In a brief but telling hearing on Tuesday, the Supreme Court bench of Justice M.M. Sundresh and Justice Satish Chandra Sharma stepped in to correct what it saw as an unnecessary burden on an accused who had already settled his cheque-bounce dispute. The courtroom atmosphere was calm, almost routine, yet the bench’s observations carried clear implications for thousands of Section 138 NI Act cases that get compromised at the revision stage.
The appeal before the Court was filed by Rajeev Khandelwal, who had been convicted under the Negotiable Instruments Act but later reached an amicable settlement with the complainant. Despite the settlement, the Bombay High Court had insisted that he pay “costs” to the State Legal Services Authority based on the Supreme Court’s earlier ruling in Damodar S. Prabhu v. Sayed Babalal H.
Background
Khandelwal’s case followed a familiar trajectory. After his conviction for cheque dishonour, his appeal failed before the Sessions Court. He then approached the High Court in revision. During that pendency, he and the complainant sorted out the issue through a mutual agreement something courts often encourage to ease the massive backlog in cheque-bounce litigation.
The High Court accepted the settlement and acquitted him, but added one more condition: payment of costs to the Legal Services Authority as per the Damodar S. Prabhu framework. This formula usually imposes graded costs depending on the stage of compromise.
However, the appellant told the Supreme Court that this cost requirement wasn’t just financially tough but legally questionable, especially because the complainant wasn’t asking for a single rupee more.
Court's Observations
As the matter was taken up, the senior counsel for the appellant argued that Damodar S. Prabhu relied on Article 142 of the Constitution, which allows the Supreme Court to pass orders “to do complete justice” in a given case. He contended that such an exercise shouldn’t automatically become a binding legal mandate for all courts.
Justice Sundresh seemed to agree, noting that settlements at the revision stage should not be discouraged by forcing litigants to pay additional amounts that neither party desires. At one point, the bench remarked,
“The bench observed, ‘Every case must be examined on its own facts. The complainant does not seek further payment and the appellant expresses genuine inability. Imposing costs in these circumstances cannot be sustained.’”
The judges also asked the State and the complainant’s counsel whether they opposed the relief sought. Both sides said they had no objection to removing the cost component a rare moment of consensus in a cheque-bounce matter.
Another important observation came when the Court remarked that the earlier judgment could not be treated as a rigid rulebook.
“The bench observed, ‘The law laid down cannot be regarded as binding precedent in all situations, especially when the settlement is complete and uncontested.’”
Decision
In its short order, the Supreme Court concluded that the High Court’s direction to deposit costs with the State Legal Services Authority was legally unsustainable in the facts of this particular case. The Court therefore set aside the cost requirement and disposed of the appeal.
No further directions were issued, and the matter ended there.
Case Title: Rajeev Khandelwal vs. State of Maharashtra & Anr.
Case Type: SLP (Crl.) No. 14340/2025
