M/S GIMPEX PRIVATE LIMITED versus MANOJ GOEL
[2021] 11 S.C.R. 432, Supreme Court of India, 2021
Outcome: Case Partly allowed (Granted)
Segment: Facts
A
B
C
D
E
F
G
H
432
SUPREME COURT REPORTS
[2021] 11 S.C.R.
432
[2021] 11 S.C.R. 432
M/S GIMPEX PRIVATE LIMITED
v.
MANOJ GOEL
(Criminal Appeal No. 1068 of 2021)
OCTOBER 08, 2021
[DR. DHANANJAYA Y CHANDRACHUD, VIKRAM NATH
AND B. V. NAGARATHNA, JJ.]
Negotiable Instruments Act, 1881 – ss. 138, 139 – Parallel
prosecutions arising from a single transaction u/s.138 –
Impermissibility of – Dishonour of cheques – First set of complaints
filed – Compromise – First complaint pending, cheques issued
pursuant to the compromise deed also dishonoured – Second
complaint filed – Both the complaints if can be pursued
simultaneously – Held: No – A settlement agreement effaces the
original complaint – Non-compliance of the terms of the settlement
agreement or dishonour of cheques issued subsequent to it gives
rise to a fresh cause of action – Allowing prosecution under both
sets of complaints would be contrary to the purpose of the enactment
– First complaint quashed – Further, Single Judge erred in quashing
the criminal complaint on a priori reasoning that the second set of
cheques issued in pursuance of the compromise deed were not in
discharge of a liability – Mere fact that a suit was instituted
challenging the compromise deed would not justify exercising
jurisdiction u/s.482 – It would continue to be valid until a decree of
the appropriate court setting it aside is passed – High Court failed
to notice the import of the presumption u/s.139 which can only be
displaced on the basis of
evidence adduced at the trial – Judgment
of the Single Judge quashing the second complaint is set aside –
Code of Criminal Procedure, 1973 – s.482 – Penal Code, 1860 –
ss. 409, 506(1).
Negotiable Instruments Act, 1881:
s.138 – Ingredients of – Discussed.
s.138 – Purpose of – Held: Primary purpose of s.138 is to
ensure compensation to the complainant – The Act also allows for
parties to enter into a compromise, both during the pendency of the
complaint and even after the conviction of the accused.
A
B
C
D
E
F
G
H
433
s.138 – Nature of offence under – Held: It is quasi-criminal,
while it arises out of a civil wrong, the law however, imposes a
criminal penalty in the form of imprisonment or fine.
s.139 – Presumption under – Burden of proof – Discussed.
Partly allowing the appeals, the Court
HELD: 1.1 Parallel Prosecutions
The nature of the offence under Section 138 of the NI Act
is quasi-criminal in that, while it arises out of a civil wrong, the
law, however, imposes a criminal penalty in the form of
imprisonment or fine. The purpose of the enactment is to provide
security to creditors and instil confidence in the banking system
of the country. Given that the primary purpose of Section 138 of
the NI Act is to ensure compensation to the complainant, the NI
Act also allows for parties to enter into a compromise, both during
the pendency of the complaint and even after the conviction of
the accused. [Paras 27, 28][450-D-E; 451-B]
1.2 Allowing prosecution under both sets of complaints
would be contrary to the purpose of the enactment. It is the
compensatory aspect of the remedy that should be given priority
as opposed to the punitive aspect. The complainant in such cases
is primarily concerned with the recovery of money, the conviction
of the accused serves little purpose. In fact, the threat of jail acts
as a stick to ensure payment of money. A complainant enters into
a settlement with open eyes and undertakes the risk of the
accused failing to honour the cheques issued
pursuant to the
settlement, based on certain benefits that the settlement
agreement postulates. Once parties have voluntarily entered into
such an agreement and agree to abide by the consequences of
non-compliance of the settlement agreement, they cannot be
allowed to reverse the effects of the agreement by pursuing both
the original complaint and the subsequent complaint arising from
such non-compliance. The settlement agreement subsumes the
original complaint. Non-compliance of the terms of the settlement
agreement or dishonour of cheques issued subsequent to it, would
then give rise to a fresh cause of action attracting liability under
Section 138 of the NI Act and other remedies under civil law and
M/S GIMPEX PRIVATE LIMITED v. MANOJ GOEL
A
B
C
D
E
F
G
H
434
SUPREME COURT REPORTS
[2021] 11 S.C.R.
criminal law. A contrary interpretation, which allows for the
complainant to pursue both the original complaint and the
consequences arising out of the settlement agreement, would
lead to contradictory results. First, it would allow for the accused
to be prosecuted and undergo trial for two different complaints,
which in its essence arise out of one underlying legal liability.
Second, the accused would then face criminal liability for not just
the violation of the original agreement of the transaction which
had resulted in issuance of the first set of cheques, but also the
cheques issued pursuant to the compromise deed. Third, instead
of reducing litigation and ensuring faster recovery of money, it
would increase the burden of the criminal justice system where
judicial time is being spent on adjudicating an offence which is
essentially in the nature of a civil wrong affecting private parties.
Most importantly, allowing the complainant to pursue parallel
proceedings, one resulting from the original complaint and the
second emanating from the terms of the settlement would make
the settlement and issuance of fresh cheques or any other partial
payment made towards the original liability meaningless. Such
an interpretation would discourage settlement of matters since
they do not have any effect on the status quo, and in fact increase
the protracted litigation before the court. Thus, a complainant
cannot pursue two
parallel prosecutions for the same underlying
transaction. Once a settlement agreement has been entered into
by the parties, the proceedings in the original complaint cannot
be sustained and a fresh cause of action accrues to the complainant
under the terms of the settlement deed. Once the compromise
deed dated 12 March 2013 was agreed, the original complaint
must be quashed and parties must proceed with the remedies
available in law under the settlement agreement. [Paras 37-40,
45][456-H; 457-A, H; 458-A-H; 462-D-E]
Re: Expeditious Trial of Cases under Section 138 of
the NI Act 1881 Decision of Supreme Court dtd.16th
April 2021 in Suo Motu Writ Petition (Crl.) No. 2 of
2020 – followed.
Lalit Kumar Sharma v. State of Uttar Pradesh (2008) 5
SCC 638 : [2008] 7 SCR 797 – held inapplicable.
A
B
C
D
E
F
G
H
435
Arun Kumar v. Anita Mishra (2020) 16 SCC 118 –
referred to.
2.1 Liability arising from the settlement agreement
Once a settlement agreement has been entered into
between the parties, the parties are bound by the terms of the
agreement and any violation of the same may result in
consequential action in civil and criminal law. In the present case,
the first set of cheques which were issued allegedly towards
discharge of the liability under the HSSA were dishonoured. A
deed of compromise was entered into thereafter on 12 March
2013. The deed of compromise was partially implemented by the
payment of an amount of Rs. 3 crores by demand draft to the
complainant. Upon the receipt of an amount of Rs. 3 crores,
Gimpex Private Limited was to grant its no objection to the plea
of bail of ‘MG’. ‘MG’ undertook to pay the balance of Rs. 7 crores
within three months in instalments. The second set of cheques
issued pursuant to the deed of compromise were also
dishonoured. [Paras 46, 47][462-E-H]
2.2 Once the ingredients of Section 138 of the NI Act are
fulfilled, the statute clearly stipulates that “such person shall be
deemed to have committed an offence”. Thus, once the
ingredients of Section 138 are fulfilled, a distinct offence arises
in respect of the dishonour of the cheques in question. There
was no basis for the Single Judge to conclude, particularly in the
course of the hearing of a petition under Section 482 of the CrPC
that the second set of cheques issued in
pursuance of the deed of
compromise cannot be construed as being towards the discharge
of a liability. The question as to whether the liability exists or not
is clearly a matter of trial. There was a serious error on the part
of the Single Judge in allowing the petition under Section 482 to
quash the prosecution on the basis that the deed of compromise
would not constitute a legally enforceable liability. The mere fact
that a suit is pending before the High Court challenging the validity
of the compromise deed would furnish no cogent basis to quash
the proceedings under Section 138. A settlement agreement
effaces the original complaint and thus, it is not up to the parties,
either complainant or accused, to simply reverse the effects of
M/S GIMPEX PRIVATE LIMITED v. MANOJ GOEL
A
B
C
D
E
F
G
H
436
SUPREME COURT REPORTS
[2021] 11 S.C.R.
that agreement and relitigate the original complaint relating to
the same underlying transaction under Section 138 of the NI Act.
The breach of the deed of compromise has arisen due to the
dishonour of the cheques which were issued by the accused
towards discharge of the remaining balance of Rs. 7 crores. In
this backdrop, it was farfetched for the High Court to have
quashed the proceedings in exercise of its jurisdiction under
Section 482. Section 139 of the NI Act raises the presumption,
unless the contrary is proved that the holder of a cheque receives
the cheque of the nature referred to in Section 138 for the
discharge, in whole or in part, of any debt or other liability. Section
139 raises the presumption “unless the contrary is proved”. Once
the complainant discharges the burden of proving that the
instrument was executed by the accused; the presumption under
Section 139 shifts the burden on the accused. The expression
“unless the contrary is proved” would demonstrate that it is only
for the accused at the trial to adduce evidence of such facts or
circumstances on the basis of which the burden would stand
discharged. These are matters of evidence and trial. The
determination of whether a cheque pursuant to a settlement
agreement arises out of a legal liability would be dependent on
various factors, such as the underlying settlement agreement,
the nature of the original transaction and whether an adjudication
on the finding of liability was arrived at in the original complaint,
the defence raised by the accused, etc. The Single Judge was in
error in proceeding to quash the criminal complaint on a priori
reasoning that the second set of cheques issued in pursuance of
the deed of compromise were not in discharge of a liability and
on that basis proceeding to quash the proceedings under Section
482 CrPC. The mere fact that a suit has been instituted before
the High Court challenging the deed of compromise would furnish
no justification for exercising the jurisdiction under Section 482.
