Settlement agreement in dishonored cheque case under Section 138 NI Act binding despite breach

Delhi HC held that a settlement agreement in a dishonored cheque case under Section 138 NI Act was valid and binding. The court found the settlement was voluntary without coercion, evidenced by respondent bringing a demand draft. When respondent breached the settlement, HC ruled that the magistrate must pass recovery orders under Section 421 read with Section 431 Cr.P.C. The court set aside the lower court's order questioning the settlement's validity, emphasizing that valid settlements have binding consequences and non-compliance triggers statutory recovery mechanisms.

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Issues Involved:
1. Validity of the settlement agreement recorded by the Court.
2. Whether mediation is mandatory for settlement under Section 138 NI Act.
3. Voluntariness of the respondent's consent to the settlement.
4. Applicability of Sections 421 and 431 Cr.P.C. for enforcement of the settlement.

Detailed Analysis:

1. Validity of the Settlement Agreement:
The petitioner challenged the order dismissing their application for issuance of a warrant of attachment and initiating contempt proceedings. The settlement agreement was recorded by the learned MM on 09.11.2020, where the respondent agreed to pay Rs. 1.20 crore. The respondent handed over a demand draft of Rs. 5 lacs and post-dated cheques. The Court emphasized that once a valid settlement is recorded, it is binding and cannot be retracted unless there is evidence of coercion or undue influence.

2. Mediation Requirement:
The petitioner argued that the settlement recorded by the Court does not require a formal mediation process to be valid. The Court agreed, stating that there is no bar on recording a settlement directly without referring the matter to mediation. The Court noted that the Trial Court misinterpreted the scope of the observations in Dayawati vs Yogesh Kumar Gosain, which pertain to mediated settlements, not settlements recorded directly by the Court.

3. Voluntariness of Consent:
The respondent claimed the settlement was not voluntary and was made under pressure. However, the Court found no evidence to support this claim. The respondent's statement recorded on 09.11.2020 indicated that the settlement was made without any force, pressure, or coercion. The Court highlighted that the respondent had already prepared a demand draft before the settlement was recorded, indicating a premeditated decision to settle.

4. Enforcement of Settlement:
The Court held that the learned MM erred in dismissing the application under Sections 421 and 431 Cr.P.C. Once a valid settlement is recorded, the Court is bound to enforce it. The Court referred to Dayawati vs Yogesh Kumar Gosain, which supports the enforcement of settlements recorded by the Court. The Court set aside the impugned order and directed the Trial Court to consider the application for warrant of attachment in accordance with law.

Conclusion:
The High Court set aside the impugned order dated 19.12.2020, holding that the settlement recorded on 09.11.2020 is binding and enforceable. The application under Sections 421 and 431 Cr.P.C. shall be considered by the learned Trial Court. The petition was disposed of, and a copy of the order was forwarded to the Trial Court for compliance.

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