The Court quashes execution proceedings, affirming that payment by cheque satisfies decretal obligations unless explicitly stated otherwise.
In a landmark decision, the Madhya Pradesh High Court has affirmed the validity of payment by cheque as a legal tender in satisfying a compromise decree, provided the cheque is not dishonoured. The judgment was delivered by Justice Alok Awasthi in the case of Parth Credit And Capital Market Pvt. Ltd. v. Ideal Electronics Pvt. Ltd., resolving a long-standing dispute over the execution of a compromise decree involving a substantial sum of Rs. 5,32,38,000.
The petition arose from the execution proceedings initiated by Ideal Electronics Pvt. Ltd., seeking specific performance of a land sale agreement after alleging non-payment by Parth Credit And Capital Market Pvt. Ltd. Despite the petitioners depositing the entire decretal amount via cheques within the stipulated one-year period, the respondent refused to accept the payment, demanding cash or payment through a Demand Draft.
Justice Awasthi's ruling quashed the order of the XIIIth District Judge, Indore, who had previously rejected the petitioners' application under Order XXI Rule 2 of the Civil Procedure Code (CPC). The High Court underscored that under CPC, payment by cheque is considered valid unless specifically excluded by agreement or court order. The court emphasized that the refusal to accept a duly tendered cheque does not invalidate the payment.
The judgment further clarified that the compromise decree did not mandate payment in cash nor did it stipulate the payment of interest, thereby validating the cheques tendered by the petitioners. Drawing upon precedents from the Supreme Court, the High Court reiterated that payment by cheque relates back to the date of delivery, provided the cheque is honoured.
The court's decision also addressed the respondent's argument regarding the doctrine of res judicata, asserting that the issue had not been previously adjudicated and was thus open for consideration. The judgment directed the petitioners to deposit the decretal amount by way of a new cheque along with simple interest at 12% per annum from the date of the original cheque tender, within 30 days.
This ruling is poised to have significant implications on the execution of compromise decrees across the jurisdiction, reinforcing the legal recognition of cheques as a valid mode of payment in civil matters.
Bottom Line:
Payment by cheque is considered valid tender unless explicitly specified otherwise in the terms of an agreement or court order. Refusal to accept a cheque that was duly tendered and not dishonoured does not invalidate the tender.
Statutory provision(s): Civil Procedure Code, 1908 Order XXI Rule 2, Negotiable Instruments Act, 1881, Income Tax Act Section 266, Article 227 of Constitution of India
