2025 (5) TMI 1617 - HC - Indian Laws

Criminal complaint under Section 138 quashed as fresh case for remaining settlement amount constitutes double jeopardy after Lok Adalat agreement.

Prabhakiran Jain Versus M/s. S.R. Jewels Pvt. Ltd. State of N.C.T. of Delhi

Delhi HC quashed criminal complaint under Section 138 NI Act where accused and complainant had entered settlement in Lok Adalat after initial conviction. ... Non-compliance of the Settlement conditions in Lok Adalat - Seeking to quash the Criminal Complaint under Section 138 of Negotiable Instruments Act, 1881 - Cheques on presentation, were dishonoured on account of “insufficient funds” - discharge of any legal liability - HELD THAT:- In this case, after the Accused was convicted under S.138 NI Act, the Parties entered into a Settlement in Lok Adalat and the cheque was issued which got dishonoured and second Complaint was filed. In this backdrop, it was held that Settlement in Lok Adalat is like a Civil Decree which is a legally enforceable debt, for which the Complaint under S.138 NI Act can be filed afresh. In the present case the legally enforceable Debt is yet to be ascertained in the First two Complaints, and no fresh Complaint for the same debt under consideration, is maintainable. If any other interpretation is given, it would result in an anomalous situation where the Petitioner would get convicted for the same debt twice. Another, interesting aspect is that the Settlement dated 14.12.2005 wherein Rs. 16,50,000/- were agreed to be received in respect of the two Cheques, was duly acted upon and the Complainant has already received Rs. 13,00,000/- leaving a balance of Rs. 3,50,000/- in respect of which the issued Cheque got dishonoured. If all the three Complaints are allowed to continue, it would actually tantamount to being tried for the same offence twice. In the light of the case of Dayawati [2017 (10) TMI 1063 - DELHI HIGH COURT], actually the two Complaints got subsumed into the Settlement which was acted upon. The option with the Complainant is to either seek Execution under Section 431 read with Section 421 Cr.P.C. or to initiate the proceedings under Section 2(b) Contempt of Courts Act, 1971. There could not have been any subsequent trial on the Complaint in which the parties had arrived at the Settlement. However, the Complainant has sought to disregard and overlooked the Settlement and continued the first two Complaints, then the only conclusion that can be drawn is that the Settlement has become non-est and no liability can be said to have accrued under it. Thus, the third Complaint CC No. 932/2014 does not disclose any legally recoverable Debt. The Complaint and all the consequent proceedings emanating therefrom, is hereby quashed and the Petitioner is hereby, discharged. In the circumstances, no observations are made in regard to the amount of Rs. 13,00,000/- already received by the Complainant, and the Petitioner/ Accused persons are at liberty to pursue the appropriate remedy under Law. Thus, the Petition is accordingly, disposed of along with pending Application(s), if any. The core legal questions considered in this judgment revolve around the maintainability of a criminal complaint filed under Section 138 of the Negotiable Instruments Act, 1881, particularly when the cheque in question was issued pursuant to a mediated settlement agreement. The issues include:(i) Whether the cheque issued pursuant to a settlement agreement discharges any legal liability, thereby justifying continuation of proceedings under Section 138 NI Act;(ii) The legal effect of a mediated settlement on the original complaint and whether the original complaint can continue post-settlement in case of default;(iii) The applicability and interpretation of precedents concerning settlement agreements, specifically distinguishing the rulings in Lalit Kumar Sharma vs. State of U.P. and Arun Kumar vs. Anita Mishra;(iv) The remedies available to a complainant upon breach of a mediated settlement, including the scope of execution under Sections 421 and 431 Cr.P.C. and contempt proceedings;(v) The principle against double jeopardy in the context of multiple complaints relating to the same debt or liability.Issue-wise Detailed Analysis1. Maintainability of Complaint Under Section 138 NI Act for Cheque Issued Pursuant to SettlementThe legal framework governing Section 138 NI Act requires the cheque to be issued in discharge of a legally enforceable debt or liability. The Petitioner contended that the cheque issued pursuant to the settlement did not discharge any fresh legal liability, thus rendering the complaint non-maintainable. Reliance was placed on Lalit Kumar Sharma, where the Supreme Court held that if a cheque is issued pursuant to a settlement and the original complaint is subsumed thereby, a subsequent complaint on the same debt is impermissible.The Respondent relied on Arun Kumar, where the Apex Court distinguished Lalit Kumar Sharma, holding that a settlement in Lok Adalat acts like a civil decree creating a fresh legally enforceable debt, allowing fresh complaint proceedings under Section 138.The Court examined the facts and found that in the present case, unlike Arun Kumar, the legally enforceable debt was yet to be ascertained in the original complaints. The settlement was recorded but the original complaints were still pending. The