Sunday, 10 November 2019

Supreme Court: Complaint for dishonour of cheque is maintainable if cheque was issued pursuant to award of Lok Adalat

In the instant case, the respondent clearly had a liability.
As observed above, there was an earlier adjudication which led to
the conviction of the respondent accused. Thus there was
adjudication of liability of the respondent accused. While the
appeal was pending, the matter was settled in the Lok Adalat in
acknowledgment of liability of the accused respondent to the
appellant complainant.
The cheque issued pursuant to the order of the Lok Adalat, was
also dishonoured. This clearly gave rise to afresh cause of action
under Section 138 of the Negotiable Instruments Act.

IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO.1580 OF 2019

ARUN KUMAR Vs ANITA MISHRA 

Dated:October 18, 2019.

Leave granted.
This appeal is against an order dated 09.09.2015 passed by the
Indore Bench of the High Court of Madhya Pradesh allowing the
application filed by the accused respondent being Misc. Criminal
Case No.9128/2012 against an order passed by the Learned Judicial
Magistrate, First Class Narsinghgarh, dated 29.07.2011, refusing to
dismiss the Complaint Case No. 547/2009 filed by the appellant
complainant against the accused respondent under Section 138 of the
Negotiable Instruments Act and the order passed by the Additional
District Judge dated 24.08.2012, dismissing the revisional
application of the accused respondent against the said order dated
29.7.2011 of the Learned Judicial Magistrate, being Criminal
Revision No.195/2011.
The brief facts are that a complaint under Section 138 of the
Negotiable Instruments Act was filed by the appellant complainant
against the accused respondent on 02.07.2007.

The Judicial Magistrate, First Class, Narsinghgarh sentenced
the accused respondent to six months’ imprisonment and further
imposed a fine of Rs.3,30,000/- on the accused respondent. Being
aggrieved, the accused respondent filed a Criminal Appeal
No.231/2007. During the pendency of the criminal appeal, the
matter was settled in a compromise before the Lok Adalat on
25.07.2008.
In terms of the compromise, the accused respondent was
required to make a payment of Rs.3,51,750/- which was paid on the
same day through a post dated cheque drawn in favour of the
appellant complainant.
The said cheque drawn by the accused respondent in favour of
the appellant complainant as per the compromise arrived at between
the appellant complainant and the accused respondent before the Lok
Adalat, also got dishonoured, whereupon the appellant complainant
filed criminal complaint No.547/2009 u/s 138 of the Negotiable
Instruments Act, referred to above, against the accused respondent.
The accused respondent filed an application before the
Judicial Magistrate, First Class Narsinghgarh for dismissal of the
complaint. The said application was dismissed. A Revisional
application against the order of dismissal of the said application,
passed by the Judicial Magistrate was also dismissed by the
Sessions Court.

The accused respondent, however, approached the High Court
under Section 482 of the Criminal Procedure Code for quashing the
proceedings. The application under Section 482, as observed above,
has been allowed by the High Court by the order impugned.
The High Court observed that it was an undisputed fact that in
respect of earlier cheque issued by the respondent accused, a
criminal case had been preferred u/s 138 of the Negotiable
Instruments Act and the respondent accused had also been convicted.
A fine was also imposed on the respondent accused.
The High Court proceeded to quash the complaint observing that
the question of entertaining the second complaint did not arise,
when the cheque was not issued in discharge of any debt or
liability of the company. It was issued on account of a
settlement.
With the greatest of respect, the High Court has misconstrued
the judgment of this Court in Lalit Kumar Sharma and Anr. vs. State
of Uttar Pradesh and Anr. reported in 2008 (5) SCC 638.
In Lalit Kumar Sharma (supra), the Supreme Court found that
ingredients of Section 138 of the Act were : i) a legally
enforceable debt; ii) that the cheque was drawn for discharge in
whole or in part of any debt or other liability, which presupposes
a legally enforceable debt; and iii) the cheque so issued had been
returned due to insufficiency of funds.

Lalit Kumar’s case is distinguishable on facts, in that the
cheque had not been issued in discharge of any debt or liability of
the Company of which the accused were said to be the Directors.
The cheque was found to have been issued for the purpose of
arriving at a settlement.
In the instant case, the respondent clearly had a liability.
As observed above, there was an earlier adjudication which led to
the conviction of the respondent accused. Thus there was
adjudication of liability of the respondent accused. While the
appeal was pending, the matter was settled in the Lok Adalat in
acknowledgment of liability of the accused respondent to the
appellant complainant.
The cheque issued pursuant to the order of the Lok Adalat, was
also dishonoured. This clearly gave rise to afresh cause of action
under Section 138 of the Negotiable Instruments Act.
SCC 51 cited by the appellant complainant, this Court held:
“11. In the case on hand, the question posed for
consideration before the High Court was that “when a criminal
case referred to by the Magistrate to a Lok Adalat is settled by
the parties and an award is passed recording the settlement,
can it be considered as a decree of a civil court and thus
executable by that court?” After highlighting the relevant
provisions, namely, Section 21 of the Act, it was contended
before the High Court that every award passed by the Lok
Adalat has to be deemed to be a decree of a civil court and as
such, executable by that court.

23. In the case on hand, the courts below erred in holding that
only if the matter was one which was referred by a civil court it
could be a decree and if the matter was referred by a criminal
court it will only be an order of the criminal court and not a
decree under Section 21 of the Act. The Act does not make out
any such distinction between the reference made by a civil
court and a criminal court. There is no restriction on the
power of Lok Adalat to pass an award based on the
compromise arrived at between the parties”.
Every award of the Lok Adalat is, as held in K.N. Govindan
Kutty Menon vs. C.D. Shaji (supra), deemed to be decree of a civil
court and executable as a legally enforceable debt. The dishonour
of the cheque gave rise to a cause of action under Section 138 of
the Negotiable Instruments Act. The impugned judgment and order is
misconceived.
The appeal is accordingly allowed and the judgment and order
impugned is set aside.
.................J.
[INDIRA BANERJEE]
.................J.
[M.R. SHAH]
New Delhi;
October 18, 2019.

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