A civil settlement does not discharge criminal liability under Section 138 unless the settlement terms are fulfilled; prosecution may continue if conditions remain unmet.

ORDER :

C.S.DIAS, J.

The petitioner is the accused in C.C.No.1311/2020 on the file of the Court of the Judicial First-Class Magistrate-II, Thrissur (‘Trial Court’, for short) on a complaint filed by the 2^nd respondent alleging the commission of the offence punishable under Section 138 of the Negotiable Instruments Act (‘N.I Act’).

2. The substance of the accusation in the complaint is that the cheque issued by the petitioner in discharge of a legally enforceable debt got dishonoured due to “insufficiency of funds” in the petitioner’s bank account. Despite receiving the statutory notice demanding payment of the cheque amount, the petitioner failed to pay the amount.

3. The petitioner has approached this Court, invoking its inherent jurisdiction, to quash the complaint on the ground that the dispute between the parties has amicably settled in mediation, and has culminated in a decree in O.S.No.2380/2020 filed by the 2^nd respondent before the Court of the Additional Munsiff, Thrissur, for recovery of money based on the very same transaction.

4. As per the terms of the agreement, the petitioner has agreed to pay a sum of Rs.9,00,000/- to the 2^nd respondent within three years from 11.01.2023, failing which the amount would carry interest at 6% per annum. It was further agreed that the 2^nd respondent would withdraw the criminal complaint. The petitioner contends that in view of the compromise decree, the criminal proceedings cannot be continued and that the 2^nd respondent’s remedy, if any, is confined to executing the decree.

5. I have heard the learned counsel for the petitioner, the learned Public Prosecutor and the learned counsel for the 2^nd respondent.

6. The learned counsel for the petitioner contends that once the parties have settled their dispute through mediation, the settlement has been recorded by the civil court and a decree is passed, then the parties are bound by the decree. He argues that continuing the prosecution would amount to an abuse of the process of the law. Reliance is placed on the decisions of the Hon’ble Supreme Court in Ruchi Agarwal v. Amit Kumar Agrawal and others [2005 KHC 469], Seshaiah B.V. v. State of Telangana [2023 (1) KHC 611], Gimpex Pvt. Ltd (M/s.) v. Manoj Goel [2021 (6) KHC 177] and the decisions of this Court in Thomas and Another v. State of Kerala and Another [2016 KHC 206] and Mathew Daniel v. Leena Mathew [2022 (5) KHC 433] in support of his contentions.

7. On the contrary, the learned counsel for the 2^nd respondent vehemently opposes the Criminal Miscellaneous Case. He contends that the civil suit and the criminal complaint are distinct and independent proceedings. The decree passed in the civil suit does not automatically obliterate the criminal liability arising under Section 138 of the NI Act. He further submits that the petitioner has not complied with the terms of the settlement, because he has failed to pay the agreed amount within the stipulated time period, i.e., by 11.01.2026. It is without complying with the conditions in the agreement and decree that the petitioner has approached this Court. The 2^nd respondent, however, is willing to withdraw the complaint if the decree amount is paid.

8. The 2^nd respondent had simultaneously instituted both the civil suit and the criminal complaint. It is also admitted that the reference to mediation was made only in the civil suit and not in the complaint pending before the Trial Court.

9. Section 89 of the Code of Civil Procedure, 1908, provides fo