B V SESHAIAH VERSUS THE STATE OF TELANGANA & ANR.

BAHARUL ISLAM & ORS.  VERSUS THE INDIAN MEDICAL ASSOCIATION AND ORS.

REPORTABLE

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले

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)

 VERSUS

THE STATE OF TELANGANA & ANR. ... RESPONDENT(S)

 WITH

CRIMINAL APPEAL NO. OF 2023

(Arising out of Special Leave Petition (CRL) NO.7100/2018)

B VAMSI KRISHNA ... APPELLANT(S)

 VERSUS

THE STATE OF TELENGANA & ANR. ... RESPONDENT(S)

JUDGMENT

KRISHNA MURARI, J.

Leave Granted.

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

1679/2014.

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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

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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

Ongole only.

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

offence.

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

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 2018 (1) SCC 560

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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

compoundable.”

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.

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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.

 .......................J.

 (KRISHNA MURARI)

 .......................J.

 (V. RAMASUBRAMANIAN)

NEW DELHI;

01st February, 2023

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