The Lahore High Court (LHC) Rawalpindi Bench has overturned a trial court’s decision that had previously favored Maple Leaf Cement in a notable case involving the recovery of Rs70 million from Mohammad Waseem. The trial court had allowed recovery under Order XXXVII of the Code of Civil Procedure (CPC) of 1908, which governs summary suits for debt recovery.
The case began when Maple Leaf Cement alleged that Mohammad Waseem’s alleged misappropriation resulted in a loss of Rs79 million. As part of a settlement, Waseem issued a cheque for Rs70 million, which later bounced due to insufficient funds, leading to legal action against him.
In its judgment, the LHC Rawalpindi Bench, consisting of Justice Mohammad Sajid Mehmood Sethi and Justice Jawad Hassan, ruled that summary suits under Order XXXVII cannot be filed without a prior contractual agreement between the parties. Justice Jawad Hassan, who authored the judgment, emphasized that Rule 2 of Order XXXVII allows such suits only in cases involving bills of exchange, hundis, or promissory notes.
The court highlighted that although a cheque is a negotiable instrument under the Negotiable Instruments Act of 1881, initiating a suit requires a demonstrable contractual relationship between the parties. Maple Leaf Cement had only provided a copy of the First Information Report (FIR) and the bounced cheque, lacking evidence of a formal contractual agreement.
Additionally, the LHC Rawalpindi Bench raised concerns about the misuse of judicial powers by district courts in cheque dishonor and recovery cases. The decision sets a new precedent by clarifying the legal framework surrounding these matters and addressing the potential misuse of summary procedures. It underscores the necessity of having a clear contractual basis for summary suits and ensures that claims are supported by appropriate agreements and documentation.
This ruling not only impacts the specific case but also establishes critical guidelines for future cases involving negotiable instruments and recovery claims, reinforcing the need for a formal contractual relationship.
