Priya Gour
Published on: 1st July, 2022 at 18:59 IST
The recent remark by Sikkim HC in the case Prahlad Sharma v Dipika Sharma and Another brought into light once again, Section 4 of the Indian Contract Act related to proposal, acceptance and revocation of contract.
The Bench of Justice Meenakshi Madan Rai held that if the communication with respect to termination of a contract has not been completed, party cannot dispute a legal liability.
The Case:
As a consideration for purchase of flat, two cheques were furnished by the Petitioner with the respondent.The cheques were dishonoured due to insufficiency of balance. The petitioner said that he had intentionally dishonoured the cheques in order to terminate the contract. While the cheques were dishonoured on 30th January, 2018 , the communication of contract termination was received by the petitioner on 8th February, 2018.
Decision of Court:
The Justice Meenakshi Madan Rai observed, “The Agreement was subsisting between the parties in view of Section 4 of the Contract Act and considering the date of posting of Notice Exhibit 11 by the R1 to the Petitioner and the fact that it was received by the Petitioner only on 08-02-2018.”
The Court also held that the reason mentioned by bank for the return of cheques was insufficiency of funds. While quoting section 139 of Negotiable Instruments Act, the court said “If the negotiable instrument happens to be a cheque, Section 139 raises a further presumption that the holder of the cheque received the cheque in discharge in whole or in part of any debt or other liability,”
Thus, the court agreed with the Session’s Court that in the above case, the termination order was not complete when the cheques bounced. Hence, the cheque dishonour cannot cover up the termination of contract in this case.
Resultantly, the High Court dismissed the petition.