2023 (2) TMI 60 - SC - Indian Laws

Dishonor of Cheque - amicable settlement of dispute - Compoundable offence or not - Compounding by mutual consent between the parties - HELD THAT - 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 - 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. In the case of M/S. METERS AND INSTRUMENTS PRIVATE LIMITED ANR. VERSUS KANCHAN MEHTA 2017 (10) TMI 218 - SUPREME COURT , 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 made a compoundable offence. 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 - 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the Respondent No.2 was duty bound to file a compromise petition before the High Court, and by not doing the same has withdrawn key information from the High Court, which has led to an unwarranted confirmation of the Appellants conviction. The order of conviction passed by the trial court is set aside - appeal allowed.

Summary

Issues:
Appeal against impugned order and judgment dated 17.04.2018 passed by the High Court in Criminal Revision Case Nos. 1678/2014 and 1679/2014. Interpretation of a Memorandum of Understanding for settlement. Compounding of the offence under Section 138 of the Negotiable Instruments Act, 1881.

Analysis:
The Appeals were filed against the High Court's order confirming the conviction of the Appellants under Section 138 of the Negotiable Instruments Act, 1881. The case originated from a private complaint by Respondent No.2, alleging that the Appellants obtained money under the guise of investments and made wrongful gains. The parties entered into a Memorandum of Understanding, which included a clause stating that any dispute must be resolved amicably, and if not, referred to arbitration. Despite this agreement, Respondent No.2 failed to file a compromise petition as required, leading to the High Court dismissing the Revision and upholding the conviction.

The Supreme Court analyzed the settlement terms and the nature of the offence under Section 138 of the N.I Act. Referring to the case of M/S Meters and Instruments Private Limited & Anr. Vs Kanchan Mehta, the Court highlighted that the offence under Section 138 is primarily a civil wrong and is compoundable. The Court emphasized that the parties had willingly entered into a settlement to avoid litigation, which is permissible under the law. Therefore, the High Court's decision to override the compounding and uphold the conviction was deemed inappropriate.

Moreover, the Court noted that Respondent No.2's failure to file the compromise petition deprived the High Court of crucial information, leading to the unjust confirmation of the Appellants' conviction. Consequently, the Supreme Court allowed the Appeals, setting aside the trial court's conviction. The parties were given the opportunity to resolve their dispute in accordance with the terms of the Memorandum of Understanding, emphasizing the importance of honoring settlement agreements in legal proceedings.