M/S Gowri Heights Private Limited vs. M/S Sri Datta Sai Security Enterprises

Held

The Court held that the proceedings initiated under Section 138 of the Negotiable Instruments Act, 1881, could be quashed. The primary reasoning was that the matter had been amicably settled between the parties. The Court noted that the offences under Section 138 of the Negotiable Instruments Act, 1881, are not offences against the State but rather arise from a dispute between private parties. Given the settlement, the Court found it appropriate to accept the application for compounding of the offence and terminate the proceedings. The Court also recorded the handing over of a Demand Draft for Rs.2,92,900/- to the respondent by the petitioner's counsel, which was acknowledged by the respondent's counsel as full and final settlement. The ratio decidendi is that when parties to a cheque dishonour case under Section 138 of the Negotiable Instruments Act, 1881, arrive at a settlement, the High Court, in its writ jurisdiction, can quash the proceedings.

Facts

The petitioners, M/s. Gowri Heights Private Limited and Umesh Chikkadoddi Puttaswamy, filed a writ petition before the High Court of Karnataka seeking to quash proceedings in CC.No.55688/2023. These proceedings were initiated under Section 138 of the Negotiable Instruments Act, 1881, before the XXXIII Additional Chief Metropolitan Magistrate, Bengaluru. The respondent is M/s. Sri Datta Sai Security Enterprises. The parties informed the Court that they had reached an amicable settlement and filed an application under Section 320 read with Section 482 of the Cr.PC. The settlement involved the petitioner undertaking to pay the GST amount due by the respondent to the GST authority and paying a sum of Rs.2,92,900/- out of a cheque amount of Rs.10,91,044/-.

Key Issues

1. Whether the proceedings initiated under Section 138 of the Negotiable Instruments Act, 1881, can be quashed in light of an amicable settlement between the parties, considering the nature of the offence? Petitioner's contention: The petitioners argued that since an amicable settlement has been reached between the parties and the matter has been resolved, the proceedings should be quashed. They relied on the settlement terms where they agreed to pay the outstanding GST amount and a significant portion of the cheque amount. They also highlighted that the offence under Section 138 of the Negotiable Instruments Act, 1881, is essentially a civil dispute that has been amicably resolved. Respondent's contention: The respondent, through their counsel, acknowledged the settlement and did not oppose the quashing of the proceedings. The judgment does not record any specific arguments from the respondent beyond their acceptance of the settlement.