Compounding of Offences (Section 147)

Because the Section 138 offence is primarily about getting the payee paid, the law encourages the parties to settle. Section 147, added in 2002, makes every offence under the Act compoundable. The Supreme Court has built on it with graded costs to encourage early settlement, first in Damodar S. Prabhu (2010) and, in revised form, in Sanjabij Tari (2025). This note explains the section, the role of consent, the costs regime and related questions.

1. The Section

• Non obstante clause: the section overrides the general code, which lists compoundable offences and the stages and courts at which they may be compounded.
• Any stage: compounding is possible at trial, in appeal, in revision and before the Supreme Court, even after conviction.
• Effect: compounding has the effect of an acquittal of the accused.

2. Consent of the Complainant

• Closure on full payment: in Meters and Instruments v. Kanchan Mehta (2018), the Court said that where the accused pays the cheque amount with interest and costs as assessed by the court, the court may close the proceedings even without the complainant's consent, since the object of the provision is compensation.
• Consent reaffirmed, with Article 142 relief: in Raj Reddy Kallem v. State of Haryana (2024), the Court reaffirmed that compounding requires the complainant's consent, but, the accused having paid the complainant in full and more, quashed the proceedings under Article 142 of the Constitution to do complete justice.
• Settlement agreements: if the parties settle and the accused defaults on the settlement, the complainant's remedy and the fate of the original complaint depend on the terms of the settlement; courts insist that settlements recorded before them be honoured.

3. Graded Costs

To discourage accused persons from delaying settlement until the last stage, the Supreme Court in Damodar S. Prabhu v. Sayed Babalal H. (2010) laid down graded costs payable on compounding, deposited with legal services authorities: none if compounded at the first or second hearing; 10 per cent of the cheque amount later before the Magistrate; 15 per cent before the Sessions Court or High Court; and 20 per cent before the Supreme Court.

In Sanjabij Tari v. Kishore S. Borcar (2025), the Court revised these costs downwards to encourage settlement:

• Before the accused's defence evidence is recorded: no cost.
• After defence evidence but before judgment by the trial court: 5 per cent of the cheque amount.
• In revision or appeal before the Sessions Court or High Court: 7.5 per cent.
• Before the Supreme Court: 10 per cent.

The court may reduce or waive costs in appropriate cases. Sanjabij Tari also directed district courts to provide online payment facilities, such as QR codes or UPI links, so that accused persons can pay and settle early.

4. Related Questions

• Other offences: compounding the Section 138 offence does not automatically compound other offences, such as cheating, arising from the same facts (JIK Industries; Topic 54).
• Mediation and Lok Adalats: courts frequently refer Section 138 cases to mediation and Lok Adalats; a settlement there leads to compounding or an award with the force of a decree.
• Probation: where a conviction stands, courts may apply the Probation of Offenders Act, 1958 in suitable cases (Sanjabij Tari).

5. Related Topics and Provisions

• Origin and nature of the offence (Topic 41)
• Interim compensation and appeal deposit (Topic 50)
• Landmark judgments (Topic 60)