TaxTMI 
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2021 (10) TMI 378
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................... 40 A Factual Background 1 This batch of appeals has arisen from a judgment dated 10 April 2019 of a Single Judge of the High Court of Judicature at Madras by which proceedings in a complaint- CC No. 389 of 2017 under Section 138 of the Negotiable Instruments Act 1881-"NI Act", pending on the file of the Seventh Metropolitan Magistrate's Court at Chennai were quashed. The jurisdiction of the Single Judge was invoked under Section 482 of the Code of Criminal Procedure 1973-"CrPC". 2 On 17 and 27 April 2012, the appellant entered into three High Seas Sale Agreements-"HSSA" with Aanchal Cement Limited-"ACL". On the request of ACL, the appellant paid an amount of Rs. 6.96 crores (Rs. 6,96,74,666/-) as customs duty and Rs. 8.04 crores (Rs. 8,04,12,495/-) as wharfage charges in order to clear the goods on behalf of ACL which is alleged to have promised to repay the amount with interest. It has been alleged that though the appellant supplied the goods, ACL failed to make payments. On 6 August 2012, ACL issued 18 cheques dated 8 August 2012, each in the amount of Rs. 50 lakhs, for a total value of Rs. 9 crores in favour of the appellant in part payment of the outstanding ....
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....efore 11th day of every month i.e. 11/04/2013, 11/05/2013 and 11/06/2013. 4. The "PARTY OF THE FIRST PART" agrees and undertake to pay the monthly instalment of Rs. 2,33,33,333/- equally divided in three parts and Sri. Sitram Goel, Sri. Manoj Goel and M/s Aanchal collection Limited would issue cheques in faovour of the "PARTY OF THE SECOND PART" towards the compliance of the settlement. 5. The "PARTY OF THE FIRST PART" handed over following cheques to the "PARTY OF THE SECOND PART" as compliance of the assurance and undertaking given by the "PARTY OF THE FIRST PART" [...] 6. The "PARTY OF THE FIRST PART" after consultation with the directions of M/s. Aanchal Cement Limited (Formerly M/s Kalika Cement Private Limited) and M/s. Aanchal Collection Limited, which is also family business and sister concern of "PARTY OF THE FIRST PART" and Sri. Sitaram Goel, has arrived at this settlement and signing this compromise deed. Any default or non commitment of the conditions set out in this compromise deed would amount to cheating and fraud. The "PARTY OF THE FIRST PART" has issued the cheque of M/s Aanchal Collection Limited, towards clearance of legal debt to the "Party of the Second....
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....ues were replaced. By an order dated 2 December 2013, the interim application was rejected and the claim of ACL that the deed of compromise was obtained by force, fraud and coercion was not found to be worthy of acceptance. An appeal against the judgment of the Single Judge was dismissed as withdrawn on 12 December 2014. 8 On 14 December 2015, this Court stayed further proceedings arising out of the FIR Crime No. 21/2013 (which had been registered with the Central Crime Branch) for offences punishable under Section 409 and 506(1) of the IPC. 9 On 15 November 2016, the Madras High Court dismissed the proceedings initiated by Sitaram Goel for quashing of the first set of complaints under Section 138 of the NI Act against him. 10 The cheques issued in pursuance of the deed of compromise dated 12 March 2013 having been dishonoured, a second complaint CC No. 389 of 2017 was instituted on 16 February 2017 by the appellant under Section 138 of the NI Act before the Seventh Metropolitan Magistrate (the complaint was initially filed before the CMM Kolkata in 2015 and was subsequently transferred to Chennai on 10 March 2015). This is the second complaint filed by the appellant against ACL....
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....take its own view. With the aforesaid observations the special leave petition is disposed of. Pending application(s), if any, stands disposed of accordingly." 13 On 14 June 2018, the second complaint was transferred to be tried along with the earlier batch of 7 cases, the first set of complaints. Pursuant to the order of this Court, on 19 July 2018, ACL instituted proceedings Crl.O.P Nos 21731-21737 of 2018 against C.C. No. 3326-3329 of 2012 and C.C. No. 99-101 of 2013 under Section 482 of the CrPC for quashing the first complaint under Section 138 of the NI Act. 14 By an order dated 6 August 2018, in the special leave petition- SLP (Criminal) Diary No. 17257 of 2018 instituted before this Court against the order of the High Court dated 24 November 2017, liberty was granted to the respondent, Manoj Goel, in the following terms to raise the issue of the simultaneous prosecution of two sets of cases: "Delay condoned. It is argued by Mr. R. Basant, learned senior counsel appearing for the petitioner, that the crux of the contention raised by the petitioner is that two sets of prosecutions under the Negotiable Instruments Act cannot simultaneously lie. Admittedly, the second ....
