April 21, 2019:

Delhi High Court has held that even if a criminal cheque bounce case is settled in mediation in respect of cheque given for liability under an earlier MOU, the earlier MOU shall remains enforceable if the payment is not made under the mediation settlement.

 

A bench of Justice Narula has passed the order in case titled SMT. AVTAR KAUR vs MRS. ZULEIKHA KARNIK on 26.03.2019.

Plaintiff filed a summary suit to recover an amount based on bill of exchange and cited one MOU of the year 2016. Defendant wants leave to defend unconditionally on the premise that the said MOU was superceded by a subsequent mediation settlement arrived at in a complaint proceeding for bouncing of cheque which was given under the said MOU.

In accordance with MOU between the parties, a cheque bearing No.640046 for Rs.2,65,00,000/- (Rupees Two Crore & Sixty Five Lacs Only) dated 30th June, 2016 drawn on DCB Bank, New Delhi was handed over to the Plaintiff. On presentation for encashment, the said cheque got dishonoured with the remarks “insufficient funds”. Plaintiff then issued a demand notice dated 17th October, 2016 demanding the payment of the dishonoured cheque. The Defendant yet again failed to make the payment and predictably, the Plaintiff filed a complaint under Section 138 of Negotiable Instrument Act, 1881. During the pendency of the said complaint before the Court of Ld. Metropolitan Magistrate, the parties were  referred to the Mediation Centre, Saket. In the mediation, the parties, once again arrived at a settlement.

In accordance with the aforesaid terms of the mediation settlement, the Defendant was required to make a payment of Rs.2,00,000,00/- to the Plaintiff within a period of four months from 02nd August, 2017. The Defendant, however, did not adhere to the aforesaid condition and again requested for time to make the payment. The Plaintiff has since filed an application under Section 431 read with Section 421 Cr. PC. against the Defendant. The said proceedings are stated to be pending before the Court of Ld. Metropolitan Magistrate, Saket.

The Defendant by way an application seeks unconditional leave to defend the present suit. On perusal of the affidavit filed along with the said application, it is noticed that the singular ground seeking leave to defend is that the Settlement Agreement dated 08th August, 2017 supersedes the terms and conditions of the previous MOU dated 30th June, 2016 and thus, the terms of the said MOU are no longer enforceable.

It is in this context that the High Court observed “The proceedings before the Mediation Centre were pursuant to the criminal complaint filed by the Plaintiff on account of dishonour of the Cheque given under the MOU. No doubt, the amount of the dishonoured cheque of Rs.2,65,000,000/- was agreed to be settled for Rs.2,00,000,00/-, however the settlement was arrived at in the criminal proceedings and more pertinently that settlement was conditional. 

The condition being that the Defendant had to make the payment of Rs.2,00,000,00/- within a period of four months from 02nd August, 2017 which expired on 02nd December, 2017. Concededly, the Defendant has failed to discharge the obligations recorded in the said settlement and make the payment within the aforesaid time period…. 

It is further noteworthy that Clause 3 of the settlement term categorically records that in case of default in making the payment of Rs.2,00,000,00/- within the mentioned period, the first party would be free to pursue it’s remedies against the second party as per the law. Therefore, the terms of the settlement recorded before the Mediation Centre, at the highest can be construed to be suspension of the obligations of the parties subject to the fulfillment of the terms of the settlement. 

The Defendant, not having complied with the said terms, cannot be permitted take benefit of the said settlement. The Plaintiff is thus entitled to pursue its remedy in terms of the MOU dated 30th June, 2016. The said agreement cannot be said to be unenforceable or superseded particularly in view of the default and breach committed by the Defendant”. (emphasis supplied).

Read the order here:

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