M/S GIMPEX PRIVATE LIMITED versus MANOJ GOEL

[2021] 11 S.C.R.

AM/S GIMPEX PRIVATE LIMITED

MANOJ GOEL

(Criminal Appeal No. 1068 of 2021)

BOCTOBER 08, 2021

[DR. DHANANJAYA Y CHANDRACHUD, VIKRAM NATHAND B. V. NAGARATHNA, JJ.]

Negotiable Instruments Act, 1881 – ss. 138, 139 – Parallelprosecutions arising from single transaction u/s.138 –CImpermissibility of – Dishonour of cheques – First set of complaintsfiled – Compromise – First complaint pending, cheques issuedpursuant to the compromise deed also dishonoured – Secondcomplaint filed – Both the complaints if can be pursuedsimultaneously – Held: No – settlement agreement effaces theDoriginal complaint – Non-compliance of the terms of the settlementagreement or dishonour of cheques issued subsequent to it givesrise to fresh cause of action – Allowing prosecution under bothsets of complaints would be contrary to the purpose of the enactment– First complaint quashed – Further, Single Judge erred in quashingthe criminal complaint on priori reasoning that the second set ofEcheques issued in pursuance of the compromise deed were not indischarge of liability – Mere fact that suit was institutedchallenging the compromise deed would not justify exercisingjurisdiction u/s.482 – It would continue to be valid until decree ofthe appropriate court setting it aside is passed – High Court failedFto notice the import of the presumption u/s.139 which can only bedisplaced on the basis of evidence adduced at the trial – Judgmentof the Single Judge quashing the second complaint is set aside –Code of Criminal Procedure, 1973 – s.482 – Penal Code, 1860 –ss. 409, 506(1).GNegotiable Instruments Act, 1881:

s.138 – Ingredients of – Discussed.

s.138 – Purpose of – Held: Primary purpose of s.138 is toensure compensation to the complainant – The Act also allows forparties to enter into compromise, both during the pendency of theHcomplaint and even after the conviction of the accused.

s.138 – Nature of offence under – Held: It is quasi-criminal,while it arises out of civil wrong, the law however, imposes acriminal penalty in the form of imprisonment or fine.

s.139 – Presumption under – Burden of proof – Discussed.

Partly allowing the appeals, the Court

HELD: 1.1 Parallel Prosecutions

The nature of the offence under Section 138 of the NI Actis quasi-criminal in that, while it arises out of civil wrong, thelaw, however, imposes criminal penalty in the form ofimprisonment or fine. The purpose of the enactment is to providesecurity to creditors and instil confidence in the banking systemof the country. Given that the primary purpose of Section 138 ofthe NI Act is to ensure compensation to the complainant, the NIAct also allows for parties to enter into compromise, both duringthe pendency of the complaint and even after the conviction ofthe accused. [Paras 27, 28][450-D-E; 451-B]1.2 Allowing prosecution under both sets of complaintswould be contrary to the purpose of the enactment. It is thecompensatory aspect of the remedy that should be given priorityas opposed to the punitive aspect. The complainant in such casesis primarily concerned with the recovery of money, the convictionof the accused serves little purpose. In fact, the threat of jail actsas stick to ensure payment of money. complainant enters intoa settlement with open eyes and undertakes the risk of theaccused failing to honour the cheques issued pursuant to thesettlement, based on certain benefits that the settlementagreement postulates. Once parties have voluntarily entered intosuch an agreement and agree to abide by the consequences ofnon-compliance of the settlement agreement, they cannot beallowed to reverse the effects of the agreement by pursuing boththe original complaint and the subsequent complaint arising fromsuch non-compliance. The settlement agreement subsumes theoriginal complaint. Non-compliance of the terms of the settlementagreement or dishonour of cheques issued subsequent to it, wouldthen give rise to fresh cause of action attracting liability underSection 138 of the NI Act and other remedies under civil law and