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....s instituted by the appellant before this Court against the quashing the second criminal complaint by the High Court. On the other hand, ACL filed a special leave petition SLP (Criminal) Nos. 7632-7638 of 2019 against the judgment of the High Court allowing the proceedings under the first complaint to continue. Both the special leave petitions were tagged and heard together. 18 The Single Judge, while allowing the petition under Section 482 and quashing the proceedings in the second complaint has provided the following reasons: "19. [...] without going into the validity of the deed of compromise the cheques issued on the deed of compromise culminated in C.C. No. 389 of 2017. Though part of compromise deed executed by the parties, the complaint initiated on the cheques issued on the deed of compromise cannot be sustained. Since originally the petitioners issued the first set of cheques on their liability of payment towards the three HSS Agreements is still pending as per the proceedings under the Negotiable Instruments Act. Therefore the second set of cheques issued only on the basis of deed of compromise and those are not issued for any liability. Also when the very deed of comp....
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....er of conviction and an order at an anterior stage seeking quashing of a criminal complaint; and (vi) There is no embargo under Section 138 of the NI Act on parallel proceedings for distinct offences involving the dishonor of cheques. Both sets of criminal complaints in respect of the first set of cheques and the second set of cheques are being tried by the same court. It is not legitimately open to the accused who committed a breach of the settlement to seek a quashing of the criminal complaints. The Magistrate at the end of the trial would undoubtedly determine the nature of the sentence that should be imposed. 21 On the other hand, Mr Jayant Bhushan, learned Senior Counsel has urged the following submissions. (i) The essential issue is whether a criminal trial can go on with both sets of cheques; (ii) The crucial ingredient of Section 138 is that a cheque must be for the discharge, in whole or in part of any debt or other liability. There cannot be a two prosecutions for the same liability; (iii) The liability under the first set of cheques was replaced following the deed of compromise by the second set of cheques; (iv) As a consequence of the deed of compromise there....
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....cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for a term which may be extended to two years, or with fine which may extend to twice the amount of the cheque, or with both: Provided that nothing contained in this section shall apply unless-- (a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier; (b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice; in writing, to the drawer of the cheque, within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and (c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice. Explanation.-- For the p....
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....edents of this Court, observed that: "53. A perusal of the judgment in Ishwarlal Bhagwandas [S.A.L. Narayan Row v. Ishwarlal Bhagwandas, (1966) 1 SCR 190 : AIR 1965 SC 1818] would show that a civil proceeding is not necessarily a proceeding which begins with the filing of a suit and culminates in execution of a decree. It would include a revenue proceeding as well as a writ petition filed under Article 226 of the Constitution, if the reliefs therein are to enforce rights of a civil nature. Interestingly, criminal proceedings are stated to be proceedings in which the larger interest of the State is concerned. Given these tests, it is clear that a Section 138 proceeding can be said to be a "civil sheep" in a "criminal wolf's" clothing, as it is the interest of the victim that is sought to be protected, the larger interest of the State being subsumed in the victim alone moving a court in cheque bouncing cases, as has been seen by us in the analysis made hereinabove of Chapter XVII of the Negotiable Instruments Act." 28 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 compromi....
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....transactions." 30 However, this Court also noted that the introduction of a criminal remedy has given rise to a worrying trend where cases under Section 138 of the NI Act are disproportionately burdening the criminal justice system. This Court observed: "5. Invariably, the provision of a strong criminal remedy has encouraged the institution of a large number of cases that are relatable to the offence contemplated by Section 138 of the Act. So much so, that at present a disproportionately large number of cases involving the dishonour of cheques is choking our criminal justice system, especially at the level of Magistrates' Courts. As per the 213th Report of the Law Commission of India, more than 38 lakh cheque bouncing cases were pending before various courts in the country as of October 2008. This is putting an unprecedented strain on our judicial system." 31 Thus, 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 co....
