Cheque dishonour prosecution survives arbitration when the criminal complaint rests on an independent statutory cause of action.

Arbitration proceedings do not bar prosecution under Section 138 of the Negotiable Instruments Act where the complaint rests on an independent statutory cause of action arising from cheque dishonour. The Court held that the criminal liability attached to dishonour of cheques is separate from any contractual dispute referred to arbitration, and that civil and criminal proceedings may continue where they arise from distinct causes of action, even if they concern the same underlying transaction. The quashing order was therefore unsustainable, and the criminal complaint was restored to proceed in accordance with law.

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Issues: Whether criminal proceedings under Section 138 of the Negotiable Instruments Act, 1881 could be quashed on the ground that arbitration proceedings had been initiated in respect of the same underlying transaction.

Analysis: The existence of arbitration proceedings did not extinguish the criminal liability arising from dishonour of cheques. The criminal complaint under Section 138 of the Negotiable Instruments Act, 1881 proceeded on a separate statutory cause of action, while the arbitration was founded on the contractual arrangement between the parties. Where civil and criminal proceedings arise from separate causes of action, one does not bar the other merely because both relate to the same transaction. The earlier decision relied upon supported the view that arbitration cannot thwart criminal prosecution in such circumstances.

Conclusion: The quashing order was unsustainable and the criminal complaint was restored to proceed in accordance with law.

Ratio Decidendi: The initiation or pendency of arbitration or other civil proceedings does not bar criminal prosecution where the criminal complaint is founded on an independent statutory cause of action arising from dishonour of cheques.

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