How to Settle Prosecution u/s. 138 NI Act before Lok Adalath [JUDGMENT]

Negotiable Instruments Act, 1881 - S. 138 - Legal Services Authorities Act, 1987 - S. 21 (2) In case of settlement of any matter relating to Section 138 of the Negotiable Instruments Act, the Lok Adalath must ensure that before passing the award, the entire amount settled between the parties is paid.

Held:- If some period is needed for the payment of the amount as agreed by the parties, the Lok Adalath shall adjourn the matter and only if the payment is made, the award can be passed. This type of modality will ensure the real settlement in prosecution under Section 138 of the N.I. Act, particularly when the award passed by the Lok Adalath is final and binding on the parties to the dispute. The Lok Adalath must take care to ensure that no party shall be put in trouble by passing the award casually and mechanically, simply for the statistical purpose.
Facts of the Case
In this case, the cheque is for Rs.5,00,000/-. However, the matter was settled for Rs.2,25,000/-. It is contended that the petitioner agreed for such a settlement on the expectation that the petitioner would be able to get so much amount immediately. However, the award provided time for six months for payment of the above said amount of Rs.2,25,000/-. The petitioner was also not aware that the first respondent was not having any property in her name. Since it is found that the first respondent is having no property, Ext.P1 award cannot be executed, as the first respondent being a lady, she cannot be sent to jail in execution of the decree of the civil court. Therefore, the award passed by the Lok Adalath is not executable as a decree of the civil court. The petitioner was made to believe that the decree could be executed if not complied with. In view of the above reason only, the petitioner agreed to settle the matter.
IN THE HIGH COURT OF KERALA AT ERNAKULAM
B. SUDHEENDRA KUMAR, J.
O.P.(Crl.) No.72 of 2018
Dated this the 11th day of June 2018 
CC 2988/2014 of TEMPORARY COURT OF JMFC, THIRUVANANTHAPURAM (JMFC XII) 


PETITIONER
VENUGOAPALN NAIR
BY ADV.SMT.M.HEMALATHA 
RESPONDENTS
1. UMA BALAKUMAR
2. STATE OF KERALA REPRESENTED BY CHIEF SECRETARY, SECRETARIAT, THIRUVANANTHAPURAM.695001.
R2 BY PUBLIC PROSECUTOR, SHRI E C BINEESH SRI NANDAGOPAL S KURUP, AMICUS CURIAE 
J U D G M E N T 
The petitioner is the complainant in C.C. No.2988 of 2014 on the files of the court of the Judicial Magistrate of First Class - XII, Thiruvananthapuram. The first respondent herein filed a complaint against the petitioner alleging offence under Section 138 of the Negotiable Instruments Act. During the pendency of the case before the trial court, the parties were referred to Lok Adalath as the court below felt that the matter would be settled if referred to Adalath. The matter was settled in Adalath and Ext.P1 award was passed on 12.12.2015, against which this O.P. has been filed.
2. The learned counsel for the petitioner has submitted that Ext.P1 award was passed by playing fraud on the petitioner and in the said circumstances, Ext.P1 award cannot be sustained.
3. Service is complete. However, there is no appearance for the respondents.
4. Adv.Sri.Nandagopal S. Kurup, was appointed as the Amicus Curiae for the first respondent by this court.
5. Heard the learned counsel for the petitioner and the learned Public Prosecutor. I have also heard Sri.Nandagopal S. Kurup, the learned Amicus Curiae.
6. The learned Public Prosecutor has submitted that the award passed by the Lok Adalath shall be deemed to be a decree of a civil court and in the said circumstances, Ext.P1 award was binding on the parties. The learned Public Prosecutor and also the learned Amicus Curiae have submitted that even though the award passed by the Lok Adalath is binding under Sub clause (2) of Section 21 of the Legal Services Authorities Act, 1987 (for short 'the Act'), if there is fraud, the award can be set aside.
7. In this case, the cheque is for Rs.5,00,000/-. However, the matter was settled for Rs.2,25,000/-. It is contended that the petitioner agreed for such a settlement on the expectation that the petitioner would be able to get so much amount immediately. However, the award provided time for six months for payment of the above said amount of Rs.2,25,000/-. The petitioner was also not aware that the first respondent was not having any property in her name. Since it is found that the first respondent is having no property, Ext.P1 award cannot be executed, as the first respondent being a lady, she cannot be sent to jail in execution of the decree of the civil court. Therefore, the award passed by the Lok Adalath is not executable as a decree of the civil court. The petitioner was made to believe that the decree could be executed if not complied with. In view of the above reason only, the petitioner agreed to settle the matter.
8. It is true that the award passed by the Lok Adalath shall be final and binding on all parties to the dispute as is evident from Sub clause 2 of Section 21 of the Act. In this case, the case was pending before the criminal court. Having gone through the relevant inputs, I am satisfied that the contention of the petitioner that the fraud was played on the petitioner appears to be correct. In case of settlement of any matter relating to Section 138 of the Negotiable Instruments Act, the Lok Adalath must ensure that before passing the award, the entire amount settled between the parties is paid. If some period is needed for the payment of the amount as agreed by the parties, the Lok Adalath shall adjourn the matter and only if the payment is made, the award can be passed. This type of modality will ensure the real settlement in prosecution under Section 138 of the N.I. Act, particularly when the award passed by the Lok Adalath is final and binding on the parties to the dispute. The Lok Adalath must take care to ensure that no party shall be put in trouble by passing the award casually and mechanically, simply for the statistical purpose. In view of the above reasons, since I am satisfied that Ext.P1 award was passed due to the fraud and mis-representation committed by the first respondent herein on the petitioner, I am of the view that Ext.P1 order cannot be sustained and consequently, I set aside the same.
In the result, this O.P.(Crl.) stands allowed and Ext.P1 award stands set aside.
The court below is directed to proceed with C.C.No.2988 of 2014 in accordance with law.
The petitioner shall appear before the court below on 25.7.2018.

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