Supreme Court of India
B V SESHAIAH versus THE STATE OF TELANGANA & ANR on 1 February 2023
[2023] 2 S.C.R. 293
B V SESHAIAH
v.
THE STATE OF TELANGANA & ANR.
(Criminal Appeal No. 284 of 2023)
FEBRUARY 01, 2023
[KRISHNA MURARI AND V. RAMASUBRAMANIAN, JJ.]
Negotiable Instruments Act, 1881 – s.138 – Conviction of theAppellants – Revision filed before High Court – Meanwhile, theparties entered into a Memorandum of Understanding (MoU) tosettle the dispute, in terms thereof Respondent No.2 was bound tofile a compromise petition before the High Court, however he failedto do so – Revision dismissed by High Court, conviction of theAppellants confirmed – On appeal, held: This is a very clear caseof the parties entering into an agreement and compounding theoffence to save themselves from the process of litigation – Whensuch a step was taken by the parties and the law clearly allowsthem to do the same, the High Court cannot override suchcompounding and impose its will – Also, Respondent No.2 was dutybound to file a compromise petition before High Court, and by notdoing the same has withdrawn key information from the High Court,which led to unwarranted confirmation of the Appellants’ conviction– Order of conviction set aside – Open to the parties to settle theirdispute as per the MoU.
CRIMINAL APPELLATE JURISDICTION : Criminal AppealNo.284 of 2023.
From the Judgment and Order dated 17.04.2018 of the High Courtof Judicature at Hyderabad for the State of Telangana and the State ofAndhra Pradesh in CRLR No.1678 of 2014.
With
Special Leave Petition (Crl) No.7100 of 2018.
M. Rambabu, Ms. Prity Kumari, N. Eswara Rao for M/s. M.Rambabu and Co., Advs. for the Appellant.
S. Udaya Kumar Sagar, Lakshay Saini, Advs. for the Respondents.
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AN. V. Subba Rao, Respondent-in-person
The Judgment of the Court was delivered by KRISHNA MURARI, J.
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1. Leave Granted.
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2. The present Appeals have been filed by the Appellants hereinagainst the impugned order and judgment dated 17.04.2018 passed bythe High Court Of Judicature at Hyderabad in Criminal Revision CaseNos. 1678/2014 and 1679/2014.
3. For the purpose of these Appeals, briefly, the facts of the presentCcase are that on a private complaint initiated by the Respondent No.2,proceedings under Section 138 of the Negotiable Instruments Act, 1881were initiated against the Appellants herein. These proceedings led tothe conviction of the Appellants by the trial court.
4. It is alleged that the Appellants, under the guise of makingDinvestments took money from Respondent No.2 and made wrongful gainfor their profits.
5. After the Appellants’ conviction, A revision was preferred bythem in the High Court It is important to note that during the course ofthe revision filed by the Appellants, the parties entered into aEMemorandum of Understanding to settle the dispute within themselves.
6. Clause 8 of the Memorandum Of Understanding stated thatthe dispute was to be settled amicably, and in the event of the disputestill not being amicably resolved, it must be first referred to a soleArbitrator. Clause 8 of the said Memorandum Of Understanding is asunder:-F
“That any dispute under this document shall be resolvedamicably. In the event the dispute is not resolved amicably,the matter shall be referred to the sole arbitration of ShriJonnalagadda Srinivasa Rao S/o Venkaiah whose decisionshall be final and binding on all the parties. On enteringGreference, the sole arbitrator shall hear the parties and passaward. The provisions of arbitration and conciliation act shallapply to the arbitration proceedings. The place of arbitrationshall be Ongole only.
7. It is also to be noted that as per the terms of the agreement, the H
Respondent No.2 was bound to file a compromise petition before theHigh Court, however he failed to do so. The lack of filing of such acompromise petition, as agreed upon by the Respondent No.2, has nowled to the High Court dismissing the Revision and confirming theConviction of the Appellants.
8. In our view, the terms and conditions of the settlement enteredinto by the parties binds them to settle the dispute amicably, or throughan arbitration as has been stated in clause 8 of the Memorandum OfUnderstanding.
9. In such a circumstance, the Appellants cannot be convicted onthe basis of the orders passed by the courts below, as the settlement isnothing but a compounding of the offence.
10. In the case of M/S Meters and Instruments Private Limited& Anr. Vs Kanchan Mehta[1], this court held that the nature of offenceunder section 138 of the N.I Act is primarily related to a civil wrong andhas been specifically made a compoundable offence. The relevantparagraph of the judgment has been extracted herein:
“This Court has noted that the object of the statute was tofacilitate smooth functioning of business transactions. Theprovision is necessary as in many transactions’ cheques wereissued merely as a device to defraud the creditors. Dishonorof cheque causes incalculable loss, injury and inconvenienceto the Vide the Banking, Public Financial Institutions andNegotiable Instruments Laws (Amendment) Act, 1988 payeeand credibility of business transactions suffers a setback. Atthe same time, it was also noted that nature of offence underSection 138 primarily related to a civil wrong and the 2002amendment specifically made it compoundable.”
11. This is a very clear case of the parties entering into an agreementand compounding the offence to save themselves from the process oflitigation. When such a step has been taken by the parties, and the lawvery clearly allows them to do the same, the High Court then cannotoverride such compounding and impose its will.
12. It must also be noted that the Respondent No.2 was dutybound to file a compromise petition before the High Court, and by notdoing the same has withdrawn key information from the High Court,which has led to an unwarranted confirmation of the Appellants’conviction.
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296SUPREME COURT REPORTS[2023] 2 S.C.R.
A13. We, therefore, allow these Appeals and set aside the order ofconviction passed by the trial court. It is, however, kept open to theparties to settle their dispute as per the terms of the Memorandum OfUnderstanding.
Divya PandeyB
Appeals allowed.
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