The deed of compromise would continue to be valid until a decree
of the appropriate court setting it aside is passed. The High Court
failed to notice the true meaning and import of the presumption
under Section 139 which can only be displaced on the basis of
evidence adduced at the trial. The judgment of the Single Judge
quashing the complaint CC No. 389/2017 is set aside. The
A
B
C
D
E
F
G
H
437
complaint CC Nos.3326-3329 of 2012 and CC Nos.99-101 of 2013
is quashed. [Paras 48, 50, 51, 53 and 55][463-C-F; 464-B-C;
465-A-B; 466-D-H; 467-A, D-E]
K Bhaskaran v. Sankaran Vaidhyan Balan (1999) 7 SCC
510:[1999] 3 Suppl. SCR 271; P Mohanraj and Others
v. Shah Brothers Ispat Private Limited (2021) 6 SCC
258; Meters and Instruments (P) Ltd. v. Kanchan Mehta
(2018) 1 SCC 560 : [2017] 10 SCR 66; Damodar S
Prabhu v. Sayed Babalal (2010) 5 SCC 663 : [2010] 5
SCR 678; R. Vijayan v. Baby (2012) 1 SCC 260 : [2011]
14 SCR 712; HMT Watches Ltd. v. M.A. Abida (2015)
11 SCC 776 : [2015] 3 SCR 719; Sampelly
Satyanarayana Rao v. Indian Renewable Energy
Development Agency Ltd. (2016) 10 SCC 458 : [2016]
6 SCR 531; Kumar Exports v. Sharma Carpets (2009)
2 SCC 513 : [2008] 17 SCR 572; Kishan Rao v.
Shankargouda (2018) 8 SCC 165 : [2018] 5 SCR 69 –
relied on.
Prakash Gupta v. SEBI (2021) SCC Online SC 485 –
referred to.
Case Law Reference
[1999] 3 Suppl. SCR 271
relied on
Para 26
(2021) 6 SCC 258
relied on
Para 27
[2017] 10 SCR 66
relied on
Para 28
[2010] 5 SCR 678
relied on
Para 29
[2011] 14 SCR 712
relied on
Para 37
[2008] 7 SCR 797
held inapplicable
Para 41
(2020) 16 SCC 118
referred to
Para 41
CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No.
1068 of 2021.
From the Judgment and Order dated 10.04.2019 of the High Court
of Judicature at Madras in Criminal Original Petition No.25398 of 2018.
With
Criminal Appeal Nos. 1069-1075 of 2021.
M/S GIMPEX PRIVATE LIMITED v.
MANOJ GOEL
A
B
C
D
E
F
G
H
438
SUPREME COURT REPORTS
[2021] 11 S.C.R.
V. Giri, Jayant Bhushan, Sr. Advs., Ms. Liz Mathew, Ms. Ankita
Gandhi, Shrirang Varma, Navneet R., Ms. Sonali Jain, Ms. Vasudha
Jain, Diwakar Maheshwari, Karun Mehta, Shreyas Edupuganti, Amartya
Bhushan, Tushar Bhushan, Ketan Paul, Advs. for the Appearing Parties.
The Judgment of the Court was delivered by
DR. DHANANJAYA Y CHANDRACHUD, J.
A
Factual Background..................................................3*
B
Submissions of parties.............................................12*
C
Analysis................................................................15*
C.1
Parallel prosecutions.............................................15*
C.2
Liability arising from the settlement agreement....33*
D
Conclusion............................................................40*
A Factual Background
1. This batch of appeals has arisen from a judgment dated 10
April 2019 of a Single Judge of the High Court of Judicature at Madras
by which proceedings in a complaint1under Section 138 of the Negotiable
Instruments Act 18812, pending on the fileof the Seventh Metropolitan
Magistrate’s Court at Chennai were quashed. The jurisdiction of the
Single Judge was invoked under Section 482 of the Code of Criminal
Procedure 19733.
2. On 17 and 27 April 2012, the appellant entered into three High
Seas Sale Agreements4 with Aanchal Cement Limited5. On the request
of ACL, the appellant paid an amount of Rs.6.96 crores (Rs. 6,96,74,666/-)
as customs
duty and Rs. 8.04 crores (Rs. 8,04,12,495/-) as wharfage
charges in order to clear the goods on behalf of ACL which is alleged to
have promised to repay the amount with interest. It has been alleged
that though the appellant supplied the goods, ACL failed to make
payments. On 6 August 2012, ACL issued 18 cheques dated 8 August
2012, each inthe amount of Rs.50 lakhs, for a total value of Rs. 9 crores
Ed. Note - *denotes the actual pagination in the Original Judgment.
1 CC No. 389 of 2017
2 “NI Act“
3 “CrPC“
4 “HSSA“
5 “ACL“
A
B
C
D
E
F
G
H
439
in favour of the appellant in part payment of the outstanding liability. On
21 August 2012, the 18 cheques were dishonoured upon presentation
with an endorsement: “payments stopped by drawer”/ “insufficient
funds”. A complaint was lodged by the appellant on 10 September
2012,with the Commissioner of Police, Egmore, Chennai, against ACL
and its directors for offences under Sections 409 and 506(1) of the Indian
Penal Code 18606, which was registered as an FIR in Central Crime
Branch on 1 February 2013as Crime No.21 of 2013. Between 22
September 2012 and 5 October 2012, the appellant issued legal notices
under Section 138 of the NI Act to ACL and its directors - Sitaram Goel,
Manoj Goel (the respondent) and Mukesh Goel in respect of the dishonor
of the 18 cheques.
3. On 22 October 2012 and 6 November 2012, the appellant filed
criminal complaints7 under Section 138 of the NI Act, in respect of the
dishonour of the cheques of the value of Rs.9 crores.This is the first set
of complaints filed by the appellant.
4. In 2013,Sitaram Goel filed petitions8 under Section 482 of the
Cr PC for quashing the complaints qua him.On 3 March 2013,Mukesh
Goel, a director of ACL was arrested by the Central Crime Branch. A
bail application was filed by Mukesh Goel on 5 March 2013.
5. During the pendency of the bail application, ACL approached
the appellant to settle the matter and arrive at a compromise. On 12
March 2013, the appellant and ACL entered into a deed of compromise
containing,inter alia, the following stipulations:
“1.
Based on the above agreement the “PARTY OF THE
FIRST PART” hand over DD No:271351, dt: 11/03/2013
for Rs. 3,00,00,000/- (Rupees Three Crore Only) drawn on
The Kapur Vysya Bank Limited, in favour of the “PARTY
OF THE SECOND PART”, to the PARTY OF THE
SECOND PART” on 11/03/2013
2.
On receipt of Rs. 3 crore mentioned above, the “PARTY
OF THE SECOND PART” shall say no objection for the
bail application filed by the “PARTY OF THE FIRST
PART”
6 “IPC“
7 CC Nos.3326-3329 of 2012 and CC Nos.99-101 of 2013
8 Crl. OP Nos. 22873 to 22878 of 2016 and Crl. M.P. Nos.10687 to 10698 of 2016
M/S GIMPEX PRIVATE LIMITED v. MANOJ GOEL
[DR. DHANANJAYA Y CHANDRACHUD, J.]
A
B
C
D
E
F
G
H
440
SUPREME COURT REPORTS
[2021] 11 S.C.R.
3.
The “PARTY OF THE FIRST PART” agrees and undertake
to pay the balance amount of Rs. 7 crore within 3 months
in 3 equal instalments of Rs. 2,33,33,333/- (Rupees Two
Crore Thirty Three Lakh Thirty Three Thousand Three
Hundred and Thirty Three Only) every month to the
“PARTY OF THE SECOND PART”. The monthly
instalment shall be paid on or before 11th day of every month
i.e. 11/04/2013, 11/05/2013 and 11/06/2013.
4.
The “PARTY OF THE FIRST PART” agrees and undertake
to pay the monthly instalment of Rs. 2,33,33,333/- equally
divided in three parts and Sri. Sitram Goel, Sri. Manoj Goel
and M/s Aanchal collection Limited would issue cheques in
faovour of the “PARTY OF THE SECOND PART”
towards the compliance of the settlement.
5.
The “PARTY OF THE FIRST PART” handed over
following cheques to the “PARTY OF THE SECOND
PART” as compliance of the assurance and undertaking
given by the “PARTY OF THE FIRST PART”
[…]
6.
The “PARTY OF THE FIRST PART” after consultation
with the directions of M/s. Aanchal Cement Limited
(Formerly M/s Kalika Cement Private Limited) and M/s.
Aanchal Collection Limited, which is also family business
and sister concern of “PARTY OF THE FIRST PART”
and Sri. Sitaram Goel, has arrived at this settlement and
signingthis compromise deed. Any default or non
commitment of the conditions set out in this compromise
deed would amount to cheating and fraud. The “PARTY
OF THE FIRST PART” has issued the cheque of
M/s
Aanchal Collection Limited, towards clearance of legal debt
to the “Party of the Second Part”.