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....n such cases it would be desirable if parties choose compounding during the earlier stages of litigation. If however, the accused has a valid defence such as a mistake, forgery or coercion among other grounds, then the matter can be litigated through the specified forums. [...] 23. We are also in agreement with the learned Attorney General's suggestions for controlling the filing of multiple complaints that are relatable to the same transaction. It was submitted that complaints are being increasingly filed in multiple jurisdictions in a vexatious manner which causes tremendous harassment and prejudice to the drawers of the cheque. For instance, in the same transaction pertaining to a loan taken on an instalment basis to be repaid in equated monthly instalments, several cheques are taken which are dated for each monthly instalment and upon the dishonour of each of such cheques, different complaints are being filed in different courts which may also have jurisdiction in relation to the complaint. In light of this submission, we direct that it should be mandatory for the complainant to disclose that no other complaint has been filed in any other court in respect of the same transa....
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....h a cause of action arising from one transaction is litigated has dampened the ease of doing business in India, impacted business sentiments and hindered investments from investors. Recognising these issues, the Ministry of Finance by a notice https://financialservices.gov.in/sites/default/files/Decriminalization%20-%20Public%20Comments.pdf dated 8 June 2020, has sought comments regarding decriminalisation of minor offences, including Section 138 of the NI Act, to improve the business sentiment in the country. 34 It is in this backdrop that we must now analyse the issue regarding pendency of parallel proceedings for complaints under Section 138 of the NI Act. The question that arises for our consideration is whether once the settlement has been entered into, the complainant can be allowed to pursue the original complaint under Section 138 of the NI Act. 35 The narration of facts would indicate that initially 18 cheques dated 8 August 2012 of a total value of Rs. 9 crores were issued by ACL in favour of the appellant (Gimpex Private Limited). The dishonour of the cheques on 21 August 2012 on the ground that the payment had been stopped by the drawer or, as the case may be, f....
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....rosecution under both sets of complaints would be contrary to the purpose of the enactment. As noted above, it is the compensatory aspect of the remedy that should be given priority as opposed to the punitive aspect. The complainant in such cases is primarily concerned with the recovery of money, the conviction of the accused serves little purpose. In fact, the threat of jail acts as a stick to ensure payment of money. This Court in R. Vijayan v. Baby (2012) 1 SCC 260 has emphasised how punishment of the offender is of a secondary concern for the complainant in the following terms: "17. The apparent intention is to ensure that not only the offender is punished, but also ensure that the complainant invariably receives the amount of the cheque by way of compensation Under Section 357(1)(b) of the Code. Though a complaint Under Section 138 of the Act is in regard to criminal liability for the offence of dishonouring the cheque and not for the recovery of the cheque amount (which strictly speaking, has to be enforced by a civil suit), in practice once the criminal complaint is lodged Under Section 138 of the Act, a civil suit is seldom filed to recover the amount of the cheque. This ....
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....secuted and undergo trial for two different complaints, which in its essence arise out of one underlying legal liability. Second, the accused would then face criminal liability for not just the violation of the original agreement of the transaction which had resulted in issuance of the first set of cheques, but also the cheques issued pursuant to the compromise deed. Third, instead of reducing litigation and ensuring faster recovery of money, it would increase the burden of the criminal justice system where judicial time is being spent on adjudicating an offence which is essentially in the nature of a civil wrong affecting private parties - a problem noted in multiple judgements of this Court cited above. Most importantly, allowing the complainant to pursue parallel proceedings, one resulting from the original complaint and the second emanating from the terms of the settlement would make the settlement and issuance of fresh cheques or any other partial payment made towards the original liability meaningless. Such an interpretation would discourage settlement of matters since they do not have any effect on the status quo, and in fact increase the protracted litigation before the cou....
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....rora and Ashish Narula and the appellants were made parties. In this backdrop, the Court noted that in respect of the first cheques, the appellants were not proceeded against and though a compromise was entered into between Manish Arora and Ashish Narula and the complainant, the complaint had not been withdrawn and the two directors had been found guilty of an offence under Section 138 of NI Act. Manish Arora had issued the second cheque in terms of the settlement between the parties. It was in this backdrop, that the Court observed: "15. Evidently, therefore, the second cheque was issued in terms of the compromise. It did not create a new liability. As the compromise did not fructify, the same cannot be said to have been issued towards payment of debt. [...] 17. Thus, the second cheque was issued by Manish Arora for the purpose of arriving at a settlement. The said cheque was not issued in discharge of the debt or liability of the Company of which the appellants were said to be the Directors. There was only one transaction between Shri Ashish Narula, Shri Manish Arora, Directors of the Company and the complainant. They have already been punished. Thus, the question of entert....
