Binding criminal court settlement in cheque dishonour proceedings can be enforced on default even without prior mediation.

A criminal court may record a lawful and voluntary settlement in a Section 138 Negotiable Instruments Act proceeding even if the matter was not first referred to mediation. The decisive requirement is that the court satisfies itself that the compromise is entered into freely, without force, pressure or undue influence; once judicially accepted and acted upon, the settlement binds the parties. If there is default, recovery may be pursued through the mechanisms contemplated by Sections 421 and 431 CrPC. A settlement recorded on oath before the trial court and partly performed by the parties was treated as enforceable, and refusal to act on it was held unsustainable.

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Issues: Whether a settlement recorded by the criminal court in proceedings under Section 138 of the Negotiable Instruments Act, 1881, without prior mediation, could be treated as binding and enforced upon default under Sections 421 and 431 of the Code of Criminal Procedure, 1973.

Analysis: The settlement was recorded by the trial court itself after the respondent's statement was taken on oath in the presence of counsel, and the terms were acted upon by partial payment and delivery of cheques. The legal position emerging from the authorities considered was that a criminal court is not barred from recording a lawful and voluntary settlement merely because the matter was not referred to mediation. What is material is that the court must satisfy itself that the settlement is lawful and entered into voluntarily, without force, pressure or undue influence. Once such settlement receives judicial acceptance and the parties act upon it, the settlement acquires binding force. On breach, the court can proceed to recover the amount in the manner contemplated by Sections 421 and 431 of the Code of Criminal Procedure, 1973.

Conclusion: The settlement was valid and binding, and the trial court erred in treating it as non est. The refusal to act on the settlement was unsustainable.

Final Conclusion: The impugned order was set aside, and the trial court was directed to consider the application for recovery in accordance with law on the basis of the recorded settlement.

Ratio Decidendi: A settlement recorded by a criminal court in a Section 138 proceeding becomes enforceable when the court is satisfied of its lawfulness and voluntariness, even if the matter was not referred to mediation, and breach of such settlement may be addressed through recovery mechanisms under the Code of Criminal Procedure, 1973.

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