The short answer: yes. Section 147 of the Negotiable Instruments Act, 1881 makes cheque bounce offences compoundable, so the payee and the drawer can settle a Section 138 case at any stage, with the court’s permission. What changes with time is the cost. The later in the case you settle, the more likely the court is to add costs on top of the cheque amount.
If you are still deciding whether to file, start with the step-by-step timeline of notice, payment window and complaint.
Why a cheque case can be settled at all
Most criminal offences cannot be settled by the parties. A Section 138 case is treated differently: the offence exists to protect the credibility of cheques as a payment instrument, and the underlying wrong is a debt. That is why Parliament made it compoundable, and why courts have encouraged settlement.
Settling before the complaint
The cleanest settlement is the one that happens inside the 15-day window after the demand notice. Full payment in that period means no offence is made out. Payment after the window but before the complaint is filed is not a legal bar to the complaint, but in practice it ends the dispute when the payee accepts it and gives a written receipt.
Settling after the complaint: the cost ladder
Once a complaint is pending, the Supreme Court’s guidelines set out a graded scale of costs, so that accused persons do not gain from delay. The current scale comes from Sanjabij Tari v. Kishore S. Borcar (25 September 2025), which revised and lowered the earlier figures of 10%, 15% and 20% laid down in Damodar S. Prabhu v. Sayed Babalal H. (2010):
| Stage of the case | Costs suggested |
|---|---|
| In the trial court, before the accused’s defence evidence is recorded | None |
| In the trial court, after defence evidence but before judgment | About 5% of the cheque amount |
| Appeal or revision before the Sessions Court or High Court | About 7.5% of the cheque amount |
| Supreme Court | About 10% of the cheque amount |
These costs are paid to the Legal Services Authority or another authority the court directs, not to the complainant. They are guidelines the court applies with discretion, and a court can depart from them for a reason it records.
Can the court close the case if the payee refuses?
In Meters and Instruments v. Kanchan Mehta (2017), the Supreme Court held that the court may, in a suitable case, close the proceedings where the accused pays the cheque amount with interest and costs, even if the complainant has not consented. The Court’s reasoning was that the essence of the offence is the unpaid money. This is not automatic, and the court will look at the conduct of the accused before doing it.
How to record a settlement properly
A handshake or an informal note is not enough. A good settlement has these features:
- A written settlement agreement stating the amount, the payment dates and what each side gives up.
- A joint application to the court under Section 147, with the settlement attached, so the court can record it.
- Payment in the manner agreed (bank transfer or a new cheque, drawn on funds that are there), with receipts.
- A default clause saying what happens if an instalment is missed.
- A court order disposing of the case on those terms.
If instalments are agreed, both sides should understand that a fresh cheque handed over to secure a settlement can bounce too, and can start a fresh Section 138 case.
What happens to the case on compounding
Once the court accepts the compounding, the prosecution ends. The court records that the accused is discharged or acquitted on the terms of the settlement, and no conviction is entered for that cheque.
Practical points for each side
- Payee: decide early what you will accept, and keep the record of the debt. Interest and reasonable costs are fair to ask for, and a signed settlement protects you better than a promise.
- Drawer: if the debt is genuine, settle at the earliest hearing, when no costs are expected. If it is disputed, your defence should be prepared, and settlement is still available later.
- Both: interim compensation of up to 20% of the cheque amount can be ordered under Section 143A, so delay is not free for the drawer.
No lawyer can promise how a particular case will end, and we do not. What we can do is tell you where your case stands on the cost ladder and what a settlement should say.
Speak to us
If you have a pending Section 138 case, or have received a notice, call 99115 44811 or write to manujalawyers@gmail.com. Read more on our cheque bounce practice at Tis Hazari Court.
This post gives general information on the law as it stands and is not advice on your particular case.