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....n for dismissal of the complaint. The application and a revision were dismissed. A petition under Section 482 CrPC thereafter was allowed by the High Court on the ground that the question of quashing the second complaint did not arise when the cheque was not issued in discharge of any debt or liability but on account of a settlement. Distinguishing the earlier judgment in Lalit Kumar Sharma (supra), the Court held: "9. Lalit Kumar case [Lalit Kumar Sharma v. State of U.P., (2008) 5 SCC 638 : (2008) 2 SCC (Cri) 682] is distinguishable on facts, in that the cheque had not been issued in discharge of any debt or liability of the company of which the accused were said to be the Directors. The cheque was found to have been issued for the purpose of arriving at a settlement. 10. In the instant case, the respondent clearly had a liability. As observed above, there was an earlier adjudication which led to the conviction of the respondent accused. Thus there was adjudication of liability of the respondent accused. While the appeal was pending, the matter was settled in the Lok Adalat in acknowledgment of liability of the respondent-accused to the appellant complainant. 11. The cheque ....
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....ially implemented by the payment of an amount of Rs. 3 crores by demand draft to the complainant. Upon the receipt of an amount of Rs. 3 crores, Gimpex Private Limited was to grant its no objection to the plea of bail of Manoj Goel. Manoj Goel undertook to pay the balance of Rs. 7 crores within three months in instalments. The second set of cheques issued pursuant to the deed of compromise were also dishonoured. The Single Judge of the High Court adverted to clause 9 of the deed of compromise which stipulated that upon the payment of the entire settlement amount of Rs. 10 crores, all proceedings including the criminal complaints would have to be withdrawn. The Single Judge was persuaded to quash the criminal complaint instituted against Manoj Goel on the basis of the second set of cheques on the ground that: (i) Since the proceedings under the NI Act for the dishonour of the first set of cheques was pending, the second set of cheques issued only on the basis of the deed of compromise could not be construed as being towards the discharge of a liability; and (ii) The validity of the deed of compromise had been challenged in the suit pending before the High Court. 48 Each of thes....
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....ginal complaint relating to the same underlying transaction under Section 138 of the NI Act. Second, the breach of the deed of compromise has arisen due to the dishonour of the cheques which were issued by the accused towards discharge of the remaining balance of Rs. 7 crores. In this backdrop, it was farfetched for the High Court to have quashed the proceedings in exercise of its jurisdiction under Section 482. For as a two judge Bench of this Court held in HMT Watches Ltd. v. M.A. Abida (2015) 11 SCC 776 : "10. [...] Whether the cheques were given as security or not, or whether there was outstanding liability or not is a question of fact which could have been determined only by the trial court after recording evidence of the parties. In our opinion, the High Court should not have expressed its view on the disputed questions of fact in a petition under Section 482 of the Code of Criminal Procedure, to come to a conclusion that the offence is not made out. The High Court has erred in law in going into the factual aspects of the matter which were not admitted between the parties." Following the above principle, another decision of a two judge Bench in Sampelly Satyanarayana Rao v....
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.... is not as presumed, the purpose of the presumption is over." 52 The accused, the Court held, may adduce direct evidence to prove that the cheque in question was not supported by consideration and that there was no debt or liability to be discharged. To disprove the presumption, the accused has to bring on the record circumstances which may lead the court to believe that the consideration and debt did not exist or it was so probable that a prudent man would act upon the plea that they did not exist. After adverting to these decisions, a two judge Bench in Kishan Rao v. Shankargouda (2018) 8 SCC 165, noted in that case that: "21. In the present case, the trial court as well as the appellate court having found that cheque contained the signatures of the accused and it was given to the appellant to present in the Bank, the presumption under Section 139 was rightly raised which was not rebutted by the accused. The accused had not led any evidence to rebut the aforesaid presumption. The accused even did not come in the witness box to support his case. In the reply to the notice which was given by the appellant, the accused took the defence that the cheque was stolen by the appellant.....