B V SESHAIAH VERSUS THE STATE OF TELANGANA & ANR.
BAHARUL ISLAM & ORS. VERSUS THE INDIAN MEDICAL ASSOCIATION AND ORS.
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO. OF 2023
(Arising out of Special Leave Petition (CRL) NO.7099/2018)
B V SESHAIAH ... APPELLANT(S)
THE STATE OF TELANGANA & ANR. ... RESPONDENT(S)
CRIMINAL APPEAL NO. OF 2023
(Arising out of Special Leave Petition (CRL) NO.7100/2018)
B VAMSI KRISHNA ... APPELLANT(S)
THE STATE OF TELENGANA & ANR. ... RESPONDENT(S)
KRISHNA MURARI, J.
2. The present Appeals have been filed by the Appellants
herein against the impugned order and judgment dated
17.04.2018 passed by the High Court Of Judicature at
Hyderabad in Criminal Revision Case Nos. 1678/2014 and
3. For the purpose of these Appeals, briefly, the facts
of the present case are that on a private complaint
initiated by the Respondent No.2, proceedings under Section
138 of the Negotiable Instruments Act, 1881 were initiated
against the Appellants herein. These proceedings led to the
conviction of the Appellants by the trial court.
4. It is alleged that the Appellants, under the guise of
making investments took money from Respondent No.2 and made
wrongful gain for their profits.
5. After the Appellants’ conviction, A revision was
preferred by them in the High Court It is important to note
that during the course of the revision filed by the
Appellants, the parties entered into a Memorandum of
Understanding to settle the dispute within themselves.
6. Clause 8 of the Memorandum Of Understanding stated
that the dispute was to be settled amicably, and in the
event of the dispute still not being amicably resolved, it
must be first referred to a sole Arbitrator. Clause 8 of the
said Memorandum Of Understanding is as under:-
“That any dispute under this document shall be
resolved amicably. In the event the dispute is
not resolved amicably, the matter shall be
referred to the sole arbitration of Shri
Jonnalagadda Srinivasa Rao S/o Venkaiah whose
decision shall be final and binding on all the
parties. On entering reference, the sole
arbitrator shall hear the parties and pass
award. The provisions of arbitration and
conciliation act shall apply to the arbitration
proceedings. The place of arbitration shall be
7. It is also to be noted that as per the terms of the
agreement, the Respondent No.2 was bound to file a
compromise petition before the High Court, however he failed
to do so. The lack of filing of such a compromise petition,
as agreed upon by the Respondent No.2, has now led to the
High Court dismissing the Revision and confirming the
Conviction of the Appellants.
8. In our view, the terms and conditions of the
settlement entered into by the parties binds them to settle
the dispute amicably, or through an arbitration as has been
stated in clause 8 of the Memorandum Of Understanding.
9. In such a circumstance, the Appellants cannot be
convicted on the basis of the orders passed by the courts
below, as the settlement is nothing but a compounding of the
10. In the case of M/S Meters and Instruments Private
Limited & Anr. Vs Kanchan Mehta1,this court held that the
nature of offence under section 138 of the N.I Act is
primarily related to a civil wrong and has been specifically
2018 (1) SCC 560
made a compoundable offence. The relevant paragraph of the
judgment has been extracted herein:
“This Court has noted that the object of the
statute was to facilitate smooth functioning
of business transactions. The provision is
necessary as in many transactions’ cheques
were issued merely as a device to defraud
the creditors. Dishonor of cheque causes
incalculable loss, injury and inconvenience
to the Vide the Banking, Public Financial
Institutions and Negotiable Instruments Laws
(Amendment) Act, 1988 payee and credibility
of business transactions suffers a setback.
At the same time, it was also noted that
nature of offence under Section 138
primarily related to a civil wrong and the
2002 amendment specifically made it
11. This is a very clear case of the parties entering
into an agreement and compounding the offence to save
themselves from the process of litigation. When such a step
has been taken by the parties, and the law very clearly
allows them to do the same, the High Court then cannot
override such compounding and impose its will.
12. It must also be noted that the Respondent No.2 was duty
bound to file a compromise petition before the High Court,
and by not doing the same has withdrawn key information from
the High Court, which has led to an unwarranted confirmation
of the Appellants’ conviction.
13. We, therefore, allow these Appeals and set aside the
order of conviction passed by the trial court. It is,
however, kept open to the parties to settle their dispute as
per the terms of the Memorandum Of Understanding.
01st February, 2023