2018 (9) TMI 928 - HC - Indian Laws

Validity of Settlement Agreement - whether the Agreement is binding on parties - case of plaintiff is that since the settlement was not recorded, no payment is liable to be made - Held that - The Defendants have not only enjoyed the entire sum which was to be paid to the Plaintiff since 2014, but even as of 2018, when submissions were heard in the matter, the Defendants were not willing to make the payment. Repeatedly, the matter was adjourned on various occasions including on 16th July, 2018, 18th July, 2018 and 24th July, 2018 and finally on 9th August, 2018 the submissions were heard and the judgment was reserved. On all these occasions, learned counsel for the Defendants had taken the stand, that if the settlement is recorded now, the payments would be as per the instalments in the Settlement Agreement and even now the Defendants are not willing to make the entire payment at one go. The Defendants categorically asserted before the Court that no interest is liable to be paid by them. A perusal of the escrow agreements also shows that the same have been only signed by the Defendants and not by the Plaintiff. In any event, these escrow agreements were prior to the Settlement Agreement, which supersedes the escrow agreements. This Court has no option but to decree the suit along with a higher rate of interest - Suit is disposed off.

Summary

Issues Involved:
1. Existence and validity of the Settlement Agreement.
2. Compliance with the Settlement Agreement.
3. Jurisdictional issues related to Section 138 of the Negotiable Instruments Act.
4. Defendants' liability and defenses.
5. Interest and costs awarded.

Detailed Analysis:

1. Existence and Validity of the Settlement Agreement:
The Plaintiff, a subsidiary of M/s HCL Infosystems Ltd., entered into agreements with the Defendants for resale/distribution of goods. Due to outstanding payments, a Settlement Agreement dated 20th August 2014 was executed, where the Defendants agreed to pay ?5,29,88,515/-. The Defendants did not dispute the authenticity, existence, or validity of this Settlement Agreement during the proceedings.

2. Compliance with the Settlement Agreement:
The Defendants issued cheques which were dishonored, leading to a complaint under Section 138 of the Negotiable Instruments Act. A Settlement Agreement was reached, and the payment schedule was outlined. However, the Defendants argued that payments were contingent on the Settlement Agreement being recorded by the court, which had not occurred due to jurisdictional issues.

3. Jurisdictional Issues Related to Section 138 of the Negotiable Instruments Act:
The Magistrate returned the complaint citing the Supreme Court's judgment in Dashrath Rupsingh Rathod v. State of Maharashtra, which restricted territorial jurisdiction to where the cheque was dishonored. Consequently, the Plaintiff had to refile the complaint in the appropriate court. The Defendants used this technicality to argue that the payment schedule had not commenced.

4. Defendants' Liability and Defenses:
The Defendants contended that since the Settlement Agreement was not recorded due to jurisdictional issues, they were not liable for payments. However, the court found this defense to be dishonest and unscrupulous. The Defendants did not challenge the Settlement Agreement's validity and were seen as trying to evade their payment obligations.

5. Interest and Costs Awarded:
The court decreed the suit in favor of the Plaintiff for ?5,38,88,509/- with 18% per annum interest from 20th May 2015 until payment. If the Defendants failed to pay within eight weeks, the interest rate would increase to 24% per annum. Additionally, the Defendants were ordered to pay costs of ?1 lakh to the Plaintiff.

Conclusion:
The court ruled that the Settlement Agreement was binding and enforceable. The Defendants' arguments were rejected as they had acknowledged the debt but failed to comply with the payment schedule. The suit was decreed with significant interest and costs due to the Defendants' failure to make timely payments.