"Supreme Court Set Aside Appellants' Conviction U/S 138 N.I. Act , Settles Dispute with MOU"

Proceedings under Section 138 of the Negotiable Instruments Act were initiated against the Appellants on a private complaint by the Respondent No. 2 and resulted in the Appellants' conviction by the trial court.

The Appellants and the Respondent No. 2 entered into a Memorandum of Understanding (MOU) to settle the dispute. Clause 8 of the MOU stated that in the event of an unresolved dispute, the matter shall be referred to a sole arbitrator.

The lack of filing of a compromise petition by the Respondent No. 2 as agreed upon in the MOU led to the High Court dismissing the revision and confirming the Appellants' conviction.

Appeal to supreme court against the order and judgment dated 17.04.2018 passed by the High Court of Judicature at Hyderabad in Criminal Revision Cases 1678/2014 and 1679/2014.

Supreme court held that the settlement entered into by the parties was a compounding of the offence and the Appellants cannot be convicted.

The nature of the offence under Section 138 of the N.I Act is primarily related to a civil wrong and has been made a compoundable offence.

The Respondent No. 2's failure to file a compromise petition has withdrawn key information from the High Court.

The appeal is allowed and the order of conviction is set aside, with the option for the parties to settle their dispute as per the terms of the MOU.

B V SESHAIAH VS THE STATE OF TELANGANA & ANR.