Acriminal law. contrary interpretation, which allows for thecomplainant to pursue both the original complaint and theconsequences arising out of the settlement agreement, wouldlead to contradictory results. First, it would allow for the accusedto be prosecuted and undergo trial for two different complaints,which in its essence arise out of one underlying legal liability.BSecond, the accused would then face criminal liability for not justthe violation of the original agreement of the transaction whichhad resulted in issuance of the first set of cheques, but also thecheques issued pursuant to the compromise deed. Third, insteadof reducing litigation and ensuring faster recovery of money, itCwould increase the burden of the criminal justice system wherejudicial time is being spent on adjudicating an offence which isessentially in the nature of civil wrong affecting private parties.Most importantly, allowing the complainant to pursue parallelproceedings, one resulting from the original complaint and thesecond emanating from the terms of the settlement would makeDthe settlement and issuance of fresh cheques or any other partialpayment made towards the original liability meaningless. Suchan interpretation would discourage settlement of matters sincethey do not have any effect on the status quo, and in fact increasethe protracted litigation before the court. Thus, complainantEcannot pursue two parallel prosecutions for the same underlyingtransaction. Once settlement agreement has been entered intoby the parties, the proceedings in the original complaint cannotbe sustained and fresh cause of action accrues to the complainantunder the terms of the settlement deed. Once the compromisedeed dated 12 March 2013 was agreed, the original complaintFmust be quashed and parties must proceed with the remediesavailable in law under the settlement agreement. [Paras 37-40,45][456-H; 457-A, H; 458-A-H; 462-D-E]

Re: Expeditious Trial of Cases under Section 138 ofthe NI Act 1881 Decision of Supreme Court dtd.16thGApril 2021 in Suo Motu Writ Petition (Crl.) No. 2 of2020 – followed.

Lalit Kumar Sharma v. State of Uttar Pradesh (2008) 5SCC 638 : [2008] 7 SCR 797 – held inapplicable.

Arun Kumar v. Anita Mishra (2020) 16 SCC 118 –referred to.

2.1 Liability arising from the settlement agreement

Once settlement agreement has been entered intobetween the parties, the parties are bound by the terms of theagreement and any violation of the same may result inconsequential action in civil and criminal law. In the present case,the first set of cheques which were issued allegedly towardsdischarge of the liability under the HSSA were dishonoured. Adeed of compromise was entered into thereafter on 12 March2013. The deed of compromise was partially implemented by thepayment of an amount of Rs. 3 crores by demand draft to thecomplainant. Upon the receipt of an amount of Rs. 3 crores,Gimpex Private Limited was to grant its no objection to the pleaof bail of ‘MG’. ‘MG’ undertook to pay the balance of Rs. 7 croreswithin three months in instalments. The second set of chequesissued pursuant to the deed of compromise were alsodishonoured. [Paras 46, 47][462-E-H]

2.2 Once the ingredients of Section 138 of the NI Act arefulfilled, the statute clearly stipulates that “such person shall bedeemed to have committed an offence”. Thus, once theingredients of Section 138 are fulfilled, distinct offence arisesin respect of the dishonour of the cheques in question. Therewas no basis for the Single Judge to conclude, particularly in thecourse of the hearing of petition under Section 482 of the CrPCthat the second set of cheques issued in pursuance of the deed ofcompromise cannot be construed as being towards the dischargeof liability. The question as to whether the liability exists or notis clearly matter of trial. There was serious error on the partof the Single Judge in allowing the petition under Section 482 toquash the prosecution on the basis that the deed of compromisewould not constitute legally enforceable liability. The mere factthat suit is pending before the High Court challenging the validityof the compromise deed would furnish no cogent basis to quashthe proceedings under Section 138. settlement agreementeffaces the original complaint and thus, it is not up to the parties,either complainant or accused, to simply reverse the effects of

