The Supreme Court has ruled that individuals convicted in cheque bounce cases can avoid imprisonment by reaching a compromise with the complainant. The court emphasized that these offenses are primarily civil wrongs, making them compoundable. This means that if both parties voluntarily agree to a settlement, the conviction can be nullified.

A bench of Justices Aravind Kumar and Sandeep Mehta overturned a Punjab and Haryana High Court ruling that had refused to quash a conviction in a cheque dishonor case after a settlement. The Supreme Court stated that when parties enter into a compromise to avoid litigation, courts should respect their decision. Once the complainant signs a compromise deed, accepting full settlement, the proceedings under Section 138 of the Negotiable Instruments Act (NI Act) become invalid, and the conviction must be overturned.

The court acknowledged that while dishonoring a cheque has criminal consequences, Section 147 of the NI Act allows it to be compounded, irrespective of the Criminal Procedure Code of 1973. This compounding can occur at any stage, especially when the parties have reached a voluntary compromise. The Supreme Court referred to an earlier verdict, describing the offense under Section 138 of the NI Act as a "Civil Sheep in Criminal Wolf's Clothing". This signifies that the issues are primarily private matters brought under criminal jurisdiction to enhance the credibility of negotiable instruments.

In cases where an accused tries to get a prison sentence, the court usually provides ample opportunities to pay or deposit some money before the court during the case's pendency. The Supreme Court's decision highlights the importance of allowing parties to resolve cheque bounce disputes amicably, reducing the burden on the criminal justice system and promoting settlement. This ruling reinforces the principle that the NI Act aims to strengthen the credibility of negotiable instruments while acknowledging the primarily civil nature of cheque bounce offenses.