7.
The “PARTY OF THE FIRST PART” agrees and
undertakes that if any of the conditions agreed in this
compromise deed is not honoured that would amount to
cheating, fraud, breach of trust, etc. and the bail granted to
Sri. Mukesh Goel shall be deemed to have cancelled
automatically and the “PARTY OF THHE SECOND
PART” is also entitled to cancel the bail and also entitle to
A
B
C
D
E
F
G
H
441
file a fresh criminal complaint besides NI Act, against the
drawer of cheques and also against other directors of the
“PARTY OF THE FIRST PART” and M/s Aanchal
Collection Limited”.
8.
The “PARTY OF THE SECOND PART”, on receipt of
Rs. 5,33,33,333/- which would be completed after honouring
all the cheques dt: 11/04/2013, shall withdraw the Garnishee
application filed in Arbitration proceedings filed against the
“PARTY OF THE FIRST PART” inA.No. 312/2013 and
ANo. 313/2013 inO.A. No. 42/2013, pending before the
Hon’ble High Court of Madras.
9.
After payment of the entire settlement amount of Rs. 10
crore by the “PARTY OF THE FIRST PART” to the
“PARTY OF THE SECOND PART”, the PARTY OF THE
SECOND PART” shall withdraw all the criminal complaints,
suits, arbitration proceedings, 138 proceedings filed in C.C.
No. 3326-3329/2012 & CC No. 99-101/2013, pending before
VIIth, MM, George Town, Chennai against the “PARTY
OF THE FIRST PART”. It is also assured and agreed by
the “PARTY OF THE FIRST PART” shall withdraw the
case filed, before the Kalkata City Civil Court against the
“PARTY OF THE SECOND PART” in O.S. No. 1615/
2012.
10.
It is agreed that on payment of Rs. 10 crore by the “PARTY
OF THE FIRST PART” either party shall have no claim
against each other on the issue of purchase of Clinker
purchased under the HSS agreements dt: 17/04/2013, 27/
04/2013 and 27/04/2013 and all the cases filed against each
other shall be withdrawn.”
6. On the basis of the above
compromise, Mukesh Goel was
granted bail. Sitaram Goel and the respondent were granted anticipatory
bail by the Metropolitan Magistrate on 26 March 2013 and 3 April 2013
on the basis of the deed of compromise.
7. On 8 April 2013, a suit9 was instituted by ACL and one of its
directors before the High Court of Judicature at Madras challenging the
deed of compromise as illegal, null and void, and for return of the cheques
9 CS No. 234 of 2013
M/S GIMPEX PRIVATE LIMITED v. MANOJ GOEL
[DR. DHANANJAYA Y CHANDRACHUD, J.]
A
B
C
D
E
F
G
H
442
SUPREME COURT REPORTS
[2021] 11 S.C.R.
issued to the appellant pursuant to it. Initially, an interim injunction was
issued and the cheques were replaced. By an order dated 2 December
2013, the interim application was rejected and the claim of ACL that the
deed of compromise was obtained by force, fraud and coercion was not
found to be worthy of acceptance. An appeal against the judgment of
the Single Judge was dismissed as withdrawn on 12 December 2014.
8. On 14 December 2015, this Court stayed further proceedings
arising out of the FIR Crime No.21/2013 (which had been registered
with the Central Crime Branch) for offences punishable under Section
409 and 506(1) of the IPC.
9. On 15 November 2016, the Madras High Court dismissed the
proceedings initiated by Sitaram Goel for quashing of the first set of
complaintsunder Section 138 of the NI Act against him.
10. The cheques issued in pursuance of the deed of compromise
dated 12 March 2013 having been dishonoured, a second complaint10
was instituted on 16 February 2017 by the appellant under Section 138
of the NI Act before the Seventh Metropolitan Magistrate (the complaint
was initially filed before the CMM Kolkata in 2015 and was subsequently
transferred to Chennai on 10 March 2015). This is the second complaint
filed by the appellant against ACL under Section 138 of the NI Act.
11. On 10 March 2017, ACL and its directors (Manoj Goel and
Mukesh Goel) instituted proceedings11 before the Madras High Court
under Section 482 of the CrPC to quash the proceedings pending against
them under Section 138 of the NI Act in the first set of complaints.On
19 August 2017, ACL and its directors instituted another proceeding12
before the Madras High Court under Sections 482 CrPC to quash the
proceedings initiated under Section 138 of the NI Act in the second
complaint. The latter was disposed of by the High Court by quashing the
proceedings as against ACL, Manoj Goel, and Vijay Srivastav, with the
complainant agreeing to proceed with the trial as against the respondent
who was the signatory of the cheques in question.
12. The High Court also disposed of the proceedings which were
instituted on 10 March 2017 and refused to quash the first set of
10 CC No. 389 of 2017
11 Crl. O.P. No. 5494-5500 of 2017 and Crl. M.P. Nos. 5244 to 5250, 4094, 4096, 4098,
4100, 4102, 4104 and 4106 of 2017
12 Crl. O.P. No. 17255 of 2017 and Crl. M.P. Nos 10587 and 10588 of 2017
A
B
C
D
E
F
G
H
443
complaints. The orders of the High Court were challenged by ACL in
special leave petitions13. By its order dated 18 May 2018, this Court
granted liberty to ACL to approach the High Court in respect of the
specific plea that the compromise deed (and the 15 cheques issued
pursuant to it) was entered into under coercion.The order of this Court
reads as follows:
“Delay condoned.
It is argued by Mr. K.V. Viswanathan, learned senior counsel
appearing for the petitioners, that the petitioners have sought
quashing of the proceedings on altogether different grounds. He
has referred to Ground ‘D’ of the petition (Pg. 67 of the paper
book) wherein it is stated that under coercion deed of compromise
was signed between the petitioners and the respondent and
pursuant to which the petitioners had issued 15 fresh cheques in
full settlement of all claims of the respondent. This aspect, he
submits has not been looked into by the High Court while passing
the common order. The petitioners are granted liberty to approach
the High Court again to take up this plea and we expect the High
Court to deal with the issue on its own merits.
We make it clear that this Court has not expressed any opinion on
the merits of the issue and it is for the High Court to take its own
view.
With the aforesaid observations the special leave petition is disposed
of.
Pending application(s), if any, stands disposed of accordingly.”
13. On 14 June 2018, the second complaintwas transferred to be
tried
along with the earlier batch of 7 cases, the first set of complaints.
Pursuant to the order of this Court, on 19 July 2018, ACL instituted
proceedings14 under Section 482 of the CrPC for quashing the first
complaint under Section 138 of the NI Act.
14. By an order dated 6 August 2018, in the special leave petition15
instituted before this Court against the order of the High Court dated 24
November 2017, liberty was granted to the respondent, Manoj Goel, in
13 SLP (Criminal) Diary No.17687 and 17257 of 2018
14 Crl.O.P Nos 21731-21737 of 2018 against C.C. No. 3326-3329 of 2012 and C.C. No.
99-101 of 2013
15 SLP (Criminal) Diary No. 17257 of 2018
M/S GIMPEX PRIVATE LIMITED v. MANOJ GOEL
[DR. DHANANJAYA Y CHANDRACHUD, J.]
A
B
C
D
E
F
G
H
444
SUPREME COURT REPORTS
[2021] 11 S.C.R.
the following terms to raise the issue of the simultaneous prosecution of
two sets of cases:
“Delay condoned.
It is argued by Mr. R. Basant, learned senior counsel appearing
for the petitioner, that the crux of the contention raised by the
petitioner is that two sets of prosecutions under the Negotiable
Instruments Act cannot simultaneously lie. Admittedly, the second
set of cheques on which the present prosecutions are initiated
were issued on the basis of a Deed of Compromise for the
discharge of the same liability for which the earlier 18 cheques
each of Rs. 50 lacs were issued. The counsel points out that in
respect of the prosecution relating to earlier cheques, this Court
had vide order dated 18.05.2018 granted leave to the petitioner to
reagitate the contention before the High Court that two separate
prosecutions under Section 138 of the Negotiable Instruments Act
in respect of two sets of cheques – both issued for the discharge
of the same liability cannot simultaneously stand. The petitioner is
granted liberty to approach the High Court again to take up this
plea and we expect the High Court to deal with the issue on its
own merits.
We make it clear that this Court has not expressed any opinion on
the merits of the issue and it is for the High Court to take its own
view.
With the aforesaid observations the Special Leave Petition is
disposed of.
Pending application(s), if any, stands disposed of accordingly.”
15. On 18 September 2018, the respondent instituted proceedings16
before the Madras High Court to quash the proceedings pending against
him under Section 138 of the NI Act in the second complaint. By its
judgment dated 10 April 2019, the High Court disposed of the petitions
filed under Section 482 of the CrPC in respect of both the first and the
second complaints. The High Court:
(i)
Dismissed the proceedings instituted by ACL and its
directors against the first complaint and directed the Fast
Track Court No.IV George Town, Chennai to complete the
trial in the first set of complaints within three months;
16 Crl O.P No. 25398 of 2018
A
B
C
D
E
F
G
H
445
(ii)
Allowed the proceedings instituted by the respondent, Manoj
Goeland quashed the proceedings in the second
complaintpending on the file of the Seventh Metropolitan
Magistrate.