Athat agreement and relitigate the original complaint relating tothe same underlying transaction under Section 138 of the NI Act.The breach of the deed of compromise has arisen due to thedishonour of the cheques which were issued by the accusedtowards discharge of the remaining balance of Rs. 7 crores. Inthis backdrop, it was farfetched for the High Court to haveBquashed the proceedings in exercise of its jurisdiction underSection 482. Section 139 of the NI Act raises the presumption,unless the contrary is proved that the holder of cheque receivesthe cheque of the nature referred to in Section 138 for thedischarge, in whole or in part, of any debt or other liability. SectionC139 raises the presumption “unless the contrary is proved”. Oncethe complainant discharges the burden of proving that theinstrument was executed by the accused; the presumption underSection 139 shifts the burden on the accused. The expression“unless the contrary is proved” would demonstrate that it is onlyfor the accused at the trial to adduce evidence of such facts orDcircumstances on the basis of which the burden would standdischarged. These are matters of evidence and trial. Thedetermination of whether cheque pursuant to settlementagreement arises out of legal liability would be dependent onvarious factors, such as the underlying settlement agreement,Ethe nature of the original transaction and whether an adjudicationon the finding of liability was arrived at in the original complaint,the defence raised by the accused, etc. The Single Judge was inerror in proceeding to quash the criminal complaint on priorireasoning that the second set of cheques issued in pursuance ofthe deed of compromise were not in discharge of liability andFon that basis proceeding to quash the proceedings under Section482 CrPC. The mere fact that suit has been instituted beforethe High Court challenging the deed of compromise would furnishno justification for exercising the jurisdiction under Section 482.The deed of compromise would continue to be valid until decreeGof the appropriate court setting it aside is passed. The High Courtfailed to notice the true meaning and import of the presumptionunder Section 139 which can only be displaced on the basis ofevidence adduced at the trial. The judgment of the Single Judgequashing the complaint CC No. 389/2017 is set aside. The

complaint CC Nos.3326-3329 of 2012 and CC Nos.99-101 of 2013is quashed. [Paras 48, 50, 51, 53 and 55][463-C-F; 464-B-C;465-A-B; 466-D-H; 467-A, D-E]

K Bhaskaran v. Sankaran Vaidhyan Balan (1999) 7 SCC510:[1999] 3 Suppl. SCR 271; P Mohanraj and Othersv. Shah Brothers Ispat Private Limited (2021) 6 SCC258; Meters and Instruments (P) Ltd. v. Kanchan Mehta(2018) 1 SCC 560 : [2017] 10 SCR 66; Damodar SPrabhu v. Sayed Babalal (2010) 5 SCC 663 : [2010] 5SCR 678; R. Vijayan v. Baby (2012) 1 SCC 260 : [2011]14 SCR 712; HMT Watches Ltd. v. M.A. Abida (2015)11 SCC 776 : [2015] 3 SCR 719; SampellySatyanarayana Rao v. Indian Renewable EnergyDevelopment Agency Ltd. (2016) 10 SCC 458 : [2016]6 SCR 531; Kumar Exports v. Sharma Carpets (2009)2 SCC 513 : [2008] 17 SCR 572; Kishan Rao v.Shankargouda (2018) 8 SCC 165 : [2018] 5 SCR 69 –relied on.

Prakash Gupta v. SEBI (2021) SCC Online SC 485 –referred to.

Case Law Reference

CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No.1068 of 2021.

From the Judgment and Order dated 10.04.2019 of the High Courtof Judicature at Madras in Criminal Original Petition No.25398 of 2018.

With

Criminal Appeal Nos. 1069-1075 of 2021.

AV. Giri, Jayant Bhushan, Sr. Advs., Ms. Liz Mathew, Ms. AnkitaGandhi, Shrirang Varma, Navneet R., Ms. Sonali Jain, Ms. VasudhaJain, Diwakar Maheshwari, Karun Mehta, Shreyas Edupuganti, AmartyaBhushan, Tushar Bhushan, Ketan Paul, Advs. for the Appearing Parties.

The Judgment of the Court was delivered byBDR. DHANANJAYA Y CHANDRACHUD, J.

AFactual Background..................................................3*

BSubmissions of parties.............................................12*

CAnalysis................................................................15*

C.1Parallel prosecutions.............................................15*

C.2Liability arising from the settlement agreement....33*

DConclusion............................................................40*

DA Factual Background

1. This batch of appeals has arisen from judgment dated 10April 2019 of Single Judge of the High Court of Judicature at Madrasby which proceedings in complaint[1]under Section 138 of the NegotiableInstruments Act 1881[2], pending on the fileof the Seventh MetropolitanEMagistrate’s Court at Chennai were quashed. The jurisdiction of theSingle Judge was invoked under Section 482 of the Code of CriminalProcedure 1973[3].

