A bench of justices Reva Khetrapal and S P Garg observed there would be no end to such issues and said it would be better for both the leaders to amicably resolve it and "bury the hatchet".
"Nothing is there, why can't you both parties shake hands and finish off the matter on an amicable note Why don't you bury the hatchet and utilize time in a more productive manner" the bench said.
"You both are renowned politicians, people look up to you," the court added.
In response to the court's observations, senior advocate Shanti Bhushan, appearing for the former Delhi Chief Minister, said "they (Gadkari) went to the court first, so let them withdraw their complaint but we will not withdraw our statement or any of the allegations made as we have proofs for all the issues raised by us".
He further said "let Gadkari give us the assurance that they will not seek prosecution of Kejriwal in this matter in future".
Additional Solicitor General Pinky Anand, appearing for Gadkari, Minister of Road Transport and Highways, said "I (Gadkari) am an honest politician and damage has been caused to my reputation by the defamatory allegation levelled against me by Kejriwal. I don't have any personal enmity against Kejriwal."
She also told the court that her client is ready to resolve the issue if Kejriwal withdraws his statement.
"If Kejriwal withdraws his allegations, then of course I will do (withdraw my case). But if he does not do that, then I will also not do it.
"It's not that we are scared of him," the ASG told the court and added that honesty is his (Gadkari) "political strength" and his "reputation is his capital".
On January 30, Kejriwal had made an allegedly defamatory statement against Gadkari in the media.