The Delhi High Court dismissed a writ petition seeking to revive a NI Act complaint after the petitioner attempted to resile from settlement statements made by its counsel before the JMFC and Lok Adalat. Holding that a party cannot withdraw from statements made by its authorized counsel, the Court emphasized the sanctity of the advocate-client relationship and the finality of settlement proceedings. The petition was dismissed in limine with no order as to costs.
Background & Facts
The Dispute
The dispute arose from a loan transaction where Equitas Small Finance Bank Ltd. (petitioner) sanctioned a loan of Rs.14,50,000 to Mrs Nirmala Bai Shanthilal & Ors. (respondents) secured by mortgage of property and a post-dated cheque. Upon default, the petitioner initiated NI Act proceedings, which were later settled before the JMFC and Lok Adalat. The petitioner subsequently sought to resile from the settlement, prompting the present writ petition.
Key Facts
- Loan amount: Rs.14,50,000 sanctioned via letter dated 24.03.2021 and Facility Agreement dated 26.03.2021.
- Collateral: Mortgage of property bearing Municipal No.40 (Old No.23/A), Second Cross, Wheeler Road, Cleveland Town, Ward No.91, Bangalore -560 005 executed on 23.04.2021; respondents also issued a post-dated cheque in favour of the petitioner.
- Account classified as Non-Performing Asset on 03.08.2023.
- SARFAESI notice issued under Section 13(2) on 08.09.2023.
- Account regularized on 16.09.2023 based on mutual understanding and respondents’ assurances.
- Post-dated cheque presented for encashment on 08.01.2024; returned dishonoured vide Return Memo dated 18.01.2024 with remark "Refer to Drawer".
- Legal Notice under NI Act served on 01.02.2024; respondents failed to pay balance.
- Complaint filed under Sections 138 and 142 NI Act as Complaint Case No.3302/2024 dated 19.03.2024.
- On 08.08.2024, petitioner’s counsel stated before the JMFC that the matter was settled and full payment received; matter referred to National Lok Adalat.
- Before Lok Adalat on 14.09.2024, counsel reiterated settlement and receipt of full payment; Award dated 14.09.2024 disposed complaint as compounded, acquitting respondents.
- On 25.09.2025, petitioner moved application to revive Complaint Case; dismissed by JMFC as beyond criminal court’s purview.
- Present writ petition filed thereafter.
Procedural History
- 24.03.2021: Sanction letter issued.
- 26.03.2021: Facility Agreement executed.
- 23.04.2021: Mortgage of property and issuance of post-dated cheque.
- 03.08.2023: Loan account declared Non-Performing Asset.
- 08.09.2023: SARFAESI notice under Section 13(2) issued.
- 16.09.2023: Account regularized.
- 08.01.2024: Cheque presented for encashment.
- 18.01.2024: Return Memo marking cheque dishonoured.
- 01.02.2024: Legal Notice under NI Act served.
- 19.03.2024: Complaint filed (CC No.3302/2024).
- 08.08.2024: Counsel’s settlement statement before JMFC.
- 14.09.2024: Lok Adalat Award disposing complaint as compounded.
- 25.09.2025: Application for revival filed and dismissed.
- 16.09.2026: Judgment reserved.
- 24.09.2026: Judgment pronounced.
Relief Sought
The petitioner sought issuance of a writ of certiorari to set aside/recall the Lok Adalat Award dated 14.09.2024, restore the complaint case before the JMFC, and obtain ancillary reliefs including direction for payment of the loan amount.
The Legal Issue
The central question was whether a petitioner may resile from settlement statements made by its counsel before the Judicial Magistrate First Class and the Lok Adalat on the ground of lack of instructions, authority or ratification, and whether such resile is permissible after a delay of over thirteen months before the JMFC and nine months before the High Court.