2. On 17 and 27 April 2012, the appellant entered into three HighSeas Sale Agreements[4 ]with Aanchal Cement Limited[5]. On the requestFof 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 wharfagecharges in order to clear the goods on behalf of ACL which is alleged tohave promised to repay the amount with interest. It has been allegedthat though the appellant supplied the goods, ACL failed to makepayments. On 6 August 2012, ACL issued 18 cheques dated 8 AugustG2012, each inthe amount of Rs.50 lakhs, for total value of Rs. 9 crores

Ed. Note - [*]denotes the actual pagination in the Original Judgment.

1 CC No. 389 of 2017

2 “NI Act“

3 “CrPC“

4 “HSSA“H5 “ACL“

in favour of the appellant in part payment of the outstanding liability. On21 August 2012, the 18 cheques were dishonoured upon presentationwith an endorsement: “payments stopped by drawer”/ “insufficientfunds”. complaint was lodged by the appellant on 10 September2012,with the Commissioner of Police, Egmore, Chennai, against ACLand its directors for offences under Sections 409 and 506(1) of the IndianPenal Code 1860[6], which was registered as an FIR in Central CrimeBranch on 1 February 2013as Crime No.21 of 2013. Between 22September 2012 and 5 October 2012, the appellant issued legal noticesunder Section 138 of the NI Act to ACL and its directors - Sitaram Goel,Manoj Goel (the respondent) and Mukesh Goel in respect of the dishonorof the 18 cheques.

3. On 22 October 2012 and 6 November 2012, the appellant filedcriminal complaints[7] under Section 138 of the NI Act, in respect of thedishonour of the cheques of the value of Rs.9 crores.This is the first setof complaints filed by the appellant.

4. In 2013,Sitaram Goel filed petitions[8 ]under Section 482 of theCr PC for quashing the complaints qua him.On 3 March 2013,MukeshGoel, director of ACL was arrested by the Central Crime Branch. Abail application was filed by Mukesh Goel on 5 March 2013.

5. During the pendency of the bail application, ACL approachedthe appellant to settle the matter and arrive at compromise. On 12March 2013, the appellant and ACL entered into deed of compromisecontaining,inter alia, the following stipulations:

“1.Based on the above agreement the “PARTY OF THEFIRST PART” hand over DD No:271351, dt: 11/03/2013for Rs. 3,00,00,000/- (Rupees Three Crore Only) drawn onThe Kapur Vysya Bank Limited, in favour of the “PARTYOF THE SECOND PART”, to the PARTY OF THESECOND PART” on 11/03/2013

2.On receipt of Rs. 3 crore mentioned above, the “PARTYOF THE SECOND PART” shall say no objection for thebail application filed by the “PARTY OF THE FIRSTPART”

6 “IPC“

7 CC Nos.3326-3329 of 2012 and CC Nos.99-101 of 2013

8 Crl. OP Nos. 22873 to 22878 of 2016 and Crl. M.P. Nos.10687 to 10698 of 2016

440SUPREME COURT REPORTS

3.The “PARTY OF THE FIRST PART” agrees and undertaketo pay the balance amount of Rs. 7 crore within 3 monthsin 3 equal instalments of Rs. 2,33,33,333/- (Rupees TwoCrore Thirty Three Lakh Thirty Three Thousand ThreeHundred and Thirty Three Only) every month to the“PARTY OF THE SECOND PART”. The monthlyinstalment shall be paid on or before 11[th] day of every monthi.e. 11/04/2013, 11/05/2013 and 11/06/2013.

4.The “PARTY OF THE FIRST PART” agrees and undertaketo pay the monthly instalment of Rs. 2,33,33,333/- equallydivided in three parts and Sri. Sitram Goel, Sri. Manoj GoelCand M/s Aanchal collection Limited would issue cheques infaovour of the “PARTY OF THE SECOND PART”towards the compliance of the settlement.

5.The “PARTY OF THE FIRST PART” handed overfollowing cheques to the “PARTY OF THE SECONDPART” as compliance of the assurance and undertakinggiven by the “PARTY OF THE FIRST PART”

6.The “PARTY OF THE FIRST PART” after consultationwith 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 businessand sister concern of “PARTY OF THE FIRST PART”and Sri. Sitaram Goel, has arrived at this settlement andsigningthis compromise deed. Any default or noncommitment of the conditions set out in this compromisedeed would amount to cheating and fraud. The “PARTYOF THE FIRST PART” has issued the cheque of M/sAanchal Collection Limited, towards clearance of legal debtto the “Party of the Second Part”.

