Tender Of Cheque Constitutes Valid Satisfaction Of Compromise Decree Absent Cash Stipulation: Madhya Pradesh High Court

The Court further held that an executing court cannot introduce conditions not contained in the compromise decree and cannot deny satisfaction of the decree merely because payment was tendered by cheque instead of cash or demand draft.

The Court was hearing a miscellaneous petition challenging an order passed by the Executing Court rejecting the judgment debtor’s application under Order XXI Rule 2 of the Code of Civil Procedure.

A Single Judge Bench of Justice Alok Awasthi, while relying on the Supreme Court’s ruling in K. Saraswathy Vs. P.S.S. Somasundaram Chettiar reiterated that “tendering a cheque is a valid form of payment unless cash is specifically required by a Court order”.

Background

The petition arose out of execution proceedings initiated pursuant to a compromise decree passed between the parties in two civil suits relating to specific performance and recovery of money. The compromise decree required the judgment debtor to pay a consolidated amount of ₹5,32,38,000/- within one year, failing which the decree holder would be entitled to seek execution of sale deeds in respect of certain agricultural land.

The dispute before the High Court centred on whether tender of the entire decretal amount by cheque within the stipulated period constituted valid compliance with the compromise decree. The parties had entered into a compromise in pending civil proceedings, pursuant to which a decree was passed requiring the judgment debtor to pay ₹5,32,38,000/- within one year.

The compromise decree did not prescribe any specific mode of payment, nor did it stipulate payment of interest, nor did it mandate that payment must be made in cash.

Within the stipulated one-year period, the judgment debtor tendered cheques for the entire decretal amount in the name of the Court and the decree holder. The cheques were deposited before the Court within time, and the decree holder was informed of such tender. The cheques were never dishonoured.

Despite knowledge of the tender, the decree holder did not collect or present the cheques for encashment and subsequently refused to accept them, while seeking execution of the sale deeds and also claiming interest.

The judgment debtor filed an application under Order XXI Rule 2 CPC seeking the recording of satisfaction of the decree on the ground that a lawful tender had been made within time. The Executing Court rejected the application and proceeded on the footing that payment by cheque did not constitute valid satisfaction of the decree.

Aggrieved, the judgment debtor approached the High Court under its supervisory jurisdiction.

Court’s Observation

The High Court first examined whether the petition was barred by the doctrine of res judicata. On a scrutiny of the earlier execution orders, the Court held that the application under Order XXI Rule 2 CPC had not been finally adjudicated earlier and that the present petition was not barred.

The Court then examined the terms of the compromise decree and held that the only material condition was payment of the total amount within one year. The Bench noted that the decree did not rigidly prescribe instalments, did not mandate any specific mode of payment, did not require cash payment, and did not provide for interest.

The Court held that the executing court cannot read additional conditions into a compromise decree and cannot rewrite the terms agreed between the parties.

The Bench examined settled law on tender of payment by cheque, including decisions of the Supreme Court in K. Saraswathy v. Somasundaram Chettiar, Ogale Glass Works Ltd., and Damadilal v. Parashram. Relying on these authorities, the Court reiterated that payment by cheque is a recognised mode of tender and that, unless specifically prohibited, tender by cheque constitutes valid payment.

The Court held that where a cheque is not dishonoured and is tendered within the stipulated time, payment relates to the date of tender. The Bench further held that refusal by the decree holder to accept or encash a valid cheque does not invalidate lawful tender and that a decree holder cannot take advantage of his own refusal to defeat satisfaction of the decree.

The Court found that the executing court “failed to appreciate that payment by cheque constitutes a valid tender in the eyes of law and that refusal by the decree holder to accept such payment does not render the tender illegal or ineffective”.

Accordingly, the Court concluded that “tender of payment by cheque through a banking mode amounts to a valid tender in the eye of law”, and that “the decree stood satisfied upon presentation of cheques before Executing Court and respondent cannot get benefit of his own fault of not presenting the cheques for encashment despite getting the knowledge of the same well within time”.

Conclusion

The Madhya Pradesh High Court allowed the miscellaneous petition and quashed the impugned order passed by the Executing Court.

The Court directed that the petitioner shall deposit the decretal amount of ₹5,32,38,000/- before the Executing Court by way of a fresh cheque along with simple interest at the rate of 12% per annum from the date of tender, within 30 days.

Accordingly, the petition was allowed and disposed of with the aforesaid directions.

Cause Title: Parth Credit And Capital Market Private Limited & Ors. v. Ideal Electronics Private Limited (Neutral Citation: 2026:MPHC-IND:2495)

Appearances

Petitioners: Mini Ravindran, Advocate

Respondent: Abhay Chand Jain, Advocate

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