B V Seshaiah vs The State Of Telangana

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

2 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

1 2018 (1) SCC 560

3 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.

4 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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