Authority: Supreme Court of India (Special Lok Adalat – Samadhan Samaroh)

Order Date: 21-08-2026

Case Overview

  • Parties: M/S Sharma Electronics (Petitioner) vs. M/S Asia Trade Links (Respondent).
  • Background: The Shimla High Court, in judgment dated 18‑July‑2024 (Cr. Appeal No. 130/2011), set aside the Trial Court’s acquittal and convicted the petitioner under Section 138 of the Negotiable Instruments Act, 1881. A subsequent order dated 09‑September‑2024 also affirmed the conviction.
  • Settlement Process: During pendency of the Special Leave Petitions (CRL Nos. 6479‑6480/2025), the parties approached the District Legal Services Authority, Kangra. The Authority forwarded the settlement on 25‑May‑2026 in the presence of its Secretary. The matter was referred to a mediator on 23‑May‑2026, and the parties appeared before the ADR Centre on 25‑May‑2026, where they executed a settlement agreement.
  • Settlement Terms (extracted from paragraph 2 of the agreement):

a. Acknowledgement of the petitioner’s conviction by the High Court.

b. The petitioner deposited the full compensation amount of Rs 5,40,000/- before the Additional Chief Judicial Magistrate, Kangra (H.P.) via draft No. 473519 on 24‑September‑2024, issued by Punjab National Bank, Kangra.

c. The respondent accepted the amount (including interest) and expressed satisfaction, relinquishing any further claim against the petitioner.

d. Both parties agreed that no further dues remain payable by the petitioner.

e. The respondent consented to the High Court order dated 18‑July‑2024 being set aside, the petitioner being acquitted of the offence under Section 138, and the offence being treated as compounded.

  • Legal Basis for Compounding: The Court relied on Section 147 of the Negotiable Instruments Act, which permits compounding of offences under Section 138 with the consent of the parties at any stage, even post‑conviction. The decision cited the following precedents:
  • Damodar S. Prabhu v. Sayed Babalal H (2010) 5 SCC 663
  • Raj Reddy Kallem v. State of Haryana (2024) 8 SCC 588
  • B. V. Seshaiah v. State of Telengana (2023) 18 SCC 512
  • Gian Chand Garg v. Harpal Singh (2025) SCC OnLine SC 2317
  • Award Incorporation: The settlement agreement is incorporated as part of the Court’s award.

Final Outcome

  • The High Court’s order dated 18‑July‑2024 is set aside.
  • The offence under Section 138 of the Negotiable Instruments Act is declared compounded.
  • Sharma Electronics is acquitted of the conviction.
  • Asia Trade Links is entitled to withdraw the deposited amount of Rs 5,40,000/- along with applicable interest, if not already withdrawn.

Topics: Legal Settlement, Section 138 Compounding