Disapproving such an approach by the High Court convicting the appellant, the Supreme Court observed:
“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. 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 Court also placed reliance on its decision in M/S Meters and Instruments Private Limited & Another v. Kanchan Mehta (2018), to hold that the nature of offence under Section 138 is primarily related to a civil wrong and has been specifically made a compoundable offence.
Therefore, the Court was of the view that this was a clear case of the parties entering into an agreement and compounding the offence to save themselves from the process of litigation.
“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the Respondent No.2 was duty bound to file a compromise petition before the High Court, and by not doing the same has withdrawn key information from the High Court, which has led to an unwarranted confirmation of the Appellants’ conviction,” the apex court said.
Therefore, the Court allowed the appeal and set aside the conviction of the appellant.