16. On 3 June 2019, ACL filed an application17 seeking review
together with the clarification of the findings to the effect that they shall
not influence the trial of the criminal complaint. The High Court passed
an order thereon on 8 July 2019.
17. The judgment of the High Court dated 10 April 2019 has given
rise to the special leave petitions before us. A special leave petition18
was instituted by the appellant before this Court against the quashing the
second criminal complaint by the High Court. On the other hand, ACL
filed a special leave petition19 against the judgment of the High Court
allowing the proceedings under the first complaint to continue. Both the
special leave petitions were tagged and heard together.
18. The Single Judge, while allowing the petition under Section
482 and quashing the proceedings in the second complainthas provided
the following reasons:
“19. […] without going into the validity of the deed of compromise
the cheques issued on the deed of compromise culminated in C.C.
No. 389 of 2017. Though part of compromise deed executed by
the parties, the complaint initiated on the cheques issued on the
deed of compromise cannot be sustained. Since originally the
petitioners issued the first set of cheques on their liability of
payment towards the three HSS
Agreements is still pending as
per the proceedings under the Negotiable Instruments Act.
Therefore the second set of cheques issued only on the basis of
deed of compromise and those are not issued for any liability.
Alsowhen the very deed of compromise itself is challenged in the
suit, the cheques issued on the said deed of compromise cannot
be construed as those cheques were issued for discharging their
liability.”
17 Crl MP Nos. 8157, 8158, 8163, 8165, 8167, 8168 of 2019 in Crl OP No. 21731-37
of 2018
18 SLP (Criminal) No. 6564 of 2019
19 SLP (Criminal) Nos. 7632-7638 of 2019
M/S GIMPEX PRIVATE LIMITED v. MANOJ GOEL
[DR. DHANANJAYA Y CHANDRACHUD, J.]
A
B
C
D
E
F
G
H
446
SUPREME COURT REPORTS
[2021] 11 S.C.R.
19. In the above extract, the High Court has held that since the
criminal complaints in respect of the dishonor of the first set of cheques
issued against the liability under the HSSA are still pending, the second
set of cheques issued on the basis of the deed of compromise “are not
issued for any liability”.The High Court has also held that since the validity
of the deed of compromise is challenged in the suit pending before the
High Court, the cheques issued on the basis of the deed of compromise
cannot be construed towards the discharge of liability. In this batch of
two appeals, the appeal by Gimpex Private Limited (appellant) assails
the decision of the High Court to quash the second complaint under
Section 138 on the ground that the cheques which were issued in
pursuance of the deed of compromise could not be construed to be in
discharge of a liability. In the companion appeal, which has been instituted
by ACL and its directors (Manoj Goel and Mukesh Goel), the order of
the High Court allowing the first complaint in respect of the first set of
cheques to continue has been assailed.
B Submissions of parties
20. Mr V Giri, learned Senior Counsel appearing on behalf of the
appellants (Gimpex Private Limited) with Ms Liz Mathew
has urged the following submissions:
(i)
The offence under Section 138 of the NI Act, 1881 is
complete once its ingredients are fulfilled;
(ii)
Once the offence is complete and a prosecution
is launched,
it must proceed to trial and it was not open to the High
court in the exercise of its jurisdiction under Section 482
CrPC to quash the prosecution on the basis of the deed of
compromise which has not been implemented due to the
default of the accused;
(iii)
Whether a liability exists and whether the cheques (as set
up in the defence) were issued as and by way of security
are matters for trial;
(iv)
In view of the presumption under Section 139 of the NI
Act, at this stage the Court has to proceed on the basis that
the cheques were issued in discharge of a legally enforceable
debt;
A
B
C
D
E
F
G
H
447
(v)
The mere pendency of a suit seeking to challenge the deed
of compromise is not a ground to quash the criminal
complaint given the clear distinction in law between an order
of conviction and an order at an anterior stage seeking
quashing of a criminal complaint; and
(vi)
There is no embargo under Section 138 of the NI Act on
parallel proceedings for distinct offences involving the
dishonor of cheques. Both sets of criminal complaints in
respect of the first set of cheques and the second set of
cheques are being tried by the same court. It is not
legitimately open to the accused who committed a breach
of the settlement to seek a quashing of the criminal
complaints. The Magistrate at the end of the trial would
undoubtedly determine the nature of the sentence that should
be imposed.
21. On the other hand, Mr Jayant Bhushan, learned Senior Counsel
has urged the following submissions.
(i)
The essential issue is whether a criminal trial can go on
with both sets of cheques;
(ii)
The crucial ingredient of Section 138 is that a cheque must
be for the discharge, in whole or in part of any debt or other
liability. There cannot be a two prosecutions for the same
liability;
(iii)
The liability under the first set of cheques was replaced
following the deed of compromise by the second set of
cheques;
(iv)
As a consequence of the deed of compromise there was a
novated contracted between the parties;
(v)
In terms of the provisions of Section 39 of the Indian
Contract
Act 1872 it is open to the appellant as the promisee
to elect whether to repudiate the agreement or continue
with its performance on breach of the agreement by the
other party (respondents);
(vi)
The appellant has in fact repudiated the deed of compromise
by failing to withdraw the criminal complaint and the arbitral
proceedings;
M/S GIMPEX PRIVATE LIMITED v. MANOJ GOEL
[DR. DHANANJAYA Y CHANDRACHUD, J.]
A
B
C
D
E
F
G
H
448
SUPREME COURT REPORTS
[2021] 11 S.C.R.
(vii)
The appellant can in the circumstances only enforce the
liability in respect of the first set of cheques as a
consequence of which the criminal prosecution in respect
of only the first set may proceed; and
(viii) In the cross appeal, Mr Jayant Bhushan, learned Senior
Counsel submitted that the principal contention of the
accused is that the transaction was not as a matter of fact
a sale on high seas. However, learned Senior Counsel
submitted that this cannot be fairly agitated in proceedings
under Section 482 CrPC and it will be appropriate if the
issue is left open to be urged at the trial.
22. The rival submissions will now be considered.
C Analysis
23. The question before this Court is whether parallel prosecutions
arising from a single transaction under Section 138 of the NI Act can be
sustained. In this case, a set of cheques were dishonoured, leading to
filing of the first complaint under Section 138 of the NI Act. The parties
thereafter entered into a deed of compromise to settle the matter. While
the first complaint was pending, the cheques issued pursuant to the
compromise deed were dishonoured leading to the second complaint
under Section 138 of the NI Act. Both proceedings are pending
simultaneously and it is for this Court to decide whether the complainant
can be allowed to pursue both the cases or whether one of them must be
quashed and the consequences resulting from such quashing.
C.1 Parallel
prosecutions
24. Section 138 of the NI Act stipulates thus:
“Dishonour of cheque for insufficiency, etc., of funds in the
account.
Where any cheque drawn by a person on an account maintained
by him with a banker for payment of any amount of money to
another person from out of that account for the discharge, in whole
or in part, of any debt or other liability, is returned by the bank
unpaid, either because of the amount of money standing to the
credit of that account is insufficient to honour the cheque or that
it exceeds the amount arranged to be paid from that account by
an agreement made with that bank, such person shall be deemed
A
B
C
D
E
F
G
H
449
to have committed an offence and shall, without prejudice to any
other provision of this Act, be punished with imprisonment for a
term which may be extended to two years, or with fine which
may extend to twice the amount of the cheque, or with both:
Provided that nothing contained in this section shall apply unless—
(a) the cheque has been presented to the bank within a period of
six months from the date on which it is drawn or within the period
of its validity, whichever is earlier;
(b) the payee or the holder in due course of the cheque, as the
case may be, makes a demand for the payment of the said amount
of money by giving a notice; in writing, to the drawer of the
cheque, within thirty days of the receipt of information by him
from the bank regarding the return of the cheque as unpaid; and
(c) the drawer of such cheque fails to make the payment of the
said amount of money to the payee or, as the case may be, to the
holder in due course of the cheque, within fifteen days of the
receipt of the said notice.
Explanation.— For the purposes of this section, debt of other
liability means a legally enforceable debt or other liability.”
25. The ingredients of the offence under Section 138 are:
(i)
The drawing of a cheque by person on an account maintained
by him with the banker for the payment of any amount of
money to another from that account;
(ii)
The cheque being drawn for the discharge in whole or in
part of any debt or other liability;
(iii)
Presentation of the cheque to the bank;
(iv)
The return of the cheque by the drawee bank as unpaid
either because the amount of money standing to the credit
of that account is insufficient to honour the cheque or that
it exceeds the amount arranged to be paid from that account;
(v)
A notice by the payee or the holder in due course making a
demand for the payment of the amount to the drawer of
the cheque within 30 days of the receipt of information from
the bank in regard to the return of the cheque; and
M/S GIMPEX PRIVATE LIMITED v. MANOJ GOEL
[DR. DHANANJAYA Y CHANDRACHUD, J.]
A
B
C
D
E
F
G
H
450
SUPREME COURT REPORTS
[2021] 11 S.C.R.
(vi)
The drawer of the cheque failing to make payment of the
amount of money to the payee or the holder in due course
within 15 days of the receipt of the notice.
