Section 147 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 147 is one sentence long, but it matters to every drawer and payee: it says that every offence punishable under the Negotiable Instruments Act is compoundable. As per the consolidated text consulted, nothing else is said in the section about how, when or on what terms an offence is to be compounded.
"Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), every offence punishable under this Act shall be compoundable." That is the whole section. It means the offence under Section 138, and any other offence punishable under the Act, can be compounded, that is, settled with the complainant so that the case need not be pursued to a verdict. The text does not say who must consent, at what stage, in what form or on what terms, and it prescribes no fee.
The text, in full
The section reads: "Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), every offence punishable under this Act shall be compoundable."
The phrase "Notwithstanding anything contained in the Code of Criminal Procedure, 1973" means the Act's rule prevails over the Code on this point. The text refers to that Code; the reader should check the current procedural law for the corresponding provision on compounding before relying on any procedural point.
What "compoundable" means in plain terms
In criminal law, to compound an offence is to settle it with the person wronged so that the prosecution comes to an end. For a cheque-bounce case, that usually means the drawer pays the payee and the payee agrees that the case is closed. The Act's own text does not define compounding. For a general explanation of the idea and how it differs from adjudication, see our guide on compounding versus adjudication of offences; and for the settlement of a Section 138 case in particular, see compounding of a Section 138 offence. If you are weighing a settlement, a legal dispute resolution adviser can help you think through the terms and how they will be recorded. A note on spelling: the Act writes "indorse"; "endorse" is the common spelling.
What the section says, and what it leaves out
| Question | What the text of Section 147 says |
|---|---|
| Which offences? | "Every offence punishable under this Act". That includes the offence in Section 138 and, on the words, any other offence under the Act |
| Is compounding allowed? | Yes: "shall be compoundable" |
| Does the Code of Criminal Procedure matter? | The section overrides it: "Notwithstanding anything contained in the Code of Criminal Procedure, 1973" |
| Who must consent? | Not stated |
| At what stage may it be done? | Not stated |
| In what form? | Not stated |
| On what terms or amount? | Not stated. No compounding fee, no percentage and no guideline appears in the text consulted |
| Effect on the case | Not stated in the section. The text consulted does not say what the Court does once the offence is compounded |
Because so much is left unsaid, no figure, percentage, stage or procedure is given in this article. Any rule on those points would have to come from a source outside the text consulted, and none is in it.
How this fits with the rest of the cheque-dishonour part
Section 147 is the last section of the part of the Act on dishonour of cheques in the consolidated copy. The sections before it cover the offence (Section 138), the presumption in favour of the holder (Section 139), the jurisdiction rules in Section 142, the summary trial in Section 143 and the evidence provisions in Section 145 and Section 146. Section 147 says the offence can be settled at any point where compounding is otherwise available; the text does not itself say when.
The later provision on appeals, Section 148, appears in the 2018 amending Act and not in the consolidated copy; it is covered in our article on Section 148.
A worked example
Example. Parag Hardware has a Section 138 complaint pending against Qureshi Paints over a returned cheque. Qureshi Paints offers to pay the cheque amount and Parag Hardware agrees to settle the matter. Section 147 says every offence punishable under the Act is compoundable, so the offence is capable of being compounded. How the settlement is to be recorded before the Court, whether any further payment is required and what the Court then does are not set out in Section 147. The parties should take advice and check the current procedural law, including the provisions of the Code of Criminal Procedure, 1973 to which the section refers.
Practical points
- Settle with a record. If a case is compounded, the terms should be written down and signed. This is general good practice and the text does not require it.
- Do not assume a fee or percentage. The text consulted gives none. Any such figure would come from material outside it.
- Check the stage. The text says nothing about the stage at which compounding may be done.
- Consider the notice stage as well. Settlement before a complaint is filed is a separate matter from compounding an offence in a pending case. See our guide on reply to a Section 138 notice for the drawer's side at the notice stage.
- Company drawers. Where the drawer is a company, Section 141 deals with who is liable; whether compounding by one person affects others is not addressed in Section 147.
Need help with a settlement?
A settlement is easiest when both sides know what they are giving up and how it will be recorded before the Court. If you are the payee or the drawer, a legal dispute resolution review of the papers and the offer can help you sort out the options before anything is signed.
Key takeaways
- Section 147 says every offence punishable under the Act shall be compoundable.
- It applies notwithstanding the Code of Criminal Procedure, 1973.
- The text gives no stage, no form, no consent rule, no fee and no guideline for compounding.
- Check the current procedural law for the Code's corresponding provision.
- The text is one sentence, with no printing slip noticed.
Read next
- Compounding of a Section 138 offence: settlement
- Section 146: bank return memo as evidence of dishonour
- Section 148: deposit of twenty per cent pending appeal against conviction
- Compounding vs adjudication of offences: key differences
Disclaimer: Based on a consolidated text of the Negotiable Instruments Act, 1881 stating the position as of 26 December 2015 and on the Negotiable Instruments (Amendment) Act, 2018, as consulted on 2 October 2026. Later amendments and current criminal procedure law should be checked. This article is general information, not legal advice; check the official text before acting.