

Case Name: Vinesh @ Vinesh Soni v. State of Punjab and Another

Date of Judgment: 08.07.2026

Citation: CRM-M-35020-2026

Bench: Justice Manisha Batra

Held: An offence under Section 138 of the Negotiable Instruments Act cannot be compounded merely because the accused deposits the entire cheque amount or expresses willingness to compensate the complainant. Consent of the complainant is an indispensable prerequisite for compounding under Section 147 of the NI Act. Courts cannot compel compounding in the absence of mutual agreement between the parties.

Summary: The petitioner challenged the order of the Judicial Magistrate First Class, Ludhiana, refusing to permit compounding of an offence under Section 138 of the Negotiable Instruments Act.

The complainant had alleged that he advanced a friendly loan to the petitioner, who issued two cheques of ₹1,00,000 each towards repayment. Both cheques were dishonoured due to insufficiency of funds, leading to the filing of a complaint under Section 138 of the Negotiable Instruments Act read with Section 420 IPC.

During trial, the petitioner sought permission to compound the offence by depositing the entire cheque amount of ₹2,00,000 through a demand draft. The complainant opposed the application, contending that the petitioner’s total liability was ₹8,50,000 and no full and final settlement had been reached.

The Trial Court dismissed the application for compounding. Before the High Court, the petitioner argued that Section 147 of the Negotiable Instruments Act encourages settlement and that once the cheque amount stood deposited, the offence ought to have been compounded.

Rejecting these submissions, the High Court relied upon the recent Supreme Court decision in A.S. Pharma Pvt. Ltd. v. Nayati Medical Pvt. Ltd. (2024), reiterating that compounding under Section 147 is founded upon mutual consent and cannot be ordered unilaterally merely because the accused is willing to pay. The Court also distinguished the concept of quashing from compounding, observing that while quashing is an exercise of inherent judicial power, compounding is essentially consensual.

Since the complainant had expressly declined to compound the offence, the High Court held that the Trial Court had committed no illegality in rejecting the application and dismissed the petition.

Decision: The Punjab & Haryana High Court upheld the Trial Court’s order and ruled that an offence under Section 138 of the Negotiable Instruments Act cannot be compounded without the complainant’s consent, notwithstanding deposit of the cheque amount by the accused.