26. The ingredients of the offence were summarized in fairly similar
terms in a judgment of a two judge Bench of this Court in K Bhaskaran
v. Sankaran Vaidhyan Balan20. Justice K T Thomas observed:
“14. The offence under Section 138 of the Act can be completed
only with the concatenation of a number of acts. The following
are the acts which are components of the said offence: (1) drawing
of the cheque, (2) presentation of the cheque to the bank, (3)
returning the cheque unpaid by the drawee bank, (4) giving notice
in writing to the drawer of the cheque demanding payment of the
cheque amount, (5) failure of the drawer to make payment within
15 days of the receipt of the notice.”
27. The nature of the offence under Section 138 of the NI Act is
quasi-criminal in that, while it arises out of a civil wrong, the law, however,
imposes a criminal penalty in the form of imprisonment or fine. The
purpose of the enactment is to provide security to creditors and instil
confidence in the banking system of the country. The nature of the
proceedings under Section 138 of the NI Act was considered by a three
judge Bench decision of this Court in P Mohanraj and Others v. Shah
Brothers Ispat Private Limited21, where Justice RF Nariman, after
adverting to the precedents of
this Court, observed that:
“53. A perusal of the judgment in Ishwarlal Bhagwandas [S.A.L.
Narayan Row v. Ishwarlal Bhagwandas, (1966) 1 SCR 190 :
AIR 1965 SC 1818] would show that a civil proceeding is not
necessarily a proceeding which begins with the filing of a suit and
culminates in execution of a decree. It would include a revenue
proceeding as well as a writ petition filed under Article 226 of the
Constitution, if the reliefs therein are to enforce rights of a civil
nature. Interestingly, criminal proceedings are stated to be
proceedings in which the larger interest of the State is concerned.
Given these tests, it is clear that a Section 138 proceeding can be
said to be a “civil sheep” in a “criminal wolf’s” clothing, as it is
the interest of the victim that is sought to be protected, the larger
20 (1999) 7 SCC 510
21 (2021) 6 SCC 258
A
B
C
D
E
F
G
H
451
interest of the State being subsumed in the victim alone moving a
court in cheque bouncing cases, as has been seen by us in the
analysis made hereinabove of Chapter XVII of the Negotiable
Instruments Act.”
28. Given that the primary purpose of Section 138 of the NI Act is
to ensure compensation to the complainant, the NI Act also allows for
parties to enter into a compromise, both during the pendency of the
complaint and even after the conviction of the accused. The decision of
this Court in Meters and Instruments (P) Ltd. v. Kanchan
Mehta22summarises the objective of allowing compounding of an offence
under Section 138 of the NI Act:
“18.2. The object of the provision being primarily compensatory,
punitive element being mainly with the object of enforcing the
compensatory element, compounding at the initial stage has to be
encouraged but is not debarred at later stage subject to appropriate
compensation as may be found acceptable to the parties or the
court.”
29. In Prakash Gupta v. SEBI23 a two judge Bench of this Court
of which one of us (Justice DY Chandrachud) was a part, analysed the
decision in Meters and Instruments (supra) in the context of a
discussion on whether compounding of an offence requires the consent
of an aggrieved party (para 78). The decision in Meters and
Instruments (supra) is cited above in regard to the rationale behind
compounding of offences punishable under Section 138. In Damodar S
Prabhu v. Sayed Babalal24 a three judge
Bench of this Court observed
that the effect of an offence under Section 138 of the NI Act is limited
to two private parties involved in a commercial transaction. However,
the intent of the legislature in providing a criminal sanction for dishonour
of cheques is to ensure the credibility of transactions involving negotiable
instruments. The Court observed:
“4. It may be noted that when the offence was inserted in the
statute in 1988, it carried the provision for imprisonment up to one
year, which was revised to two years following the amendment to
the Act in 2002. It is quite evident that the legislative intent was to
22 (2018) 1 SCC 560
23 (2021) SCC Online SC 485
24 (2010) 5 SCC 663
M/S GIMPEX PRIVATE LIMITED v. MANOJ GOEL
[DR. DHANANJAYA Y CHANDRACHUD, J.]
A
B
C
D
E
F
G
H
452
SUPREME COURT REPORTS
[2021] 11 S.C.R.
provide a strong criminal remedy in order to deter the worryingly
high incidence of dishonour of cheques. While the possibility of
imprisonment up to two years provides a remedy of a punitive
nature, the provision for imposing a “fine which may extend to
twice the amount of the cheque” serves a compensatory purpose.
What must be remembered is that the dishonour of a cheque can
be best described as a regulatory offence that has been created
to serve the public interest in ensuring the reliability of these
instruments. The impact of this offence is usually confined to the
private parties involved in commercial transactions.”
30. However, this Court also noted that the introduction of a criminal
remedy has given rise to a worrying trend where cases under Section
138 of the NI Act are disproportionately burdening the criminal justice
system. This Court observed:
“5. Invariably, the provision of a strong criminal remedy has
encouraged the institution of a large number of cases that are
relatable to the offence contemplated by Section 138 of the Act.
So much so, that at present a disproportionately large number of
cases involving the dishonour of cheques is choking our criminal
justice system, especially at the level of Magistrates’ Courts. As
per the 213th Report of the Law Commission of India, more than
38 lakh cheque bouncing cases were pending before various courts
in the country as of October 2008. This is putting an
unprecedented
strain on our judicial system.”
31. Thus, under the shadow of Section 138 of the NI Act, parties
are encouraged to settle the dispute resulting in ultimate closure of the
case rather than continuing with a protracted litigation before the court.
This is beneficial for the complainant as it results in early recovery of
money; alteration of the terms of the contract for higher compensation
and avoidance of litigation. Equally, the accused is benefitted as it leads
to avoidance of a conviction and sentence or payment of a fine. It also
leads to unburdening of the judicial system, which has a huge pendency
of complaints filed under Section 138 of the NI Act. In Damodar S.
Prabhu (supra) this Court had emphasised that the compensatory aspect
of the remedy under Section 138 of the NI Act must be preferred and
has encouraged litigants to resolve disputes amicably. The Court observed:
“18. It is quite obvious that with respect to the offence of dishonour
of cheques, it is the compensatory aspect of the remedy which
A
B
C
D
E
F
G
H
453
should be given priority over the punitive aspect. There is also
some support for the apprehensions raised by the learned Attorney
General that a majority of cheque bounce cases are indeed being
compromised or settled by way of compounding, albeit during the
later stages of litigation thereby contributing to undue delay in
justice delivery. The problem herein is with the tendency of litigants
to belatedly choose compounding as a means to resolve their
dispute. Furthermore, the written submissions filed on behalf of
the learned Attorney General have stressed on the fact that unlike
Section 320 CrPC, Section 147 of the Negotiable Instruments
Act provides no explicit guidance as to what stage compounding
can or cannot be done and whether compounding can be done at
the instance of the complainant or with the leave of the court.
19. As mentioned earlier, the learned Attorney General’s
submission is that in the absence of statutory guidance, parties
are choosing compounding as a method of last resort instead of
opting for it as soon as the Magistrates take cognizance of the
complaints. One explanation for such behaviour could be that the
accused persons are willing to take the chance of progressing
through the various stages of litigation and then choose the route
of settlement only when no other route remains. While such
behaviour may be viewed as rational from the viewpoint of litigants,
the hard facts are that the undue delay in opting for compounding
contributes to the arrears pending before the courts at various
levels. If the accused is willing to settle or compromise by way of
compounding of the offence at a later stage of litigation, it is
generally indicative of some merit in the complainant’s case. In
such cases it would be desirable if parties choose compounding
during the earlier stages of litigation. If however, the accused has
a valid defence such as a mistake, forgery or coercion among
other grounds, then the matter can be litigated through the specified
forums.
[…]
23. We are also in agreement with the learned Attorney General’s
suggestions for controlling the filing of multiple complaints that
are relatable to the same transaction. It was submitted that
complaints are being increasingly filed in multiple jurisdictions in a
vexatious manner which causes tremendous harassment and
M/S GIMPEX PRIVATE LIMITED v. MANOJ GOEL
[DR. DHANANJAYA Y CHANDRACHUD, J.]
A
B
C
D
E
F
G
H
454
SUPREME COURT REPORTS
[2021] 11 S.C.R.
prejudice to the drawers of the cheque. For instance, in the same
transaction pertaining to a loan taken on an instalment basis to be
repaid in equated monthly instalments, several cheques are taken
which are dated for each monthly instalment and upon the
dishonour of each of such cheques, different complaints are being
filed in different courts which may also have jurisdiction in relation
to the complaint. In light of this submission, we direct that it should
be mandatory for the complainant to disclose that no other
complaint has been filed in any other court in respect of the same
transaction. Such a disclosure should be made on a sworn affidavit
which should accompany the complaint filed under Section 200
CrPC. If it is found that such multiple complaints have been filed,
orders for transfer of the complaint to the first court should be
given, generally speaking, by the High Court after imposing heavy
costs on the complainant for resorting to such a practice. These
directions should be given effect prospectively.”
32. This concern has been reiterated recently by a Constitution
Bench of this Court in Re: Expeditious Trial of Cases under Section
138 of the NI Act 188125, where it was observed that
“5. The situation has not improved as courts continue to struggle
with the humongous pendency of complaints under Section 138
of the Act. The preliminary report submitted by the learned Amici
Curiae shows that as on
31.12.2019, the total number of criminal
cases pending was 2.31 crores, out of which 35.16 lakh pertained
to Section 138 of the Act. The reasons for the backlog of cases,
according to the learned Amici Curiae, is that while there is a
steady increase in the institution of complaints every year, the
rate of disposal does not match the rate of institution of complaints.
