Case: ARUN KUMAR Vs. ANITA MISHRA AND ORS

3. The brief facts are that a complaint Under Section 138 of the Negotiable Instruments Act was filed by the Appellant complainant against the accused Respondent on 02.07.2007.  4. The Judicial Magistrate, First Class, Narsinghgarh sentenced the accused Respondent to six months imprisonment and further imposed a fine of Rs. 3,30,000/- on the accused Respondent. Being aggrieved, the accused Respondent filed a Criminal Appeal No. 231/2007. During the pendency of the criminal appeal, the matter was settled in a compromise before the Lok Adalat on 25.07.2008.  5. In terms of the compromise, the accused Respondent was required to make a payment of Rs. 3,51,750/- which was paid on the same day through a post dated cheque drawn in favour of the Appellant complainant.  6. The said cheque drawn by the accused Respondent in favour of the Appellant complainant as per the compromise arrived at between the Appellant complainant and the accused Respondent before the Lok Adalat, also got dishonoured, whereupon the Appellant complainant filed criminal complaint No. 547/2009 Under Section 138 of the Negotiable Instruments Act, referred to above, against the accused Respondent.  7. The accused Respondent filed an application before the Judicial Magistrate, First Class Narsinghgarh for dismissal of the complaint. The said application was dismissed. A Revisional application against the order of dismissal of the said application, passed by the Judicial Magistrate was also dismissed by the Sessions Court.  8. The accused Respondent, however, approached the High Court Under Section 482 of the Code of Criminal Procedure for quashing the proceedings. The application Under Section 482, as observed above, has been allowed by the High Court by the order impugned.  9. The High Court observed that it was an undisputed fact that in respect of earlier cheque issued by the Respondent accused, a criminal case had been preferred Under Section 138 of the Negotiable Instruments Act and the Respondent accused had also been convicted. A fine was also imposed on the Respondent accused.  10. The High Court proceeded to quash the complaint observing that the question of entertaining the second complaint did not arise, when the cheque was not issued in discharge of any debt or liability of the company. It was issued on account of a settlement.

Court's reasoning:
11. With the greatest of respect, the High Court has misconstrued the judgment of this Court in Lalit Kumar Sharma and Anr. vs. State of Uttar Pradesh and Anr. reported in 2008 : 2008 (5) SCC 638 : (2008 AIR SCW 3503).12. In Lalit Kumar Sharma (supra), the Supreme Court found that ingredients of Section 138 of the Act were : i) a legally enforceable debt; ii) that the cheque was drawn for discharge in whole or in part of any debt or other liability, which presupposes a legally enforceable debt; and iii) the cheque so issued had been returned due to insufficiency of funds.13. Lalit Kumars case (2008 AIR SCW 3503) is distinguishable on facts, in that 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. The cheque was found to have been issued for the purpose of arriving at a settlement.14. 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. I 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.15. 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.16. In K.N. Govindan Kutty Menon vs. C.D. Shaji reported in (2012) 2 SCC 51 : (AIR 2012 SC 719 , Para 8) cited by the Appellant complainant, this Court held:11. In the case on hand, the question posed for consideration before the High Court was that when a criminal case referred to by the Magistrate to a Lok Adalat is settled by the parties and an award is passed recording the settlement, can it be considered as a decree of a civil court and thus executable by that court? After highlighting the relevant provisions, namely, Section 21 of the Act, it was contended before the High Court that every award passed by the Lok Adalat has to be deemed to be a decree of a civil court and as such, executable by that court.23. In the case on hand, the courts below erred in holding that only if the matter was one which was referred by a civil court it could be a decree and if the matter was referred by a criminal court it will only be an order of the criminal court and not a decree Under Section 21 of the Act. The Act does not make out any such distinction between the reference made by a civil court and a criminal court. There is no restriction on the power of Lok Adalat to pass an award based on the compromise arrived at between the parties.17. Every award of the Lok Adalat is, as held in K.N. Govindan Kutty Menon vs. C.D. Shaji (AIR 2012 SC 719 ) (supra), 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. The impugned judgment and order is misconceived.