2021 Supreme(SC) 605

SUPREME COURT OF INDIA
Dhananjaya Y Chandrachud, Vikram Nath, B.V. Nagarathna, JJ.
M/s Gimpex Private Limited - Appellant
Versus
Manoj Goel - Respondent
Criminal Appeal No. 1068 of 2021 (Arising out of SLP (Criminal) No. 6564 of 2019) With Criminal Appeal Nos. 1069-1075 of 2021 (Arising out of SLP (Criminal) Nos. 7632-7638 of 2019)
Decided On : 08-10-2021

IMPORTANT POINTS
(1) Dishonour of cheque – Once a settlement agreement has been entered into by parties, proceedings in original complaint cannot be sustained and a fresh cause of action accrues to complainant under terms of settlement deed.
(2) Once parties have voluntarily entered into such an agreement and agree to abide by consequences of non-compliance of settlement agreement, they cannot be allowed to reverse effects of agreement by pursuing both original complaint and subsequent complaint arising from such non-compliance – Settlement agreement subsumes original complaint.
(3) Deed of compromise would continue to be valid until a decree of appropriate court setting it aside is passed.

Headnote:

(A) Negotiable Instruments Act, 1881 – Sections 138 and 147 – Criminal Procedure Code, 1973 – Section 320 – Dishonour of cheque – Compromise of matter – Nature of offence under Section 138 of NI Act is quasi-criminal in that, while it arises out of a civil wrong, law, however, imposes a criminal penalty in the form of imprisonment or fine – Purpose of enactment is to provide security to creditors and instil confidence in banking system of country – Given that primary purpose of Section 138 of NI Act is to ensure compensation to complainant, NI Act also allows for parties to enter into a compromise, both during pendency of complaint and even after conviction of accused – Intent of legislature in providing a criminal sanction for dishonour of cheques is to ensure credibility of transactions involving negotiable instruments – Under shadow of Section 138 of NI Act, parties are encouraged to settle dispute resulting in ultimate closure of case rather than continuing with a protracted litigation before court – This is beneficial for complainant as it results in early recovery of money; alteration of terms of contract for higher compensation and avoidance of litigation – Equally, accused is benefitted as it leads to avoidance of a conviction and sentence or payment of a fine – It also leads to unburdening of judicial system which has a huge pendency of complaints filed under Section 138 of NI Act. (Paras 27, 28, 29 and 31)

(B) Negotiable Instruments Act, 1881 – Sections 138 and 147 – Criminal Procedure Code, 1973 – Section 320 – Dishonour of cheque – Parallel prosecutions – Whether once settlement has been entered into, complainant can be allowed to pursue original complaint under Section 138 of NI Act – Complainant cannot pursue two parallel prosecutions for same underlying transaction – Once a settlement agreement has been entered into by parties, proceedings in original complaint cannot be sustained and a fresh cause of action accrues to complainant under terms of settlement deed – There are two sets of criminal complaints under Section 138 of NI Act based on dishonour of first set of cheques and second set respectively – Allowing prosecution under both sets of complaints would be contrary to purpose of enactment – It is compensatory aspect of remedy that should be given priority as opposed to punitive aspect – Complainant in such cases is primarily concerned with recovery of money, conviction of accused serves little purpose – Once parties have voluntarily entered into such an agreement and agree to abide by consequences of non-compliance of settlement agreement, they cannot be allowed to reverse effects of agreement by pursuing both original complaint and subsequent complaint arising from such non-compliance – Settlement agreement subsumes original complaint – Non-compliance of terms of 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 NI Act and other remedies under civil law and criminal law. (Paras 34, 36, 37, 38 and 40)

(C) Negotiable Instruments Act, 1881 – Sections 138 and 147 – Criminal Procedure Code, 1973 – Sections 320 and 482 – Dishonour of cheque – Quashing of complaint – Parallel prosecutions – Once a settlement agreement has been entered into between parties, parties are bound by the terms of agreement and any violation of same may result in consequential action in civil and criminal law – Once ingredients of Section 138 are fulfilled, a distinct offence arises in respect of dishonour of cheques in question – There was no basis for Single Judge to conclude, particularly in course of hearing of a petition under Section 482 of Cr.P.C. that second set of cheques issued in pursuance of deed of compromise cannot be construed as being towards discharge of a liability – Question as to whether liability exists or not is clearly a matter of trial – There was a serious error on part of Single Judge in allowing petition under Section 482 to quash prosecution on the basis that deed of compromise would not constitute a legally enforceable liability – Mere fact that a suit is pending before High Court challenging validity of compromise deed would furnish no cogent basis to quash proceedings under Section 138 – Settlement agreement effaces original complaint and it is not up to parties, either complainant or accused, to simply reverse effects of that agreement and relitigate original complaint relating to the same underlying transaction under Section 138 of NI Act – Breach of deed of compromise has arisen due to dishonour of cheques which were issued by accused towards discharge of remaining balance – Single Judge was in error in proceeding to quash criminal complaint on a priori reasoning that second set of cheques issued in pursuance of deed of compromise were not in discharge of a liability and on that basis proceeding to quash proceedings under Section 482 Cr.P.C. – Mere fact that a suit has been instituted before Madras High Court challenging deed of compromise would furnish no justification for exercising jurisdiction under Section 482 – Deed of compromise would continue to be valid until a decree of appropriate court setting it aside is passed – Judgment of Single Judge quashing complaint set aside. (Paras 46, 48, 50, 53 and 55)

Facts of the case:

Present 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 Complaint under Section 138 of Negotiable Instruments Act 1881, pending on file of 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 1973. 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 first complaint was pending, the cheques issued pursuant to the compromise deed were dishonoured leading to the second complaint under Section 138 of NI Act. Both proceedings are pending simultaneously.

Findings of Court:

Section 139 raises the presumption “unless the contrary is proved”. Once complainant discharges the burden of proving that the instrument was executed by 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 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.

In the event that 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.

Result : Criminal Appeal Partially allowed.