Delay in disposal of the complaints under Section 138 of the Act
has been due to reasons which we shall deal with in this order.
[…]
23. Though we have referred all the other issues which are not
decided herein to the Committee appointed by this Court on
10.03.2021, it is necessary to deal with the complaints under
25 Suo Motu Writ Petition (Crl.) No. 2 of 2020, 16 April 2021, available at
https://main.sci.gov.in/supremecourt/2020/9631/9631_2020_31_501_27616_
Judgement_16-Apr-2021.pdf.
A
B
C
D
E
F
G
H
455
Section 138 pending in Appellate Courts, High Courts and in this
Court. We are informed by the learned Amici Curiae that cases
pending at the appellate stage and before the High Courts and
this Court can be settled through mediation. We request the High
Courts to identify the pending revisions arising out of complaints
filed under Section 138 of the Act and refer them to mediation at
the earliest. The Courts before which appeals against judgments
in complaints under Section 138 of the Act are pending should be
directed to make an effort to settle the disputes through mediation.”
33. The pendency of court proceedings under Section 138 of the
NI Act and the multiplicity of complaints in which a cause of action
arising from one transaction is litigated has dampened the ease of doing
business in India, impacted business sentiments and hindered investments
from investors. Recognising these issues, the Ministry of Finance by a
notice26 dated 8 June 2020, has sought comments regarding
decriminalisation of minor offences, including Section 138 of the NI Act,
to improve the business sentiment in the country.
34. It is in this backdrop that we must now analyse the issue
regarding pendency of parallel proceedings for complaints under Section
138 of the NI Act. The question that arises for our consideration is
whether once the settlement has been entered into, the complainant can
be allowed to pursue the original complaint under Section 138 of the NI
Act.
35. The
narration of facts would indicate that initially 18 cheques
dated 8 August 2012 of a total value of Rs.9 crores were issued by ACL
in favour of the appellant (Gimpex Private Limited). The dishonour of
the cheques on 21 August 2012 on the ground that the payment had
been stopped by the drawer or, as the case may be, for insufficiency of
funds led to the issuance of legal notices under Section 138 of the NI
Act and the institution of the first criminal complaint before the Seventh
Metropolitan Magistrate. It was at that stage that Mukesh Goel, a director
of ACL was arrested by the Central Crime Branch on 3 March 2013, in
connection with Crime No. 21/2013 which was registered for offences
under Sections 409 and 506(1) of the IPC. In this backdrop, the deed of
compromise was entered into on 12 March 2013. The deed of
compromise envisages that:
26 https://financialservices.gov.in/sites/default/files/Decriminalization%20-%20Public%
20Comments.pdf
M/S GIMPEX PRIVATE LIMITED v. MANOJ GOEL
[DR. DHANANJAYA Y CHANDRACHUD, J.]
A
B
C
D
E
F
G
H
456
SUPREME COURT REPORTS
[2021] 11 S.C.R.
(i)
A demand draft of Rs. 3 crores was handed over to the
complainant on 11 March 2013;
(ii)
On receipt of the amount of Rs.3 crores, the complainant
would not object to the bail application filed by Manoj Goel;
(iii)
Apart from the amount of Rs.3 crores, the balance of Rs.7
crores would be paid within three months in three equal
monthly instalments each of Rs.2,33,33,333/- commencing
from 11 April 2013 and ending on 11 June 2013;
(iv)
The amount of Rs.2.33 crores would be divided equally
between Sitaram Goel, Manoj Goel and ACL who would
issue cheques in favour of the complainant in compliance
of the settlement;
(v)
Towards discharge of the liability, post-dated cheques dated
11 April 2013, 11 May 2013 and 11 June 2013 had been
handed over; and
(vi)
Any default in complying with the conditions set out in the
compromise deed would entitle the complainant to file a
fresh criminal complaint under the NI Act against the drawer
of the cheques and to proceed against the other directors;
and
(vii)
Upon the payment of the entire settlement amount of Rs.10
crores, all criminal complaints, suits, arbitration proceedings
and Section 138 proceedings would be withdrawn.
36. It is not in dispute that following the receipt of an amount of
Rs. 3 crores, in pursuance of the compromise deed, Mukesh Goel was
granted bail by the competent court. The balance due and payable under
the deed of compromise has admittedly not been paid and
the second set
of cheques has been dishonoured. ACL proceeded to institute a suit
before the Madras High Court to challenge the deed of compromise.
While the suit is pending, the interim application stands dismissed. In this
backdrop, there are two sets of criminal complaints under Section 138
of the NI Act based on the dishonour of the first set of cheques and the
second set respectively.
37. Allowing prosecution under both sets of complaints would be
contrary to the purpose of the enactment. As noted above, it is the
compensatory aspect of the remedy that should be given priority as
A
B
C
D
E
F
G
H
457
opposed to the punitive aspect. The complainant in such cases is primarily
concerned with the recovery of money, the conviction of the accused
serves little purpose. In fact, the threat of jail acts as a stick to ensure
payment of money. This Court in R. Vijayan v. Baby27 has emphasised
how punishment of the offender is of a secondary concern for the
complainant in the following terms:
“17. The apparent intention is to ensure that not only the offender
is punished, but also ensure that the complainant invariably receives
the amount of the cheque by way of compensation Under Section
357(1)(b) of the Code. Though a complaint Under Section 138 of
the Act is in regard to criminal liability for the offence of
dishonouring the cheque and not for the recovery of the cheque
amount (which strictly speaking, has to be enforced by a civil
suit), in practice once the criminal complaint is lodged Under
Section 138 of the Act, a civil suit is seldom filed to recover the
amount of the cheque. This is because of the provision enabling
the court to levy a fine linked to the cheque amount and the usual
direction in such cases is for payment as compensation, the cheque
amount, as loss incurred by the complainant on account of
dishonour of cheque. Under Section 357(1)(b) of the Code and
the provision for compounding the offences Under Section 138 of
the Act most of the cases (except those where liability is denied)
get compounded at one stage or the other by payment of the
cheque amount with or without interest. Even where the offence
is not compounded, the courts tend to direct payment of
compensation equal to the cheque amount (or even something
more towards interest) by levying a fine commensurate with the
cheque amount. A stage has reached when most of the
complainants, in particular the financing institutions (particularly
private financiers) view the proceedings under Section 138 of the
Act, as a proceeding for the recovery of the cheque amount, the
punishment of the drawer of the cheque for the offence of
dishonour, becoming secondary.”
38. When a complainant party enters into a compromise agreement
with the accused, it may be for a multitude of reasons – higher
compensation, faster recovery of money, uncertainty of trial and strength
of the complaint, among others. A complainant enters into a settlement
27 (2012) 1 SCC 260
M/S GIMPEX PRIVATE LIMITED v. MANOJ GOEL
[DR. DHANANJAYA Y CHANDRACHUD, J.]
A
B
C
D
E
F
G
H
458
SUPREME COURT REPORTS
[2021] 11 S.C.R.
with open eyes and undertakes the risk of the accused failing to honour
the cheques issued pursuant to the settlement, based on certain benefits
that the settlement agreement postulates. Once parties have voluntarily
entered into such an agreement and agree to abide by the consequences
of non-compliance of the settlement agreement, they cannot be allowed
to reverse the effects of the agreement by pursuing both the original
complaint and the subsequent complaint arising from such non-
compliance. The settlement agreement subsumes the original complaint.
Non-compliance of the terms of the settlement agreement or dishonour
of cheques issued subsequent to it, would then give rise to a fresh cause
of action attracting liability under Section 138 of the NI Act and other
remedies under civil law and criminal law.
39. A contrary interpretation, which allows for the complainant to
pursue both the original complaint and the consequences arising out of
the settlement agreement, would lead to contradictory results. First, it
would allow for the accused to be prosecuted and undergo trial for two
different complaints, which in its essence arise out of one underlying
legal liability. Second, the accused would then face criminal liability for
not just the violation of the original agreement of the transaction which
had resulted in issuance of the first set of cheques, but also the cheques
issued pursuant to the compromise deed.
Third, instead of reducing
litigation and ensuring faster recovery of money, it would increase the
burden of the criminal justice system where judicial time is being spent
on adjudicating an offence which is essentially in the nature of a civil
wrong affecting private parties – a problem noted in multiple judgements
of this Court cited above. Most importantly, allowing the complainant to
pursue parallel proceedings, one resulting from the original complaint
and the second emanating from the terms of the settlement would make
the settlement and issuance of fresh cheques or any other partial payment
made towards the original liability meaningless. Such an interpretation
would discourage settlement of matters since they do not have any effect
on the status quo, and in fact increase the protracted litigation before
the court.
40. Thus, in our view, a complainant cannot pursue two parallel
prosecutions for the same underlying transaction. Once a settlement
agreement has been entered into by the parties, the proceedings in the
original complaint cannot be sustained and a fresh cause of action accrues
to the complainant under the terms of the settlement deed. It has been
urged by Mr V Giri, learned Senior Counsel, and Ms Liz Mathew, learned
A
B
C
D
E
F
G
H
459
counsel, that parallel prosecutions would not lead to a multiplicity of
proceedings, as in the present case, both complaints are being tried by
the same court. This may be true for the case before us, however, this
Court in Damodar S. Prabhu (supra) and Re: Expeditious Trial of
Cases (supra) has recognized multiplicity of complaints as one of the
major reasons for delay in trial of cases under Section 138 of the NI Act
and the consequent choking of the criminal justice system by a
disproportionate number of Section 138 cases. While it is true that the
trial in this case is before one court, that is not necessarily the ground
reality in all cases.
