TMI Blog2021 (10) TMI 378X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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. 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of evidence adduced at the trial - 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. Application disposed off. - Criminal Appeal No. 1068 of 2021 (Arising out of SLP (Criminal) No. 6564 of 2019) Criminal Appeal Nos. 1069-1075 of 2021 (Arising out of SLP (Criminal) Nos. 7632-7638 of 2019) - - - Dated:- 8-10-2021 - Justice Dr. Dhananjaya Y Chandrachud , Justice Vikram Nath And Justice B.V. Nagarathna JUDGMENT Dr. Dhananjaya Y. Chandrachud, J A Factual Background ........................................................................................... 3 B Submissions of parties .................................................................................... 12 C Analysis ............................................................................................................. 15 C.1 Parallel prosecutions ................................................................................. 15 C. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 crores. This is the first set of complaints filed by the appellant. 4 In 2013, Sitaram Goel filed petitions Crl. OP Nos. 22873 to 22878 of 2016 and Crl. M.P. Nos.10687 to 10698 of 2016 under Section 482 of the CrPC 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 ₹ 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 ₹ 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 3. The PARTY OF THE FIRST PART agrees and undertake to pay the bal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the Hon ble High Court of Madras. 9. After payment of the entire settlement amount of ₹ 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 ₹ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceed 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 complaints. The orders of the High Court were challenged by ACL in special leave petitions- SLP (Criminal) Diary No.17687 and 17257 of 2018 . 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 bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt 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 proceedings Crl O.P No. 25398 of 2018 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; (ii) Allowed the proceedings instituted by the respondent, Manoj Goel and quashed the proceedings in the second complaint pending on the file of the Seventh Metropolitan Magistrate. 16 On 3 June 2019, ACL filed an application Crl MP Nos. 8157, 8158, 8163, 8165, 8167, 8168 of 2019 in Crl O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imited (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yee 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 (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 Balan (1999) 7 SCC 510. 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 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 Babalal (2010) 5 SCC 663 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 provide a strong criminal remedy in order to deter the worryingly high incidence of dishonour of cheques. While the possibi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 var ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .in/supremecourt/2020/9631/9631_2020_31_501_27616_Judgement_16-Apr-2021.pdf , 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 3 crores, the complainant would not object to the bail application filed by Manoj Goel; (iii) Apart from the amount of ₹ 3 crores, the balance of ₹ 7 crores would be paid within three months in three equal monthly instalments each of ₹ 2,33,33,333/- commencing from 11 April 2013 and ending on 11 June 2013; (iv) The amount of ₹ 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 ₹ 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 ₹ 3 crores, in pursuance of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heque 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 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- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 Pradesh (2008) 5 SCC 638 and Arun Kumar v. Anita Mishra (2020) 16 SCC 118. In Lalit Kumar Sharma (supra), a company, with two directors (Manish Arora and Ashish Narula), had obtained a loan for the amount of ₹ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent. 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. 43 The above decision has been subsequently considered in a very recent decision of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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. Exten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 Carpets (2009) 2 SCC 513 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 m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial 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 exp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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