Simultaneous Continuance of Arbitration Proceedings and Section 138 NI Act Proceeding can be initiated from Separate causes of Action: Delhi HC [Read Order]

The Delhi High court recently ruled that simultaneous continuance of arbitration proceedings and section 138 of Negotiable Instrument Act 1881 proceedings could be initiated , even if the two arise from the separate causes of action.

The present petition has been filed by petitioner Newton Engineering And Chemicals Limited seeking quashing of complaint under Section 138 of the Negotiable Instruments Act, 1881 filed by the respondent Uem India Pvt Ltd.

The incident led to filing the above petition was, The Memorandum of Understanding (MoU) was signed between the petitioners and the respondent company towards work for Modernization of ETP Plant at the ONGC Urban Plan.

The respondent company was to participate as a technical collaborator and provide its expertise to the petitioner, if the bid and contract of the aforesaid work was awarded by ONGC to the petitioner in pursuance of a tender.The contract was awarded by the ONGC to the petitioners.

The petitioners gave the respondent company a postdated cheque for Rs. 7,00,000 on June 23, 2017, in response to discussions between the respondent company's and petitioner no. 1's representatives on May 17 and 18, 2017e. Subsequently, the ONGC terminated the contract with the petitioners.

The petitioner's asked the respondent company not to deposit the aforesaid cheque. However, the respondent company deposited the said cheque . Since the aforesaid cheque was dishonored, a complaint under Section 138 of the NI Act was filed by the respondent company in which summons were issued to the petitioners by the learned Magistrate.

Counsel for the petitioner argued that MoU between the parties contained an arbitration clause, pursuant to which arbitration proceedings have been initiated, the complaint under Section 138 NI Act is not maintainable.

Counsel for revenue argued that the arbitration proceedings and proceedings under Section 138 of the NI Act are separate and independent proceedings and both can proceed simultaneously.

The court observed that the arbitration proceedings as well as the proceedings under Section 138 of the NI Act arise from separate causes of action and the pendency of the arbitration proceedings would not affect the proceedings under Section 138 of the NI Act.

Therefore the single bench of Justice Amit Bansal held that simultaneous continuance of arbitration proceedings and section 138 of Negotiable Instrument Act 1881 proceedings could be initiated , even if the two arise from the separate causes of action.

Rajiv Kumar and Sanjeev Gupta, Advocates appeared for the petitioner and Ravi Prakash and Astu Khandelwal, Advocates appeared for respondent.

To Read the full text of the Order CLICK HERE

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