41. At this stage, it may be necessary to dwell on the decision of
this Court in Lalit Kumar Sharma v. State of Uttar Pradesh28and
Arun Kumar v. Anita Mishra29. In Lalit Kumar Sharma (supra), a
company, with two directors (Manish Arora and Ashish Narula), had
obtained a loan for the amount of Rs.5,00,000/- and drew two cheques
in an equivalent amount in favour of the first respondent. The cheques
were returned unpaid for “insufficiency of funds”. A complaint was
instituted under Section 138 of the NI Act against the two directors. The
appellants, who were also directors of the said company, were not
signatories to the cheques and had not been made parties to the complaint.
During the pendency of the complaint, an agreement was entered into
between Manish Arora, Ashish Narula and the complainant under which
it was
envisaged that if a cheque for Rs.5,02,050/- was issued, the
complaint would be withdrawn. Manish Arora issued a cheque which
was returned on presentation for insufficiency of funds. Meanwhile,
Ashish Narula and the company entered into an agreement stating that
the liability arising from the said transaction was of the director personally,
and not of the company. Another complaint was filed on the basis of the
return of the subsequent cheque, where Manish Arora and Ashish Narula
and the appellants were made parties. In this backdrop, the Court noted
that in respect of the first cheques, the appellants were not proceeded
against and though a compromise was entered into between Manish
Arora and Ashish Narula and the complainant, the complaint had not
been withdrawn and the two directors had been found guilty of an offence
under Section 138 of NI Act. Manish Arora had issued the second cheque
in terms of the settlement between the parties. It was in this backdrop,
that the Court observed:
28 (2008) 5 SCC 638
29 (2020) 16 SCC 118
M/S GIMPEX PRIVATE LIMITED v. MANOJ GOEL
[DR. DHANANJAYA Y CHANDRACHUD, J.]
A
B
C
D
E
F
G
H
460
SUPREME COURT REPORTS
[2021] 11 S.C.R.
“15. Evidently, therefore, the second cheque was issued in terms
of the compromise. It did not create a new liability. As the
compromise did not fructify, the same cannot be said to have
been issued towards payment of debt.
[…]
17. Thus, the second cheque was issued by Manish Arora for the
purpose of arriving at a settlement. The said cheque was not issued
in discharge of the debt or liability of the Company of which the
appellants were said to be the Directors. There was only one
transaction between Shri Ashish Narula, Shri Manish Arora,
Directors of the Company and the complainant. They have already
been punished. Thus, the question of entertaining the second
complaint did not arise. It was, in our opinion, wholly misconceived.
The appeal, therefore, in our opinion, must be allowed. It is directed
accordingly. The respondent shall bear the costs of the appellants.
Counsel’s fee assessed at Rs. 25,000.”
42. The Court noted that the second cheque was issued by Manish
Arora for arriving at the settlement in his personal capacity and not in
discharge of a debt or liability of the company. There was only one
transaction between Manish Arora and Ashish Narula and the complainant
for which there was an order of conviction and punishment. It was in
this background that the Court held that the question of entertaining the
second complaint against the appellants did not arise because the cheques
issued pursuant to the
settlement were not issued in discharge of the
debt or liability of the company of which the appellants were the directors.
Thus, the decision in Lalit Kumar Sharma (supra) is not applicable in
the present case as there was already an adjudication on the question of
liability and a conviction with respect to the first cheque. The second
complaint was misconceived as the trial in the first complaint had been
taken to its logical conclusion and there remained no pending liability.
Thus, there were no parallel proceedings that were pending with regards
to the same transaction. The first complaint had concluded, only after
which the Court observed that the second complaint could not be initiated.
In fact, Lalit Kumar Sharma (supra) bolsters the case that multiple
prosecutions cannot arise from one legal liability under Section 138 of
the NI Act and parties must either go to trial or compromise and settle
the matter.
A
B
C
D
E
F
G
H
461
43. The above decision has been subsequently considered in a
very recent decision of a two judge Bench in Arun Kumar v. Anita
Mishra30. In that case, a complaint was filed by the appellant under
Section 138 against the respondent. The Judicial Magistrate, First Class,
convicted and sentenced the respondent to six months’ imprisonment
and to a fine. During the pendency of the criminal appeal, a compromise
was arrived at before the Lok Adalat in terms of which the respondent
issued a post-dated cheque in favour of the appellant. The cheque was
dishonoured on presentation and this led to the institution of a complaint
under Section 138. The respondent filed an application for dismissal of
the complaint. The application and a revision were dismissed. A petition
under Section 482 CrPC thereafter was allowed by the High Court on
the ground that the question of quashing the second complaint did not
arise when the cheque was not issued in discharge of any debt or liability
but on account of a settlement. Distinguishing the earlier judgment in
Lalit Kumar Sharma (supra), the Court held:
“9. Lalit Kumar case [Lalit Kumar Sharma v. State of U.P., (2008)
5 SCC 638 : (2008) 2 SCC (Cri) 682] is distinguishable on facts, in
that the cheque had not been issued in discharge of any debt or
liability of the company of which the accused were said to be the
Directors. The cheque was found to have been issued for the
purpose of arriving at a settlement.
10. In the instant
case, the respondent clearly had a liability. As
observed above, there was an earlier adjudication which
led to the conviction of the respondent accused. Thus there
was adjudication of liability of the respondent accused.
While the appeal was pending, the matter was settled in
the Lok Adalat in acknowledgment of liability of the
respondent-accused to the appellant complainant.
11. The cheque issued pursuant to the order of the Lok Adalat,
was also dishonoured. This clearly gave rise to a fresh cause of
action under Section 138 of the Negotiable Instruments Act.”
(emphasis supplied)
44. In the decision in Arun Kumar (supra), the subsequent cheque,
following the conviction of the appellant in an earlier complaint under
Section 138, was issued towards a settlement which was arrived at before
30 (2020) 16 SCC 118
M/S GIMPEX PRIVATE LIMITED v. MANOJ GOEL
[DR. DHANANJAYA Y CHANDRACHUD, J.]
A
B
C
D
E
F
G
H
462
SUPREME COURT REPORTS
[2021] 11 S.C.R.
the Lok Adalat during the pendency of the appeal. The Court distinguished
the decision in Lalit Kumar Sharma (supra) by holding that the dishonour
of the cheques in pursuance of the order of the Lok Adalat gave rise to
a fresh cause of action under Section 138. Moreover, the Court was
persuaded to act on the second complaint as the first complaint had
resulted in a clear finding of guilt, however no punishment had been
granted owing to the compromise. Thus, there was no doubt regarding
the existence of a debt or liability in furtherance of which the cheque
was issued. Hence, the decision in Arun Kumar (supra)would indicate
that the question as to whether the dishonour of a subsequent cheque (in
that case pursuant to a settlement before the Lok Adalat) gives rise to a
fresh cause of action is a question of fact to be determined in each case.
In other words, the earlier decision in Lalit Kumar Sharma (supra)
cannot be construed as laying down and invariable or inflexible principle
that a cheque issued subsequently in terms of a settlement, after the
dishonour of an earlier cheque does not create a new liability. Lalit
Kumar Sharma (supra) was decided on the facts of the case, as noticed
earlier in the present judgment.
45. Based on the discussion above, in our opinion, once the
compromise deed dated 12 March 2013 was agreed, the original complaint
must be quashed and parties must proceed with the remedies available
in
law under the settlement agreement.
C.2 Liability arising from the settlement agreement
46. Once a settlement agreement has been entered into between
the parties, the parties are bound by the terms of the agreement and any
violation of the same may result in consequential action in civil and criminal
law.
47. In the present case, the first set of cheques which were issued
allegedly towards discharge of the liability under the HSSA were
dishonoured. A deed of compromise was entered into thereafter on 12
March 2013. The deed of compromise was partially implemented by the
payment of an amount of Rs. 3 crores by demand draft to the complainant.
Upon the receipt of an amount of Rs. 3 crores, Gimpex Private Limited
was to grant its no objection to the plea of bail of Manoj Goel. Manoj
Goel undertook to pay the balance of Rs. 7 crores within three months in
instalments. The second set of cheques issued pursuant to the deed of
compromise were also dishonoured. The Single Judge of the High Court
adverted to clause 9 of the deed of compromise which stipulated that
A
B
C
D
E
F
G
H
463
upon the payment of the entire settlement amount of Rs. 10 crores, all
proceedings including the criminal complaints would have to be
withdrawn. The Single Judge was persuaded to quash the criminal
complaint instituted against Manoj Goel on the basis of the second set of
cheques on the ground that:
(i)
Since the proceedings under the NI Act for the dishonour
of the first set of cheques was pending, the second set of
cheques issued only on the basis of the deed of compromise
could not be construed as being towards the discharge of a
liability; and
(ii)
The validity of the deed of compromise had been challenged
in the suit pending before the High Court.
