The Supreme Court yesterday held that the Appellants cannot be convicted on the basis of the orders passed by the Trial Court, as the settlement was nothing but a compounding of the offence.
The Supreme Court bench comprising Justices Krishna Murari and V. Ramasubramanian was hearing an Appeal yesterday on Section 138 of the Negotiable Instruments Act, 1881 and held that the Appellants cannot be convicted on the basis of the orders passed by the court below, as the settlement was nothing but a compounding of the offence.
In the present case, 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. 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.
The Supreme Court noted that as per the terms of the agreement, 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 Respondent No.2, has now led to the High Court dismissing the Revision and confirming the Conviction of the Appellants.
The terms and conditions of the settlement entered into by the parties bind them to settle the dispute amicably, or through arbitration as has been stated in clause 8 of the Memorandum of Understanding, the Supreme Court bench noted.
The Apex Court observed that 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.
The Supreme Court observed that Respondent No.2 was duty bound to file a compromise petition before the High Court, and by not doing the same has withdrawn key information from the High Court, which has led to an unwarranted confirmation of the Appellants’ conviction.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 Supreme Court noted that this was 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.
The Appeals were allowed and the order of conviction passed by the Trial court was set aside.