Chandigarh: A cheque-bounce case can still be settled even after a person has been convicted and has lost appeals, but delaying the settlement may increase the financial burden. A recent Punjab and Haryana High Court order has highlighted how the cost of resolving such disputes can rise depending on the stage at which the compromise is reached.
The court referred to a Supreme Court framework under which additional costs may apply when cheque-bounce cases are settled late. While early settlements may involve no extra payment, parties could face additional costs of up to 10% of the cheque amount if the matter reaches the Supreme Court before being resolved.
Cheque-bounce cases are generally filed under Section 138 of the Negotiable Instruments Act, 1881, which deals with dishonour of cheques due to reasons such as insufficient funds or arrangements with banks.
Settlement costs increase as cases move through courts
The Supreme Court has encouraged parties to settle cheque-bounce disputes whenever possible to reduce the burden on courts. However, it has also created a graded cost structure to discourage accused persons from delaying settlements after prolonged litigation.
According to the framework discussed by the Punjab and Haryana High Court, the additional cost depends on when the settlement takes place.
- If the accused pays the cheque amount before the recording of defence evidence, the court may allow settlement without additional costs.
- If payment is made after defence evidence but before the trial court delivers its judgment, an additional cost of 5% of the cheque amount may apply.
- If the dispute reaches the Sessions Court or High Court during appeal or revision proceedings, the additional cost can rise to 7.5%.
- If the matter reaches the Supreme Court before settlement, the additional cost may increase to 10%.
For example, in a dispute involving a cheque amount of ₹10 lakh, settling the matter at the Sessions Court or High Court stage could involve an additional payment of ₹75,000. If the case reaches the Supreme Court, the additional amount could rise to ₹1 lakh.
These additional costs are separate from the original cheque amount owed to the complainant.
Why courts impose higher costs for delayed settlements
The purpose behind the graded cost system is to encourage early resolution of cheque-bounce disputes. Courts have observed that allowing accused persons to wait until the final stages of litigation before settling could encourage unnecessary delays.
In the 2010 judgment of Damodar S. Prabhu vs Sayed Babalal H, the Supreme Court introduced a framework for imposing costs on delayed settlements. The court noted that a person should not benefit from prolonging legal proceedings and then choosing to settle only after years of litigation.
The Supreme Court later revisited the guidelines in the 2025 judgment of Sanjabij Tari vs Kishore S. Borcar, modifying the applicable costs at different stages of the case.
The Punjab and Haryana High Court referred to this updated framework while deciding the recent matter.
Case that reached High Court after conviction
The recent case involved Subhash Chander, who had been convicted by a Judicial Magistrate First Class in Sonipat in two cheque-bounce matters involving complainant Sunil Kumar.
In March 2019, the trial court convicted Chander and sentenced him to imprisonment of one year and six months. He was also directed to pay compensation of ₹5.10 lakh in one case and ₹1.55 lakh in another.
His appeals before the Additional Sessions Judge, Sonipat, were dismissed in November 2025, after which he approached the Punjab and Haryana High Court.
While his revision petitions were pending, Chander and the complainant reached a settlement through the Mediation and Conciliation Centre in Sonipat on May 22, 2026.
The complainant informed the High Court that he had no objection to the settlement and requested that the offences be compounded.
The High Court accepted the compromise and set aside the earlier conviction, sentences and Sessions Court orders.
Can cheque-bounce cases be settled after conviction?
Yes, cheque-bounce cases can be settled even after conviction.
The Punjab and Haryana High Court clarified that offences under Section 138 of the Negotiable Instruments Act can be compounded at any stage of litigation. This includes situations where the accused has already been convicted by a trial court and has lost an appeal before the Sessions Court.
However, such settlement requires a genuine compromise between both parties and approval from the appropriate court.
The recent order does not create a new legal principle but reinforces the existing position established through Supreme Court judgments.
Courts can waive additional costs in exceptional cases
Although delayed settlements generally attract additional costs, courts have the authority to reduce or waive them in certain situations.
The High Court observed that such waivers should not be granted routinely. They should only be considered when there are exceptional and compelling circumstances.
If a court decides to waive the additional cost, it must provide clear reasons for making such an exception.
In Subhash Chander’s case, the High Court decided not to impose additional costs, noting that he had been involved in criminal proceedings since around 2014.
Early settlement can save money and time
The key lesson from the ruling is that while settlement remains possible even at advanced stages of a cheque-bounce case, delaying the decision can increase expenses.
A person facing a cheque-bounce dispute may still resolve the matter after conviction, but the financial implications depend on when the settlement happens. Early compromise before major trial stages can avoid additional costs, while late settlements during appeals may require payment of thousands or even lakhs of rupees more.
For individuals and businesses involved in cheque-bounce disputes, the legal framework provides a clear incentive: resolving the matter at the earliest possible stage can reduce both financial pressure and years of court proceedings.