48. Each of these grounds which weighed with the Single Judge
of the High Court in our view is misplaced. Once the ingredients of
Section 138 of the NI Act are fulfilled, the statute clearly stipulates that
“such person shall be deemed to have committed an offence”. Thus,
once the ingredients of Section 138 are fulfilled, a distinct offence arises
in respect of the dishonour of the cheques in question. There was no
basis for the learned Single Judge to conclude, particularly in the course
of the hearing of a petition under Section 482 of the CrPC that the
second set of cheques issued in pursuance of the deed of compromise
cannot be construed as being towards the discharge of a liability. The
question as to whether the liability exists or not is clearly a matter of
trial. There was a serious error on the part
of the Single Judge in allowing
the petition under Section 482 to quash the prosecution on the basis that
the deed of compromise would not constitute a legally enforceable liability.
The mere fact that a suit is pending before the High Court challenging
the validity of the compromise deed would furnish no cogent basis to
quash the proceedings under Section 138.
49. Mr Jayant Bhushan, learned Senior Counsel has made an
earnest attempt to urge that under Section 39 of the Indian Contract Act
1872 when a party to contract has refused to perform his promise in its
entirety; the promisee has the option of putting an end to the contract
unless he signifies his acquiescence in its continuance. Learned Senior
Counsel submitted that since proceedings under Section 138 are in the
nature of a civil wrong, though the legislature has imparted criminal
sanctions. The deed of compromise, according to the submission,
represented a novation. Extending this line of argument, it was urged
M/S GIMPEX PRIVATE LIMITED v. MANOJ GOEL
[DR. DHANANJAYA Y CHANDRACHUD, J.]
A
B
C
D
E
F
G
H
464
SUPREME COURT REPORTS
[2021] 11 S.C.R.
that it was the appellant who did not withdraw the criminal proceedings
and pursued with the arbitration in which event its conduct must be
construed to amount to repudiation of the settlement. Thus, it has been
urged that the appellant can only insist on the enforcement of the liability
in relation to the first set of cheques.
50. We are unable to accept the line of argument on two grounds.
First, as held above, a settlement agreement effaces the original complaint
and thus, it is not up to the parties, either complainant or accused, to
simply reverse the effects of that agreement and relitigate the original
complaint relating to the same underlying transaction under Section 138
of the NI Act. Second, the breach of the deed of compromise has arisen
due to the dishonour of the cheques which were issued by the accused
towards discharge of the remaining balance of Rs. 7 crores. In this
backdrop, it was farfetched for the High Court to have quashed the
proceedings in exercise of its jurisdiction under Section 482. For as a
two judge Bench of this Court held in HMT Watches Ltd. v. M.A.
Abida31:
“10. […] Whether the cheques were given as security or not, or
whether there was outstanding liability or not is a question of fact
which could have been determined only by the trial court after
recording evidence of the parties. In our opinion, the High Court
should not have expressed its view on the disputed questions of
fact in
a petition under Section 482 of the Code of Criminal
Procedure, to come to a conclusion that the offence is not made
out. The High Court has erred in law in going into the factual
aspects of the matter which were not admitted between the
parties.”
Following the above principle, another decision of a two judge
Bench in Sampelly Satyanarayana Rao v. Indian Renewable Energy
Development Agency Ltd.32 held:
“16. As is clear from the above observations of this Court, it is
well settled that while dealing with a quashing petition, the court
has ordinarily to proceed on the basis of averments in the complaint.
The defence of the accused cannot be considered at this stage.
The court considering the prayer for quashing does not adjudicate
upon a disputed question of fact.”
31 (2015) 11 SCC 776
32 (2016) 10 SCC 458
A
B
C
D
E
F
G
H
465
51. Section 139 of the NI Act raises the presumption, unless the
contrary is proved that the holder of a cheque receives the cheque of
the nature referred to in Section 138 for the discharge, in whole or in
part, of any debt or other liability. Interpreting the provisions of Section
139 in Kumar Exports v. Sharma Carpets33 this Court has observed:
“18. Applying the definition of the word “proved” in Section 3 of
the Evidence Act to the provisions of Sections 118 and 139 of the
Act, it becomes evident that in a trial under Section 138 of the Act
a presumption will have to be made that every negotiable instrument
was made or drawn for consideration and that it was executed
for discharge of debt or liability once the execution of negotiable
instrument is either proved or admitted. As soon as the complainant
discharges the burden to prove that the instrument, say a note,
was executed by the accused, the rules of presumptions under
Sections 118 and 139 of the Act help him shift the burden on the
accused. The presumptions will live, exist and survive and shall
end only when the contrary is proved by the accused, that is, the
cheque was not issued for consideration and in discharge of any
debt or liability. A presumption is not in itself evidence, but only
makes a prima facie case for a party for whose benefit it exists.
19. The use of the phrase “until the contrary is proved” in Section
118 of the Act and use of the words “unless the contrary is proved”
in
Section 139 of the Act read with definitions of “may presume”
and “shall presume” as given in Section 4 of the Evidence Act,
makes it at once clear that presumptions to be raised under both
the provisions are rebuttable. When a presumption is rebuttable, it
only points out that the party on whom lies the duty of going forward
with evidence, on the fact presumed and when that party has
produced evidence fairly and reasonably tending to show that the
real fact is not as presumed, the purpose of the presumption is
over.”
52. The accused, the Court held, may adduce direct evidence to
prove that the cheque in question was not supported by consideration
and that there was no debt or liability to be discharged. To disprove the
presumption, the accused has to bring on the record circumstances which
may lead the court to believe that the consideration and debt did not
33 (2009) 2 SCC 513
M/S GIMPEX PRIVATE LIMITED v. MANOJ GOEL
[DR. DHANANJAYA Y CHANDRACHUD, J.]
A
B
C
D
E
F
G
H
466
SUPREME COURT REPORTS
[2021] 11 S.C.R.
exist or it was so probable that a prudent man would act upon the plea
that they did not exist. After adverting to these decisions, a two judge
Bench in Kishan Rao v. Shankargouda34, noted in that case that:
“21. In the present case, the trial court as well as the appellate
court having found that cheque contained the signatures of the
accused and it was given to the appellant to present in the Bank,
the presumption under Section 139 was rightly raised which was
not rebutted by the accused. The accused had not led any evidence
to rebut the aforesaid presumption. The accused even did not
come in the witness box to support his case. In the reply to the
notice which was given by the appellant, the accused took the
defence that the cheque was stolen by the appellant. The said
defence was rejected by the trial court after considering the
evidence on record with regard to which no contrary view has
also been expressed by the High Court.”
53. Section 139 raises the presumption “unless the contrary is
proved”. Once the complainant discharges the burden of proving that
the instrument was executed by the accused; the presumption under
Section 139 shifts the burden on the accused. The expression “unless
the contrary is proved” would demonstrate that it is only for the accused
at the trial to adduce evidence of such facts or circumstances on the
basis of which the burden would stand discharged. These are matters of
evidence and
trial. As held in Arun Kumar (supra) and discussed above,
the determination of whether a cheque pursuant to a settlement
agreement arises out of a legal liability would be dependent on various
factors, such as the underlying settlement agreement, the nature of the
original transaction and whether an adjudication on the finding of liability
was arrived at in the original complaint, the defence raised by the accused,
etc. The Single Judge was in error in proceeding to quash the criminal
complaint on a priori reasoning that the second set of cheques issued in
pursuance of the deed of compromise were not in discharge of a liability
and on that basis proceeding to quash the proceedings under Section
482 CrPC. The mere fact that a suit has been instituted before the Madras
High Court challenging the deed of compromise would furnish no
justification for exercising the jurisdiction under Section 482. The deed
of compromise would continue to be valid until a decree of the appropriate
court setting it aside is passed. The High Court, as we have explained
34 (2018) 8 SCC 165
A
B
C
D
E
F
G
H
467
above, has failed to notice the true meaning and import of the presumption
under Section 139 which can only be displaced on the basis of evidence
adduced at the trial.
54. A submission was urged by the appellants that in the event the
second complaint is found to be non-maintainable and the compromise
deed is held to be invalid, they would be left remediless and thus, the first
trial should be allowed to continue. We do not find any merit in this
submission. In the event that the compromise deed is found to be void
ab initio on account of coercion, the very basis for quashing of the first
complaint is removed since the settlement agreement is deemed to have
never existed and hence it had no effect on the liability subsisting under
the first complaint. The appellants may then approach the competent
court for reinstatement of the original complaint and the trial can proceed
on that basis.
D Conclusion
55. For the above reasons, we hereby pass the following order:
(i)
We are of the view that the Single Judge was in error in
quashing the complaint CC No. 389/2017 pending on the
file of the Seventh Metropolitan Magistrate, Chennai. The
judgment of the Single Judge quashing the complaint is set
aside;
(ii)
Based on our analysis in Section C.1 above, we hereby
quash the complaint CC Nos.3326-3329 of 2012 and CC
Nos.99-101 of 2013.
56. As regards the companion appeal, we have already noted the
submission of Mr Jayant Bhushan that the issue as to whether the
transaction was not a sale or otherwise could not have been enquired
into in the course of the proceedings under Section 482 CrPC. All the
rights and contentions of the parties are kept open in the course of the
trial. Accordingly Criminal Appeal No. 1068 of 2021 arising out of SLP
(Criminal) No. 6564 of 2019 and Criminal Appeal Nos.1069-1075 of
2021 arising out of SLP (Criminal) Nos.7632-7638 of 2019 shall stand
partially allowed in the above terms.
57. Pending application(s), if any, stand disposed of.
Divya Pandey
Appeals partly allowed.
M/S GIMPEX PRIVATE LIMITED v. MANOJ GOEL
[DR. DHANANJAYA Y CHANDRACHUD, J.]