Landmark Judgments III: Damodar S. Prabhu, Meters and Instruments, the 2021 Suo Motu Case and P. Mohanraj

The third group of landmark decisions deals with the system of Section 138 litigation: how to encourage settlement, how to speed up trials, and how the offence interacts with insolvency. Damodar S. Prabhu introduced graded costs for compounding; Meters and Instruments stressed the compensatory character of the offence; the 2021 Constitution Bench proceedings issued system-wide directions; and P. Mohanraj applied the insolvency moratorium. The 2025 Sanjabij Tari guidelines continue this line.

1. Damodar S. Prabhu v. Sayed Babalal H. (2010)

📖 Damodar S. Prabhu v. Sayed Babalal H. (Supreme Court, three judges, 2010)

Held: Section 147 permits compounding at any stage, but parties often settle only at the final stages after years of litigation. To encourage early settlement, the Court laid down graded costs: no cost if compounding is sought at the first or second hearing; 10 per cent of the cheque amount if later before the trial court; 15 per cent before the Sessions Court or High Court; and 20 per cent before the Supreme Court, payable to legal services authorities. Courts could reduce the costs in suitable cases.

Later development: in Sanjabij Tari v. Kishore S. Borcar (2025), the Court revised these costs downwards: nil before defence evidence, 5 per cent before judgment, 7.5 per cent in the Sessions Court or High Court, and 10 per cent in the Supreme Court (Topic 51).

2. Meters and Instruments v. Kanchan Mehta (2017)

📖 Meters and Instruments Pvt. Ltd. v. Kanchan Mehta (Supreme Court, decided 2017; reported 2018)

Held: The offence under Section 138 is primarily a civil wrong, and its punitive element is mainly meant to enforce the compensatory purpose. Courts should therefore encourage early payment: where the accused tenders the cheque amount with interest and costs as assessed by the court, the court may close the proceedings even without the complainant's consent. The Court also stressed summary trial, evidence on affidavit, exemption from personal appearance and the use of interim compensation and electronic service.

Partly disapproved: its suggestion that a Magistrate could invoke Section 258 of the CrPC to stop proceedings was rejected in the 2021 Constitution Bench proceedings, which held that section inapplicable to Section 138 complaints.
Consent and compounding: its approach to closure without consent coexists uneasily with JIK Industries (2012); in Raj Reddy Kallem (2024) the Court reaffirmed the need for consent for compounding, while quashing proceedings under Article 142 on full payment (Topic 51).
Nature of the offence: its "civil wrong" characterisation was relied on in P. Mohanraj (2021), and questioned in Dineshchand Surana (2026).

3. In re Expeditious Trial of Cases under Section 138 (2021)

Taking suo motu notice of the huge pendency of cheque cases, a five-judge Bench heard amici and the Union Government and, on 16 April 2021, issued directions and recommendations:

High Courts to direct Magistrates to record reasons before converting a summary trial into a summons trial.
Where the accused lives outside the court's jurisdiction, an inquiry under the criminal procedure code before summons is mandatory, but the complainant's witnesses may give evidence on affidavit.
Parliament to consider allowing one trial for Section 138 offences arising from the same relationship within 12 months.
Service of summons in one complaint to be treated as deemed service in related complaints from the same transaction.
Magistrates have no inherent power to review or recall a summons, and Section 258 of the CrPC does not apply to Section 138 complaints; Meters and Instruments was not followed on this point.
A committee was set up to recommend further measures.

4. P. Mohanraj v. Shah Brothers Ispat (2021)

📖 P. Mohanraj v. Shah Brothers Ispat Pvt. Ltd. (Supreme Court, three judges, 2021)

Held: A Section 138 proceeding is, in substance, "a civil sheep in a criminal wolf's clothing", aimed largely at recovery. It is therefore a "proceeding" covered by the Section 14 IBC moratorium, and cannot be started or continued against the corporate debtor during the moratorium. But the moratorium protects only the corporate debtor; directors and other natural persons liable under Section 141 may still be prosecuted.

Follow-up: Ajay Kumar Radheyshyam Goenka (2023) held that directors' liability survives a resolution plan; Vishnoo Mittal (2025) protected a director whose cause of action arose after he lost control.
Open question: in Dineshchand Surana v. UCO Bank (2026), a two-judge Bench, doubting the emphasis on the compensatory character, referred to a larger Bench whether the personal insolvency moratorium covers Section 138 (Topic 53).

5. The Continuing Line: Sanjabij Tari (2025)

In Sanjabij Tari v. Kishore S. Borcar (Supreme Court, 2025), the Court restored a conviction, held that cash loans in breach of Section 269SS of the Income-tax Act remain enforceable, permitted probation, and issued fresh system-wide directions: electronic service of summons, online payment links, structured complaint synopses, no pre-cognizance hearing, early plea and questioning, evening courts and dashboards, and revised compounding costs. It is the latest step in the effort begun in Damodar S. Prabhu.

⚠ Key point

Damodar S. Prabhu (2010) set graded costs (nil, 10, 15, 20 per cent) to encourage early compounding, now revised downwards by Sanjabij Tari (2025). Meters and Instruments (2017) called the offence primarily compensatory and allowed closure on full payment. The 2021 Constitution Bench required reasons for converting summary trials, inquiries for out-of-jurisdiction accused (on affidavits), recommended one trial for cheques within 12 months, and denied Magistrates power to recall summons or use Section 258 CrPC. P. Mohanraj (2021) applied the IBC moratorium to Section 138 proceedings against companies, but not their directors; its approach is now under review for personal insolvency (Dineshchand Surana, 2026).

6. Related Topics and Provisions

Summary trial and evidence (Topic 49)
Compounding (Topic 51)
IBC moratorium (Topic 53)