Can a cheque bounce case be settled out of court?

Yes, a cheque bounce case can be settled out of court in India. Settlement between the complainant (payee) and the accused (drawer) is allowed at various stages of the legal process under the Negotiable Instruments Act, 1881, and supported by provisions in the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS) Here is a detailed explanation:

1. Settlement During the Legal Process

- Settlement is legally permitted in cheque bounce cases, as the offense under Section 138 of the Negotiable Instruments Act, 1881, is considered a compoundable offense.

- Compoundable Offense: These are offenses where the complainant and the accused can reach a compromise and request the court to drop the charges against the accused.

2. Stages for Out-of-Court Settlement

A. Settlement Before Filing the Case

- After the dishonor of the cheque and issuing a legal notice, the accused can resolve the matter by:

- Paying the cheque amount, including additional charges such as legal notice costs or other compensation demanded.

- If the settlement is reached, the complainant need not proceed to file the case in court.

B. Settlement After Filing the Complaint and Before Trial

- Once the case is filed, the parties can still arrive at a compromise by mutual agreement.

- In such cases, the accused may:

- Make the full payment (cheque amount plus compensation).

- Seek a formal withdrawal of the case by filing an application for compounding before the court.

C. Settlement During the Trial

- If the case reaches trial, the accused can negotiate with the complainant to settle the case.

- Once both parties agree, an application under Section 147 of the Negotiable Instruments Act or Section 359 of the Code of Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS) can be filed before the trial court for compounding of the offense.

D. Settlement After Conviction

- Even if the accused is convicted under Section 138 and sentenced (imprisonment or fine), they can seek to settle the matter:

- In the trial court: By offering the full payment and requesting the complainant’s consent for compounding the offense.

- In appellate courts: The accused can challenge the conviction and propose a settlement at the appellate stage.

- Courts in such cases often encourage settlements and may reduce the sentence if both parties agree.

3. Process of Out-of-Court Settlement

A. Negotiation

- Both parties should enter into negotiations, preferably through their respective lawyers.

- Terms of settlement may include:

- Payment of the cheque amount.

- Compensation for legal expenses or damages.

- A formal apology, if necessary.

B. Drafting a Settlement Agreement

- Once the terms are agreed upon, a Settlement Agreement is drafted, detailing:

- Cheque details.

- Compensation terms.

- Mode of payment and timelines.

- Acknowledgment by the complainant that no further legal claims will be made.

- Consent to withdrawal or dismissal of the case.

C. Application for Compounding the Offense

- Both parties file a joint application before the trial or appellate court under Section 147 of the Negotiable Instruments Act to compound the offense.

- The court reviews the settlement and approves it if found to be genuine and lawful.

D. Closure of Case

- Once the court accepts the application, it records the compromise and dismisses the case against the accused.

4. Benefits of Out-of-Court Settlement

A. For the Complainant

1. Timely Recovery: Avoids the delays of court proceedings.

2. Reduced Costs: Saves legal expenses associated with prolonged litigation.

3. Certainty: Ensures immediate recovery of the amount without relying on the outcome of a trial.

B. For the Accused

1. Avoidance of Conviction: Prevents a criminal conviction under Section 138, which carries imprisonment and fine.

2. Lower Expenses: Saves litigation costs and time.

3. Preserves Relationships: Helps maintain goodwill, especially in business relationships.

5. Points to Consider Before Settlement

1. Genuineness of Settlement: Both parties must negotiate in good faith and fulfill agreed terms.

2. Documentation: The settlement must be recorded in writing to prevent future disputes.

3. Court Approval: If the case has been filed, settlement must be approved by the court to make it legally binding.

4. Payment Completion: Ensure the agreed amount is paid before withdrawing the case.

5. Consultation with Lawyers: Legal counsel can guide both parties to ensure compliance with procedural and legal requirements.

Relevant Legal Provisions

1. Section 147 of the Negotiable Instruments Act, 1881: Allows for compounding offenses under the Act.

2. Section 359 of the Code of Bharatiya Nagarik Suraksha Sanhita, 2023: Details the compounding of offenses and procedures for withdrawal.

Conclusion

Out-of-court settlement in cheque bounce cases is not only legally permissible but also encouraged by courts to save time and resources while providing effective resolution for both parties. Through proper negotiation, documentation, and adherence to legal formalities, parties can resolve disputes amicably. Settlement at any stage from before filing to after conviction can help avoid lengthy litigation and ensure mutual satisfaction.

Disclaimer: This information is intended for general guidance only and does not constitute legal advice. Please consult with a qualified lawyer for personalized advice specific to your situation.

Adcocate J.S. Rohilla (Civil & Criminal Lawyer in Indore)

Contact: 88271 22304

www.jsrohilla.in