2018 (1) TMI 311 - HC - Indian Laws

Cheque bounced - Recovery of money / dues - Section 138 of the Negotiable Instruments Act - In the absence of any privity of contract between the plaintiff and the predecessor of the defendants, or the necessary proof as to the existence of any legally valid debt or liability in favour of the plaintiff, whether the Courts below are correct in decreeing the suit of the plaintiff for recovery of money? - Held that - the plea of the defendants that there is no proof of valid contract between the plaintiff and deceased B.Ramaiah as to the execution of Ex.A1, when it is found that the defendants have failed to establish that Ex.A1 Panchayat Muchilika, involved in the matter had been obtained by the plaintiff by threat, duress and coercion and when it is further found that the Panchayat Muchilika, Ex.A1 had come to be executed by the parties only in connection with the debt due from B.Ramaiah to the plaintiff, in connection with the business transactions and it is accordingly seen that Courts below have rightly assessed the materials placed on record, both oral and documentary evidence in the correct perspective, factually as well as legally and had rightly come to the conclusion that the Panchayat Muchilika Ex.A1, is a true and valid document and binding on the defendants, as the legal heirs of the deceased B.Ramaiah. The very fact that, one of the cheques had been honoured as put forth by the plaintiff and when the same also is admitted by the defendants and when till date the defendants have not endeavored to lay any action against the plaintiff for the obtainment of the amount received by the plaintiff under the said cheque also would go to show that inasmuch as the cheques in question were issued by B.Ramaiah for the outstanding amount due from him to the plaintiff, it is seen that no further concrete action had been initiated by the defendants as regards the encashment of the one cheque by the plaintiff. The substantial questions of law formulated in the second appeal are answered against the defendants and in favour of the plaintiff - appeal dismissed.

Summary

Issues Involved:
1. Privity of contract between the plaintiff and the predecessor of the defendants.
2. Validity and binding nature of Ex.A1 Muchilika/agreement and the cheques issued under it.
3. Legal or moral obligation of the defendants to discharge the alleged debts.
4. Consideration of oral and documentary evidence by the lower courts.

Issue-Wise Detailed Analysis:

1. Privity of Contract:
The primary issue was whether there was any privity of contract between the plaintiff and the predecessor of the defendants, B.Ramaiah. The plaintiff claimed that he and B.Ramaiah were engaged in a joint real estate business, which led to a settlement agreement (Ex.A1) wherein B.Ramaiah agreed to pay ?1,90,000 to the plaintiff. The defendants argued that there was no privity of contract and denied any joint business or resulting settlement. The court found that the plaintiff had sufficiently demonstrated the existence of a business relationship and subsequent settlement through oral and documentary evidence, including the Muchilika (Ex.A1) signed by B.Ramaiah and the 6th defendant.

2. Validity and Binding Nature of Ex.A1 Muchilika/Agreement and Cheques:
The defendants contended that Ex.A1 and the cheques were obtained under duress and coercion, and thus were not legally valid. They claimed that the plaintiff and his associates used threats to obtain signatures on blank papers and cheques. However, the court noted that no legal action or complaint was filed by B.Ramaiah or the defendants against the plaintiff regarding these allegations. The court further observed that the plaintiff had initiated a criminal complaint under Section 138 of the Negotiable Instruments Act when the cheques were dishonored, which added credibility to the plaintiff's claims. The court concluded that Ex.A1 was validly executed and binding.

3. Legal or Moral Obligation of the Defendants:
The court examined whether the defendants, as legal heirs of B.Ramaiah, were obligated to discharge the debt. The plaintiff argued that the defendants were bound to pay the amount due from B.Ramaiah. The court found that the defendants admitted the signatures on Ex.A1 and the issuance of cheques, and the plaintiff had already encashed one cheque for ?40,000. The court held that the defendants were legally obligated to honor the remaining debt as stipulated in Ex.A1.

4. Consideration of Oral and Documentary Evidence:
The defendants argued that the lower courts failed to properly consider the oral and documentary evidence, resulting in perverse findings. The court reviewed the evidence presented, including testimonies from the plaintiff and witnesses (PWs 1 to 3), and found them to be credible and consistent. The court noted that the defendants failed to provide substantial evidence to support their claims of coercion and threat. The court affirmed that the lower courts had correctly assessed the evidence and reached a valid conclusion.

Conclusion:
The court dismissed the second appeal, affirming the judgments and decrees of the lower courts. The court held that the plaintiff had successfully established the existence of a valid contract and debt, and the defendants were legally bound to discharge the debt. The substantial questions of law were answered in favor of the plaintiff, and the second appeal was dismissed with costs.