Complaint U/s 138 NI Act Maintainable Against Dishonour Of Cheque Issued Pursuant To Lok Adalat Award: SC [Read Order]

The Supreme Court has observed that a complaint under Section 138 of the Negotiable Instruments Act for dishonor of a cheque issued pursuant to the Lok Adalat award is maintainable.

In this case [Arun Kumar vs. Anita Mishra], as regards the first cheque issued by the accused, a criminal case was preferred u/S. 138 of the Negotiable Instruments Act and it resulted in conviction and a sentence of fine. An appeal was preferred against the judgment of conviction and both the parties in Lok Adalat to withdraw pending litigation. A cheque was also given in the light of the settlement and the same has been dishonoured. The second complaint has been preferred on account of dishonour of the second cheque.

In a petition filed under Section 482 CrPC, the High Court quashed the second complaint on the ground that it is a second complaint and that the cheque was not issued in discharge of debt or liability of the Company, but only on account of a settlement arrived at between the parties. The High Court placed reliance on Lalit Kumar Sharma . vs. State of Uttar Pradesh 2008 (5) SCC 638.

In appeal filed by the complainant, the Apex Court bench comprising of Justice Indira Banerjee and Justice MR Shah noted that in Lalit Kumar Sharma case, 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 and that the cheque was found to have been issued for the purpose of arriving at a settlement. The bench said that the High Court has misconstrued the judgment in Lalit Kumar Sharma. It observed:

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.

Referring to K.N. Govindan Kutty Menon vs. C.D. Shaji (2012) 2 SCC 51, the bench observed that every award of the Lok Adalat is, as held in 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, it added while setting aside the High Court judgment. 

Click here to Read/Download Order