DECRIMINALISING THE PROCESS, NOT THE LAW: MEDIATION IN CHEQUE DISHONOUR CASES

AUTHOR – SAKSHAM KHANDARE, STUDENT AT THE MAHARAJA SAYAJIRAO UNIVERSITY OF BARODA

BEST CITATION – SAKSHAM KHANDARE, DECRIMINALISING THE PROCESS, NOT THE LAW: MEDIATION IN CHEQUE DISHONOUR CASES, INDIAN JOURNAL OF LEGAL REVIEW (IJLR), 6 (7) OF 2026, PG. 799-810, APIS – 3920 – 0001 & ISSN – 2583-2344. DOI – https://doi.org/10.65393/IJLRV6I790

Abstract

Section 138 of the Negotiable Instruments Act, 1881 criminalises cheque dishonour for insufficiency of funds or exceeding the arranged amount. Though framed as a criminal offence, its primary purpose is to secure repayment of a legally enforceable debt rather than to punish the drawer through incarceration. Complainants typically seek recovery of money, and the threat of jail serves mainly as leverage. As a result, most cases are eventually settled or compounded, with only a small fraction reaching full trial and conviction.

Despite amendments and Supreme Court guidelines for speedy disposal, over 43 lakh Section 138 cases remain pending across India, accounting for a large share of magisterial court workload, especially in major cities. The offence has a distinct quasi-civil character: criminal in procedure but compensatory in substance, as repeatedly noted by the Supreme Court.

The compounding framework under Section 147 allows settlement at any stage, yet it lacks a structured pathway to facilitate negotiations. This paper argues for decriminalising the process, not the law, retaining the deterrent effect of the offence while introducing mandatory pre-trial mediation as the default first step after cognizance.

Mediation, supported by the Mediation Act, 2023, offers a faster, confidential, and party-driven mechanism to reach enforceable settlements, including payment schedules. Where mediation fails or bad faith is evident, ordinary criminal proceedings can continue without delay. This approach aligns with the compensatory objective of Section 138, reduces judicial burden, and draws on international models that favour civil recovery and administrative sanctions over routine criminal prosecution for simple defaults.

Keywords: Cheque Dishonour, Section 138 NI Act, Mediation, Process Decriminalisation, Compounding of Offences, Judicial Backlog, Restorative Justice, Digital Dispute Resolution