2018 (9) TMI 998 - HC - Indian Laws

Dishonor of Cheque - case of appellant is that the Cheque id given just for security and is not meant to be honored - Held that - The contention of the appellant-defendant that the cheques were given as mere security and were not meant be honoured on presentation again does not impress us. The cheques issued were not to be kept in a show-case and were meant to be honoured on presentation. The e-mails placed on record show that the appellant-defendant had not disputed its liability to pay, albeit the appellant-defendant was praying for time as they were facing a liquidity crunch and waiting for certain deals to come through. These e-mails do not, in our opinion, furnish any reason and ground for grant of leave to the appellant-defendant. Appeal dismissed.

Issues:
1. Application for leave to defend under Order XXXVII, Rule 3 of the Code of Civil Procedure.
2. Interpretation of Memorandum of Understanding (MoU) regarding investment versus loan.
3. Repayment made by the appellant-defendant.
4. Maintainability of the suit under Order XXXVII of the Code.
5. Dispute regarding dishonored cheques and their adjustment.
6. Decree for payment of a specific amount by the appellant-defendant.
7. Nature of cheques issued as security.
8. Difference between civil suit under Order XXXVII and proceedings under Section 138 of the Negotiable Instruments Act.

Analysis:

1. The judgment pertains to a Regular First Appeal challenging an order dismissing an application for leave to defend under Order XXXVII, Rule 3 of the Code of Civil Procedure. The appellant argued that the suit was not entirely based on the MoU and raised triable issues necessitating evidence and a regular trial.

2. The interpretation of the MoU was crucial in determining whether the amount advanced was an investment or a loan. The court emphasized that the terms of the MoU clearly stipulated the refund of the amount with a minimum guaranteed return, irrespective of the nature of the transaction.

3. The appellant-defendant had made partial repayments, which the court considered as affirming the obligation to refund the invested amount as per the terms of the MoU, rejecting the appellant's contention that no further payment was due.

4. The court found the suit under Order XXXVII of the Code maintainable, as it was based on the MoU and dishonored cheques, despite the appellant's arguments to the contrary.

5. Disputes regarding the dishonored cheques and their adjustment were addressed, with the court upholding the validity of the suit based on dishonored negotiable instruments.

6. A decree was passed for the payment of a specific amount by the appellant-defendant, considering the repayments made and the suppressed facts regarding payments in the plaint.

7. The nature of the cheques issued as security was examined, with the court emphasizing that the cheques were meant to be honored on presentation, dismissing the appellant's argument that they were not intended for payment.

8. Lastly, the judgment highlighted the difference between civil suits under Order XXXVII and proceedings under Section 138 of the Negotiable Instruments Act, emphasizing that the pendency of criminal proceedings does not impact the grant of leave to defend in a civil suit.

In conclusion, the appeal was dismissed, affirming the decree for payment and clarifying the distinct nature of civil suits and criminal proceedings under the relevant legal provisions.

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