- The question before the court was that whether parallel prosecutions arising from a single transaction under Section 138 of the NI Act could be sustained. The section specifies the consequences of a dishonoured cheque.
- In the present case, the respondent’s cheques were dishonoured, leading to the first complaint. The parties subsequently entered into a deed of compromise to settle the matter.
- Another complaint was filed under section 138 of the NI Act while the first was still pending.
- The Supreme Court found that allowing prosecution on both sets of complaints will be contrary to the purpose of the enactment.
- The Appellant in the case of M/s Gimpex Private Limited v. Manoj Goel entered into a Sale Agreement with Aanchal Cement Limited (ACL). The Appellant paid customs duty on behalf of ACL, which ACL promised to pay back. It was alleged that despite the appellant supplying goods, ACL failed to pay the appellant.
- ACL issues 18 cheques which were dishonoured upon presentation. The appellant lodged a complaint with the police against ACL for offences under Sections 409 and 506(1) of the Indian Penal Code 1860.
- Consequently, the appellant filed criminal complaints under Section 138 of the Negotiable Instruments Act 1881, concerning the dishonour of the cheques. In 2013 ACL and the appellant arrived at a compromise. Later a suit was instituted by ACL and one of its directors claiming this compromise to be null and void. ACL contented the deed was obtained through force and coercion and was not worthy of acceptance.
- The appellant filed a second complaint regarding the cheques under Section 138 of the NI Act. ACL and its directors filed a suit in the Madras High Court to quash these proceedings. These were quashed by the High Court, but only against ACL, Manoj Goel, and Vijay Srivastav. The complainant agreed to this on the condition that proceedings against the respondent who was the signatory of the cheques will continue.
High Court’s Order
- By an order of the apex court, liberty was granted to Manoj Goel to raise the issue of simultaneous prosecutions. The respondent instituted proceedings in the Madras High Court to quash the proceedings pending against him under Section 138 of the NI Act. The High Court dismissed the proceedings brought by ACL against the first complainant and allowed the respondent, Manoj Goel to continue with proceedings.
- The High Court held that since criminal complaint under IPC was still pending, the second set of cheques “are not issued for any liability”. Further, since the validity of the compromise deed is pending, the cheques issued based on it, cannot be construed towards the discharge of liability
- This gave rise to a special leave petition in the Apex Court.
- The issue was if the complainant could pursue both the cases filed, or should one be quashed. The appellant challenged the decision of the High Court to quash the second complaint under Section 138. ACL’s appeal has assailed the order of the High Court allowing the first complaint about cheques.
- The court observed that the nature of an offence under Section 138 of the NI Act is quasi-criminal, meaning that while it stems from a civil wrong, the law, it imposes a criminal penalty through imprisonment or fine. But this has burdened the criminal justice system. Parties are thus encouraged to settle disputes instead of resorting to litigation.
- The court stated that allowing prosecution on both sets of complaints will be contrary to the purpose of the enactment. The compensatory aspect of the remedy should be given priority rather than the punitive aspect. A complainant goes into the settlement aware of the risk and decides to undertake it. When a party voluntarily enters a compromise, they must abide by consequences and cannot ask to reverse the effects of the original complaint. The court does not believe two complaints can be pursued for the same underlying transaction.
- Regarding the second complaint,the supreme court finds that there was no basis on which the High Court concluded that the second set of cheques issued after the deed of compromise cannot be construed as being towards the discharge of a liability. Once the ingredients of section 138 are fulfilled, the person is deemed to have committed an offence.
- The court passed the order that the single judge erred by quashing the complaint. The criminal appeals were partially allowed.
- What is the nature of offence under Section 138 of the NI Act as per the Supreme court?
- Was prosecution on both petitions allowed by the supreme court?