As soon as cheque is dishonoured, it will amount to no consideration and acceptance of offer will stand vitiated: Punjab & Haryana HC

Read Order: Amrik Singh And Another v. Kashmiri Lal Through LRs. And Others 

Monika Rahar

Chandigarh, February 17, 2022: While dealing with a second appeal in a cheque dishonour case, the Punjab and Haryana High Court has held that once a cheque, which is issued for payment of sale consideration in relation to an agreement to sale, is dishonored and as a result, the payment of sale consideration is denied, the agreement becomes void for the want of consideration. 

The Bench of Justice Arun Monga added that any agreement without consideration is void unless, of course, it is a case of acceptable exception per Section 25 of the Contract Act.

“Concededly, the cheque issued by the appellant was dishonored. Same amounts to no consideration ever paid to the other party”, adjudged the Court. 

In the matter placed before the Court, the first defendant agreed to sell the suit land to the plaintiffs. The plaintiffs were to pay a sum of Rs 5 lakhs as earnest money out of the total sale consideration by a Cheque. The remaining payment along with the execution and registration of the sale deed was decided to be done on a future date. However, the cheque of the aforementioned amount issued by the plaintiffs was dishonoured and as per the case of the defendants, even after being served notice, the plaintiffs did not pay the sum concerned. Resultantly, the first defendant executed a sale deed in favour of the second and the third defendants.

Aggrieved by such execution of a sale deed, the plaintiffs filed a suit for possession by way of specific performance of contract/ agreement. The Trial Court decided the suit against the plaintiff who then filed an appeal before the First Appellate Court which also upheld the trial court decision. Hence the instant Regular Second Appeal before the High Court was filed. 

It is to be noted that the first appellate Court addressed the question of whether the agreement entered into between the parties, was valid and enforceable. Regarding this question, the Court was of the opinion that no sale consideration in cash was passed from the plaintiff to the defendant and therefore while holding that an agreement without consideration is void, the first appellate Court denied the relief sought by the plaintiff in his appeal. 

The counsel for the appellant argued that merely because the cheque was dishonored it would not absolve the parties of promise and that the acceptance of the promise results in a binding contract.

Addressing this argument the Court made the above-stated observations of an agreement becoming void for the lack of consideration. In this respect, the Court also opined that the acceptance of the offer stood vitiated the moment the cheque was dishonored. 

Additionally, the Court opined, “Merely, because a person who made the offer on acceptance of counter offer turns around and says that he still has the money to pay (assuming so), will not bind the other party. As already noted, once the cheque was dishonoured, contract stood vitiated.”

On the scope of Section 100 CPC which provide for the second appeal, the Court observed that no question of law, much less a substantial question of law which is a sine qua non for entertaining regular second appeal, was involved in the case, so as to exercise appellate jurisdiction under Section 41 of the Punjab Courts Act read with Section 100 of Civil Procedure Code, 1908. 

Therefore, the Court reached the conclusion that there was no perversity or illegality in the concurrent findings of facts returned by the Courts below and that both the Courts below took an equitable view. 

Thus, the appeal was dismissed.