He paid back Rs 1.65 crore. She still refused to settle. The Supreme Court said —

He paid back every rupee — plus Rs 10 lakh interest — for a machine that was never delivered. The woman still refused to settle.

The Supreme Court had before it a man who had done everything the law could ask. He had taken an advance of Rs 1.55 crore for a laser cutting machine his company never supplied. He had issued cheques to return the money. Those cheques had bounced. He had been convicted under Section 138 of the Negotiable Instruments Act (the law that makes cheque dishonour a criminal offence). He had served time in jail. And then, over years of litigation, he had paid back every rupee — the full Rs 1.55 crore plus Rs 10 lakh as interest — under the watch of the Supreme Court itself.

The complainant, a woman who had paid the advance in 2012, still refused to consent to compounding (the legal process where the victim agrees to drop charges after settlement). She wanted the cases to continue. The question before the bench of Justice A.S. Bopanna and Justice Sudhanshu Dhulia was simple and brutal: could a court shut down criminal proceedings when the person who was wronged refused to let them go?

When the machine never arrived

In 2012, the complainant paid Rs 1.55 crore as an advance to the appellant's company for a laser cutting machine. The company failed to deliver. The appellant issued cheques to refund the money. Those cheques bounced — the bank returned them unpaid because of insufficient funds. The trial court, in a courtroom thick with the smell of old case files, convicted the appellant under Section 138 in May 2015, sentencing him to two years of rigorous imprisonment and directing him to pay the cheque amount. He appealed.

The complainant did what any person in her position would do. She filed cheque dishonour cases under Section 138 of the NI Act. She also filed an FIR (a written complaint that starts a police investigation) at Police Station Mahesh Nagar, Ambala, on January 1, 2014, alleging cheating, criminal breach of trust, and criminal conspiracy — offences under Sections 406, 420, and 120B of the Indian Penal Code (the IPC provisions that deal with breach of trust, cheating, and conspiracy).

The settlement that fell apart

At the appellate stage, both sides went to a Lok Adalat (a court-annexed alternative dispute resolution forum). In December 2015, they reached a settlement: the appellant would repay the full Rs 1.55 crore, and in exchange, all cases would be compounded and quashed. The Lok Adalat file, stamped with the promise of a clean resolution, seemed to close the matter.

The appellant defaulted on the payment timeline. In July 2016, the Lok Adalat settlement was declared frustrated — the file now stamped FRUSTRATED in red ink, dead, legally speaking. The cases stayed alive.

What followed was a procedural marathon. The appellant's wife filed a Special Leave Petition (a plea for the Supreme Court's permission to appeal) in 2019. The Supreme Court directed the appellant to deposit Rs 20 lakh within three weeks. He did. But then, in a curious procedural deadlock, the trial court refused to accept the demand draft in February 2021 — the sealed envelope containing the draft sat on the trial judge's desk, unopened, as the court declined to take it.

The appellant then approached the Punjab and Haryana High Court under Section 482 of the CrPC (the High Court's inherent power to prevent abuse of its process). The High Court dismissed his application in November 2022. He came to the Supreme Court.

Why the complainant wouldn't let go

By the time the matter reached the Supreme Court in April 2024, the appellant had paid the entire Rs 1.55 crore plus Rs 10 lakh interest. The money sat in demand drafts, ready to be handed over. The complainant still refused to consent to compounding.

The law on compounding under Section 147 of the NI Act (which makes cheque dishonour offences compoundable) and Section 320 of the CrPC (which lists which offences can be compounded and with whose consent) is clear: the victim's consent is ordinarily required. Without it, the court cannot simply declare the matter settled.

The appellant's counsel argued that the transaction was purely civil in nature — a failure to supply goods after receiving an advance, not a criminal conspiracy hatched from the start. There was no evidence that the appellant had intended to cheat the complainant when he took the money in 2012. The criminal cases under Sections 406, 420, and 120B IPC, they said, were an abuse of process — a way to use criminal law to collect a civil debt.

The complainant's side argued the opposite: the appellant had taken money, not delivered goods, issued cheques that bounced, and then defaulted on a settlement. The law should not reward such behaviour by letting him walk away.

What the Supreme Court did

The bench did something unusual. It invoked Article 142 of the Constitution — the Supreme Court's extraordinary power to pass any order necessary to do complete justice in a case before it. This power is rarely used in routine criminal matters. As counsel argued the civil-versus-criminal line, the bench leaned forward, the courtroom falling into a tense silence. The court said this case deserved it.

The court's reasoning had two tracks.

First, on the cheque dishonour case: the appellant had fully compensated the complainant, including interest, and had already served jail time. The court had monitored the payment process itself. The purpose of Section 138 — to ensure that cheques are honoured and that victims are compensated — had been fully served. Continuing the prosecution would serve no purpose except punishment for punishment's sake. The court drew on its own precedents — Damodar S. Prabhu v. Sayed Babalal H., where it had held that compounding should be encouraged in cheque dishonour cases, and Meters and Instruments Pvt. Ltd. v. Kanchan Mehta, which emphasised that the object of Section 138 is compensatory, not punitive. In JIK Industries Ltd. & Ors. v. Amarlal V. Jamuni & Anr., the court had noted that compounding requires consent, but the present case was different — here, the court was not compounding the offence; it was quashing the proceedings on its own authority.

Second, on the IPC offences: the court examined the FIR and found no evidence that the appellant had intended to cheat the complainant from the very beginning. A failed business transaction — taking an advance and failing to deliver — is not automatically a criminal conspiracy. The court held that where a transaction is purely civil in nature, criminal proceedings under Sections 406, 420, and 120B IPC are not maintainable and deserve to be quashed.

The court made a crucial distinction: "Quashing of criminal proceedings is distinct from compounding; while compounding requires consent of the injured party, quashing is a power exercised by the court on its own assessment. Therefore, absence of complainant's consent does not bar the court from quashing proceedings." This single sentence — the court's own holding — cut through the deadlock.

Why this matters for every lawyer and litigant

This judgment gives the Supreme Court a powerful tool to close cases where the accused has done everything right — paid in full, served time — but the complainant refuses to let go. It tells trial courts and High Courts that they are not helpless when a settlement fails because of one party's refusal to consent. The court can step in under Article 142 and do what is just.

But the judgment also carries a warning: this power will not be used for everyone. The appellant paid the full amount plus interest, served jail time, and the court monitored the entire process. A litigant who delays, defaults, or shows bad faith cannot expect the same treatment.

THE PLAY: If you have fully compensated the complainant in a Section 138 case — including interest — and the complainant still refuses to compound, ask the court to quash the proceedings on its own authority rather than waiting for the victim's consent.

The court ordered the trial court to hand over the demand drafts totalling Rs 30 lakh to the complainant. All criminal proceedings arising from the 2014 FIR — including the charge sheet filed in July 2014 under Sections 406, 420 read with 120B IPC — were quashed. The conviction under Section 138 was set aside. The appellant walked free — not because the complainant forgave him, but because the court decided that justice had been done.