IN THE HIGH COURT OF DELHI AT NEW DELHI
Swarana Kanta Sharma, J.
M/s. Khanuja Exports & Finance Pvt. Ltd. – Appellant
Versus
Mr. Nallapaneni Nageshwara Rao – Respondent
Cr.M.C. 6010 of 2019 & Cr.M.A. 41136 of 2019, Cr.M.C. 6028 of 2019 & Cr.M.A. 41197 of 2019 and Cr.M.C. 6602 of 2019 & Cr.M.A. 43176 of 2019
Decided On : 29-05-2023
Lok Adalat Settlement - Negotiable Instruments Act - Section 145(2) - 138 NI Act, 1881 - 21 of Legal Services Authorities Act, 1987 - Every award of Lok Adalat is deemed to be a decree of a civil court and is final and binding on all parties to the dispute. The settlement before National Lok Adalat is binding and can only be challenged by way of writ petition on limited grounds. The award of Lok Adalat in respect of Section 138 of Negotiable Instruments Act is to be treated as a decree under Section 21 of Legal Services Authority Act.
Fact of the Case:
The petitioner, M/s. Khanuja Exports & Finance Pvt. Ltd., granted a loan to the respondent, proprietor of M/s. South India Freight Carriers. Disputes arose when several cheques issued by the respondent were dishonored, leading to complaints under Section 138 of Negotiable Instruments Act, 1881. The respondent sought to cross-examine the complainant witness under Section 145(2) of NI Act, alleging fraud in the settlement agreement reached before National Lok Adalat.
Finding of the Court:
The court found that the settlement before National Lok Adalat was binding and acted upon by the parties. The respondent's application under Section 145(2) of NI Act was not maintainable after the settlement, as the award of Lok Adalat is deemed to be a civil decree and is final and binding on the parties.
Issues: Whether the settlement before National Lok Adalat is binding in a case under Section 138 of NI Act? Whether the respondent's application under Section 145(2) of NI Act is maintainable after the settlement?
Ratio Decidendi: The settlement before National Lok Adalat in a case under Section 138 of NI Act is binding and can only be challenged by way of writ petition on limited grounds. The award of Lok Adalat is deemed to be a decree of a civil court and is final and binding on all parties to the dispute.
Final Decision: The court allowed the petitions, setting aside the impugned orders and holding that the respondent's application under Section 145(2) of NI Act was not maintainable after the settlement before National Lok Adalat.
JUDGMENT
Swarana Kanta Sharma, J.
1. By way of above-captioned petitions filed under Section 482 of the Code of Criminal Procedure, 1973 (`Cr.P.C.'), the petitioner seeks the following reliefs:
i. Setting aside of order dated 27.09.2019 passed by learned Metropolitan Magistrate (NI Act), Central, Tis Hazari Courts, Delhi in Complaint Case No. 6779/2017, and dismiss the application under Section 145(2) of Negotiable Instruments Act, in CRL.M.C. 6010/2019;
ii. Setting aside of order dated 27.09.2019 passed by learned Metropolitan Magistrate (NI Act), Central, Tis Hazari Courts, Delhi in Complaint Case No. 6780/2017, and dismiss the application under Section 145(2) of Negotiable Instruments Act, in CRL.M.C. 6028/2019;
iii. Setting aside of orders dated 30.04.2019 and 03.12.2019 passed by learned Metropolitan Magistrate (NI Act), Central, Tis Hazari Courts, Delhi in Complaint Case No. 541812/2016, and dismiss the application under Section 145(2) of Negotiable Instruments Act, in CRL.M.C. 6602/2019.
2. Brief facts of the case, leading to the filing of present petitions, are that petitioner i.e. M/s. Khanuja Exports & Finance Pvt. Ltd. is a Private Limited Company, who was approached by the respondent in capacity of proprietor of M/s. South India Freight Carriers in July, 2012 for availing a loan of Rs.1,00,00,000/-, which was granted by the petitioner on certain terms and conditions. Subsequently, disputes had arisen between the parties in relation to terms of payment and several Memorandum of Understanding/Settlement Agreements were executed. Later on, in the year 2016 and 2017, when the several cheques issued by the respondent/accused had got dishonored, the petitioner/complainant had filed complaints under Section 138 of Negotiable Instruments Act, 1881 accordingly.
3. It is the case of petitioner that when the respondent was summoned before the learned Trial Court, he had shown his willingness to settle the disputes and the matter was referred to National Lok Adalat which was to be held on 09.09.2017. However, before that, the parties had entered into an Understanding/Settlement Agreement dated 08.09.2017. Thereafter, when the matter was listed before National Lok Adalat, the factum of settlement dated 08.09.2017 was disclosed by the parties before the learned Judge and accordingly, the settlement between the parties was reduced in their respective statements on oath and the memorandum of settlement was exhibited being part of their statement which were duly signed and accepted by both the parties. It is further stated that the matter was then posted before learned Trial Court on 08.11.2017 by National Lok Adalat for payment of installments as agreed between the parties and the respondent had started making payment in parts in compliance with the settlement. It is the case of petitioner that after making some payments as per the settlement entered into before National Lok Adalat, the became dishonest and stopped making payments, and rather filed an application under Section 145(2) of Negotiable Instruments Act seeking permission to lead evidence and cross-examine the complainant witness, after lapse of more than two years.
4. In CRL.M.C.6010/2019 and 6028/2019, the common order dated 27.09.2019 passed by learned Metropolitan Magistrate (NI Act), Central, Tis Hazari Courts, Delhi in Complaint Case No. 6779/2017 and 6780/2017 respectively, impugned before this Court reads as under:
"...On last date of hearing, notice was framed against the accused and the matter was listed today for orders on the application filed by the accused u/s 145(2) of Nl Act. Written submissions have already been filed.
Arguments heard. Record perused.
The accused has flatly denied the averments of the complainant and has infact stated that he has already made payment to the complainant for an amount more than what is so being demanded of him. He has also filed on record several documents in support thereof.
Considering all of this, the contentions elaboratel
The Lok Adalat cannot impose conditions beyond a compromise agreement, as its role is limited to facilitating settlements without adjudicatory powers.
The main legal point established in the judgment is that the Lok Adalat has no jurisdiction to adjudicate the matter on merits if no compromise or settlement is arrived at between the parties.
The Lok Adalat does not have the authority to decide the matter on merits if no compromise or settlement is reached between the parties to a dispute.
Jurisdiction of Lok Adalat and consequences of non-prosecution
Point of Law : Challenge to the award of Lok Adalat can be done only by filing a writ petition under Article 226 and/or Article 227 of the Constitution of India in the High Court and that too on very....
The settlement cannot be enforced until an award is passed in terms of the Legal Services Authorities Act, and the proceedings before the Lok Adalat should not prejudice the mind of the Court determi....
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