Arguments Presented
For the Petitioner
The petitioner contended that its then counsel, Mr Shamim Saifi, misunderstood instructions and erroneously represented that the respondents’ dues had been settled and full payment received. It asserted that no settlement or payment ever occurred, the statement was made under immense confusion and without authority from the petitioner, and was never ratified. The petitioner further argued that it had not received any payment towards the cheque/satisfaction and that the Lok Adalat Award was based on an erroneous submission.
For the Respondent
The respondents maintained that the settlement statements were made by the petitioner’s own nominated counsel before two judicial forums, the JMFC and the Lok Adalat, and had not been disputed by the petitioner at the time. They argued that the petitioner cannot resile from such statements after a long lapse, as doing so would undermine the sanctity of the advocate-client relationship and create a chaotic situation allowing litigants a “second bite at the cherry.” The respondents emphasized that the petitioner, represented by authorized counsel, had acquiesced to the settlement and thus was bound by it.
The Court's Analysis
The Court began by noting that the petitioner’s case rested entirely on the statement made by its counsel on 08.08.2024 and reiterated on 14.09.2024 that a settlement had been effected and full payment received. It observed that the petitioner had not challenged these statements at the time they were made, nor had it sought clarification from its counsel despite having a vakalatnama executed in his favour. The Court held that a party is bound by the statements made by its authorized counsel in judicial proceedings, and cannot be permitted to resile therefrom on the plea of lack of instructions or authority after a substantial delay.
The Court emphasized the importance of the advocate-client relationship, stating that allowing a litigant to withdraw from counsel’s statements would strike at the very foundation of that relationship and undermine the sanctity of the role played by counsel in assisting the Court. It further observed that permitting such resile would lead to a chaotic situation where parties could repeatedly seek to overturn settled matters, thereby defeating the finality of proceedings before forums like the Lok Adalat.
The Court also relied on the principle that a litigant cannot be allowed a “second bite at the cherry.” It noted that the petitioner had waited thirteen months before approaching the JMFC for revival and a further nine months before approaching the High Court, indicating that the present attempt was an after-thought lacking any supporting affidavit or contemporaneous objection.
"Thus, the petitioner 's attempt to resile from the statement made by its counsel on the plea of ‘lack of instructions / authority/ ratification ’, in the considered opinion of this Court , is unsustainable in the eyes of law as the same strikes at the very foundation of the Advocate -Client Relationship and undermines the sanc tity of the role played by a counsel in assisting the Court in adjudicatory process."
In conclusion, the Court found the writ petition devoid of merit and dismissed it in limine, with no order as to costs.
The Verdict
The petitioner, Equitas Small Finance Bank Ltd., failed in its writ petition. The Court held that the party is bound by the settlement statements made by its authorized counsel before the JMFC and Lok Adalat and cannot resile therefrom on grounds of lack of instructions or authority. Accordingly, the writ petition was dismissed in limine with no order as to costs. The Lok Adalat Award dated 14.09.2024 remains undisturbed, and the complaint case stands disposed of as compounded.
What This Means For Similar Cases
Counsel’s Statements Bind the Party
Practitioners must ensure that instructions to counsel are clear and unambiguous, as any statement made by counsel on behalf of the client in court is binding. A party cannot later resile from such statements by claiming lack of instructions or ratification after a delay. It is advisable to obtain written confirmation from counsel regarding any settlement or payment before relying on it in judicial proceedings.
Finality of Settlement Proceedings
Settlements recorded before judicial forums, including Lok Adalats, attain finality and cannot be overturned by a mere change of stance. Parties seeking to revive settled matters must show strong contemporaneous evidence of fraud, misrepresentation, or lack of authority; mere allegations of misunderstanding after months of silence are insufficient. This reinforces the efficacy of alternative dispute resolution mechanisms.
Sanctity of the Advocate-Client Relationship
The judgment underscores that the advocate-client relationship is fiduciary in nature; counsel’s statements made with authority are deemed to be the client’s own. Litigants must therefore vet their counsel’s actions promptly and cannot benefit from delay to challenge those actions. Maintaining timely communication and obtaining ratification of critical decisions protects both the client and the integrity of judicial process.
