2014 (2) TMI 343 - HC - Companies Law

Liability u/s 138 - Cheque issued for compromise - Dishonour of cheque - negotiable instrument act - Held that - cheque issued in terms of a compromise did not create a new liability and in case the compromise did not fructify, the cheque could not have been issued towards payment of a debt - In view of compromise between the appellant and the respondent did not fructify, acceptance of cheque by the authorised representative was conditional in nature and the trial court in the order dated 1.11.2003 noticed the controversy between the parties that there was no absolute settlement - Following decision of Lalit Kumar Sharma and Another v. State of Uttar Pradesh and Another 2008 (5) TMI 429 - Supreme Court of India - Decided in favour of appellant.

Summary

Issues:
Appeal against dismissal of complaint under Section 138 of Negotiable Instruments Act.

Analysis:
1. The trial court dismissed the complaint under Section 138 of the Negotiable Instruments Act after the parties had reached a compromise. The accused respondent had initially offered to make the payment but failed to do so, leading to legal proceedings.

2. The appellant argued that the judgment cited by the trial court was not applicable as there was no lawful compromise between the parties. The acceptance of the cheque was conditional, as evidenced by the statement made by the appellant's representative regarding withdrawing the civil suit upon encashment of the cheque.

3. The appellant contended that the trial court failed to consider the order dated 1.11.2003, which clearly stated that no compromise had taken place between the parties. The appellant also referred to a Supreme Court decision that emphasized the conditions for a cheque to be considered as payment towards a debt.

4. The High Court analyzed the facts and legal precedents presented by both parties. It noted that the trial court's order from 1.11.2003 indicated that there was no complete settlement between the parties, as the complainant's representative had agreed to withdraw the civil suit only upon encashment of the cheque.

5. Relying on the Supreme Court decision in Lalit Kumar Sharma, the High Court concluded that the acceptance of the cheque was conditional and did not create a new liability. Since the compromise did not materialize, the cheque could not be considered as payment towards a debt.

6. Consequently, the High Court allowed the appeal, directing the parties to appear before the District Judge to mark the complaint to the appropriate Court of jurisdiction. The appeal was disposed of based on the findings and legal principles discussed in the judgment.