7.The “PARTY OF THE FIRST PART” agrees andGundertakes that if any of the conditions agreed in thiscompromise deed is not honoured that would amount tocheating, fraud, breach of trust, etc. and the bail granted toSri. Mukesh Goel shall be deemed to have cancelledautomatically and the “PARTY OF THHE SECONDHPART” is also entitled to cancel the bail and also entitle to

file fresh criminal complaint besides NI Act, against thedrawer of cheques and also against other directors of the“PARTY OF THE FIRST PART” and M/s AanchalCollection Limited”.

8.The “PARTY OF THE SECOND PART”, on receipt ofRs. 5,33,33,333/- which would be completed after honouringall the cheques dt: 11/04/2013, shall withdraw the Garnisheeapplication filed in Arbitration proceedings filed against the“PARTY OF THE FIRST PART” inA.No. 312/2013 andANo. 313/2013 inO.A. No. 42/2013, pending before theHon’ble High Court of Madras.

9.After payment of the entire settlement amount of Rs. 10crore by the “PARTY OF THE FIRST PART” to the“PARTY OF THE SECOND PART”, the PARTY OF THESECOND 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 beforeVIIth, MM, George Town, Chennai against the “PARTYOF THE FIRST PART”. It is also assured and agreed bythe “PARTY OF THE FIRST PART” shall withdraw thecase 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 Rs. 10 crore by the “PARTYOF THE FIRST PART” either party shall have no claimagainst each other on the issue of purchase of Clinkerpurchased under the HSS agreements dt: 17/04/2013, 27/04/2013 and 27/04/2013 and all the cases filed against eachother shall be withdrawn.”

6. On the basis of the above compromise, Mukesh Goel wasgranted bail. Sitaram Goel and the respondent were granted anticipatorybail by the Metropolitan Magistrate on 26 March 2013 and 3 April 2013on the basis of the deed of compromise.

7. On 8 April 2013, suit[9] was instituted by ACL and one of itsdirectors before the High Court of Judicature at Madras challenging thedeed of compromise as illegal, null and void, and for return of the cheques

9 CS No. 234 of 2013

Aissued to the appellant pursuant to it. Initially, an interim injunction wasissued and the cheques were replaced. By an order dated 2 December2013, the interim application was rejected and the claim of ACL that thedeed of compromise was obtained by force, fraud and coercion was notfound to be worthy of acceptance. An appeal against the judgment ofthe Single Judge was dismissed as withdrawn on 12 December 2014.B

8. On 14 December 2015, this Court stayed further proceedingsarising out of the FIR Crime No.21/2013 (which had been registeredwith the Central Crime Branch) for offences punishable under Section409 and 506(1) of the IPC.

C9. On 15 November 2016, the Madras High Court dismissed theproceedings initiated by Sitaram Goel for quashing of the first set ofcomplaintsunder Section 138 of the NI Act against him.

10. The cheques issued in pursuance of the deed of compromisedated 12 March 2013 having been dishonoured, second complaint[10]Dwas instituted on 16 February 2017 by the appellant under Section 138of the NI Act before the Seventh Metropolitan Magistrate (the complaintwas initially filed before the CMM Kolkata in 2015 and was subsequentlytransferred to Chennai on 10 March 2015). This is the second complaintfiled by the appellant against ACL under Section 138 of the NI Act.

E11. On 10 March 2017, ACL and its directors (Manoj Goel andMukesh Goel) instituted proceedings[11] before the Madras High Courtunder Section 482 of the CrPC to quash the proceedings pending againstthem under Section 138 of the NI Act in the first set of complaints.On19 August 2017, ACL and its directors instituted another proceeding[12]before the Madras High Court under Sections 482 CrPC to quash theFproceedings initiated under Section 138 of the NI Act in the secondcomplaint. The latter was disposed of by the High Court by quashing theproceedings as against ACL, Manoj Goel, and Vijay Srivastav, with thecomplainant agreeing to proceed with the trial as against the respondentwho was the signatory of the cheques in question.