subsequent cheque dishonoured was part of the settlement amount agreed upon, not a fresh liability. The Court emphasized that continuation of multiple complaints for the same debt would amount to double jeopardy.2. Effect of Mediated Settlement on Original Complaint and Remedies on BreachThe Court referred to Gimpex Private Limited vs. Manoj Goel, which established that a settlement agreement subsumes the original complaint, preventing parties from pursuing both original and subsequent complaints arising from non-compliance. The settlement agreement, once voluntarily entered into, governs the consequences of non-compliance.Further, Dayawati vs. Yogesh Kumar Gosain was cited to elucidate the procedure upon breach of mediated settlement. The Court held that the magistrate may proceed under Section 431 read with Section 421 Cr.P.C. to recover the amount as a fine and may initiate contempt proceedings under Section 2(b) of the Contempt of Courts Act, 1971 for enforcement. This establishes that the remedy for breach of settlement lies in execution and contempt proceedings, not in continuing the original criminal complaint.The Court also referred to coordinate bench decisions affirming that after mediation settlement, recovery of the outstanding amount should be through execution under Sections 421/431 Cr.P.C., not trial on merits of the original complaint.3. Application of Double Jeopardy PrincipleThe Court noted that if all three complaints (two original and one pursuant to settlement) were allowed to proceed, it would result in multiple trials and convictions for the same debt, violating the principle against double jeopardy. The settlement had been acted upon with partial payment of Rs. 13,00,000/- out of Rs. 16,50,000/-, leaving Rs. 3,50,000/- as balance. The dishonour of the cheque for the balance amount cannot be treated as a fresh offence independent of the original debt.4. Treatment of Competing Arguments and Distinction of PrecedentsThe Petitioner's reliance on Lalit Kumar Sharma was supported by the facts of a single transaction and subsumed complaint. The Respondent's reliance on Arun Kumar was distinguished on the ground that in Arun Kumar, the settlement was post-conviction and operated as a civil decree, whereas in the present case, the settlement was prior to adjudication and the original complaints were pending.The Court found that the Respondent's attempt to continue the original complaints despite the settlement was a disregard of the settlement's legal effect, rendering the settlement non-est and no fresh liability accruing under it.5. Conclusion on Maintainability and Appropriate Legal RemediesThe Court concluded that the third complaint did not disclose any legally recoverable debt, as it arose from a cheque issued pursuant to a settlement that subsumed the original complaints. The proper remedy for breach of settlement lies in execution proceedings under Sections 421 and 431 Cr.P.C. or contempt proceedings, not in continuation of criminal complaints under Section 138 NI Act.The judgment quashed the third complaint and discharged the Petitioner, leaving open the question of the amount already received and permitting the parties to pursue appropriate remedies under law.Significant Holdings'When a complainant party enters into a compromise agreement.... 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- compliance. The settlement agreement subsumes the original complaint.''If the settlement in Mediation is not complied with - is the court required to proceed with the case for a trial on merits, or hold such a settlement agreement to be executable as a decreeRs. In case the mediation settlement accepted by the court as above is not complied with, the following procedure is required to be followed: (i) In the event of default or non-compliance or breach of the settlement agreement by the accused person, the magistrate would pass an order under Section 431 read with Section 421 of the Cr.P.C. to recover the amount agreed to be paid by the accused in the same manner as a fine would be recovered. (ii) Additionally, for breach of the undertaking given to the magistrate/court, the court would take appropriate action permissible in law to enforce compliance with the undertaking as well as the orders of the court based thereon, including proceeding under Section 2(b) of the Contempt of Courts Act, 1971 for violation thereof.'Core principles established include:- A mediated settlement subsumes the original complaint under Section 138 NI Act, preventing continuation of original complaints post-settlement;- Breach of settlement must be enforced through execution proceedings under Sections 421/431 Cr.P.C. or contempt proceedings, not by filing fresh criminal complaints;- The principle against double jeopardy prohibits multiple prosecutions for the same debt or liability;- Distinction between settlements pre- and post-conviction is critical in determining whether fresh complaints under Section 138 NI Act are maintainable;- The legal effect of a settlement recorded and acted upon is binding, and parties cannot circumvent it by pursuing multiple complaints.Final determination was that the third complaint under Section 138 NI Act was not maintainable and was quashed, discharging the Petitioner, while preserving the Complainant's right to seek execution or contempt remedies for breach of settlement.