The issuance of cheques as part of a settlement agreement does not constitute a legally enforceable debt if the terms of the settlement are violated.

ORAL ORDER

In these petitions, petitioner is common i.e., Udupi Transport Private Limited, a company incorporated under the Companies Act, 1956 represented by its Managing Director.

2. Proceedings initiated by the respective complainants by filing a private complaint alleging offence punishable under Section 138 of Negotiable Instruments Act, 1881 (for short ‘N.I. Act’) are under challenge.

3. Since the questions involved is one and the same, all these petitions are taken up together and disposed of by a common order, with the consent of both the parties.

4. Brief facts of the case are:

That the petitioner entity operates the contract carriage and stage carriage vehicles on inter-district and intra-district routes within the State of Karnataka. The respondents/complainants, employees working under the petitioner approached the Labour Officer/Conciliatory Officer, Udupi, claiming that they are regular employees of the petitioner entity and they are deprived of their salaries for the period between March-2020 to June-2020 and their services were terminated and replaced by other individuals. Petitioner with an intention of buying peace, agreed to pay off certain pre-determined sums to the employees as part of settlement scheme and in reciprocation, they were given solemn undertaking not to putforth any claim against the petitioners. This resulted in an order passed by the Labour Officer on 19.4.2021, recording a settlement so as to give quietus to the issue. In terms of the settlement, post dated cheques were issued to the respondents/complainants, which are the subject matter of the proceedings.

5. Grievance of the petitioner is that, as per the terms of settlement and the order dated 19.4.2021 in No.IDA/SR-02/2020-21, the employees who received the cheques have given an undertaking as per clause 9 that henceforth, they will not raise any claim or demand. However, the employees / respondents herein have gone against their own undertaking and submitted a representation dated 30.04.2021 to the ESI Corporation alleging that employers’ contribution for a particular period of time remained unpaid by the petitioner and based on the said representation, the ESI Corporation has caused a demand notice dated 11.5.2021 upon the petitioner.

6. It is the contention of the learned counsel for petitioner that since the respondents have gone against their own undertaking given before the Labour Officer in the above mentioned case, petitioner was constrained to instruct their banker not to honour the cheques issued as per the settlement. It is his further contention that post dated cheques were issued in terms of the agreement entered into between the parties and subject to the compliance of the conditions therein and in view of the violation, it cannot be said that the debt if any due to the complainants are legally enforceable debt, which is a condition precedent for initiating proceedings for an offence punishable under Section 138 of N.I. Act.

7. Learned counsel would draw the attention of the Court to Section 139 of N.I. Act, to contend that the complainants have to prove that the holder of a cheque received the cheque of the nature referred to in Section 138 for the discharge, in whole or in part, of any debt or other liability, for which three ingredients of Section 138 of N.I. Act have to be fulfilled and therefore, unless the complainants prove that there is existence of legally recoverable debt, only then a presumption under Section 139 of N.I. Act, come into play. The learned counsel would therefore stress on his arguments that the alleged cheques were issued as a part of a settlement, which imposed certain obliga