Date:06/04/2008 URL: http://www.thehindu.com/2008/04/06/stories/2008040655671200.htm

National

‘Settlement without instructions from clients valid’

Legal Correspondent

Supreme Court ruling relates to ‘cheque-bouncing cases’

New Delhi: Settlement made by lawyers in court in ‘cheque-bouncing cases’ under the Negotiable Instruments (NI) Act even without express instructions from their clients would be valid in law, the Supreme Court has held. A Bench of Justices S.B. Sinha and V.S. Sirpurkar said that why the parties entered into a settlement under Section 147 of the NI Act was not a matter for the court to consider. But such a settlement was permissible in law and “ex-facie it does not violate any public policy and not otherwise inequitable.”

The Bench said that “indisputably, the provisions of the Cr.P.C. would be applicable to the proceedings pending before the courts for trial of offences under the NI Act.” The Bench said that in such a situation a settlement could be arrived at between the complainant and the accused.

It said: “While a settlement is arrived at, it is not necessary under the provisions of the NI Act and/or Cr.P.C. to file any affidavit affirmed by the complainant or the accused. By reason of the authority granted by a litigant in favour of his advocate which, inter alia, empowers the latter to enter into a settlement, any settlement arrived at, on behalf of a party to a lis [dispute] would be binding on the parties thereto.”

In the instant case, appellant R. Rajeswari had filed a complaint against the respondent H.N. Jagdish alleging that a cheque issued by him was dishonoured. The trial court in Bangalore found him guilty for an offence under Section 138 of the NI Act and sentenced him to undergo one month imprisonment and to pay a fine of Rs.2 lakh. After the Sessions Court dismissed his appeal, he preferred a revision in the Karnataka High Court.

During the course of hearing, a settlement was arrived at by counsel for the parties and the respondent agreed to pay the cheque amount of Rs.1 lakh, besides a fine of Rs. 5,000. Since he had already deposited Rs. 75,000, he was asked to pay Rs.30,000. As the matter was settled, the sentence of imprisonment was set aside.

The appellant, Rajeswari, who refused to accept Rs.30,000, filed a petition to recall the order stating that the settlement arrived at by her lawyer without instructions was not binding.

The High Court declined to recall the order and the present appeal by her is directed against this order. Holding that such a settlement was valid, the Supreme Court dismissed her appeal.