G12. The High Court also disposed of the proceedings which wereinstituted on 10 March 2017 and refused to quash the first set of

10 CC No. 389 of 2017

11 Crl. O.P. No. 5494-5500 of 2017 and Crl. M.P. Nos. 5244 to 5250, 4094, 4096, 4098,4100, 4102, 4104 and 4106 of 2017H12 Crl. O.P. No. 17255 of 2017 and Crl. M.P. Nos 10587 and 10588 of 2017

complaints. The orders of the High Court were challenged by ACL inspecial leave petitions[13]. By its order dated 18 May 2018, this Courtgranted liberty to ACL to approach the High Court in respect of thespecific plea that the compromise deed (and the 15 cheques issuedpursuant to it) was entered into under coercion.The order of this Courtreads as follows:

“Delay condoned.

It is argued by Mr. K.V. Viswanathan, learned senior counselappearing for the petitioners, that the petitioners have soughtquashing of the proceedings on altogether different grounds. Hehas referred to Ground ‘D’ of the petition (Pg. 67 of the paperbook) wherein it is stated that under coercion deed of compromisewas signed between the petitioners and the respondent andpursuant to which the petitioners had issued 15 fresh cheques infull settlement of all claims of the respondent. This aspect, hesubmits has not been looked into by the High Court while passingthe common order. The petitioners are granted liberty to approachthe High Court again to take up this plea and we expect the HighCourt to deal with the issue on its own merits.We make it clear that this Court has not expressed any opinion onthe merits of the issue and it is for the High Court to take its ownview.

With the aforesaid observations the special leave petition is disposedof.

Pending application(s), if any, stands disposed of accordingly.”

13. On 14 June 2018, the second complaintwas transferred to betried 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 institutedproceedings[14 ]under Section 482 of the CrPC for quashing the firstcomplaint under Section 138 of the NI Act.

14. By an order dated 6 August 2018, in the special leave petition[15]instituted before this Court against the order of the High Court dated 24November 2017, liberty was granted to the respondent, Manoj Goel, in

13 SLP (Criminal) Diary No.17687 and 17257 of 201814 Crl.O.P Nos 21731-21737 of 2018 against C.C. No. 3326-3329 of 2012 and C.C. No.99-101 of 2013

15 SLP (Criminal) Diary No. 17257 of 2018

Athe following terms to raise the issue of the simultaneous prosecution oftwo sets of cases:

“Delay condoned.

It is argued by Mr. R. Basant, learned senior counsel appearingfor the petitioner, that the crux of the contention raised by theBpetitioner is that two sets of prosecutions under the NegotiableInstruments Act cannot simultaneously lie. Admittedly, the secondset of cheques on which the present prosecutions are initiatedwere issued on the basis of Deed of Compromise for thedischarge of the same liability for which the earlier 18 chequesCeach of Rs. 50 lacs were issued. The counsel points out that inrespect of the prosecution relating to earlier cheques, this Courthad vide order dated 18.05.2018 granted leave to the petitioner toreagitate the contention before the High Court that two separateprosecutions under Section 138 of the Negotiable Instruments Actin respect of two sets of cheques – both issued for the dischargeDof the same liability cannot simultaneously stand. The petitioner isgranted liberty to approach the High Court again to take up thisplea and we expect the High Court to deal with the issue on itsown merits.

We make it clear that this Court has not expressed any opinion onEthe merits of the issue and it is for the High Court to take its ownview.

With the aforesaid observations the Special Leave Petition isdisposed of.

Pending application(s), if any, stands disposed of accordingly.”F15. On 18 September 2018, the respondent instituted proceedings[16]before the Madras High Court to quash the proceedings pending againsthim under Section 138 of the NI Act in the second complaint. By itsjudgment dated 10 April 2019, the High Court disposed of the petitionsfiled under Section 482 of the CrPC in respect of both the first and theGsecond complaints. The High Court:

(i)Dismissed the proceedings instituted by ACL and itsdirectors against the first complaint and directed the FastTrack Court No.IV George Town, Chennai to complete thetrial in the first set of complaints within three months;

H16 Crl O.P No. 25398 of 2018

(ii)Allowed the proceedings instituted by the respondent, ManojGoeland quashed the proceedings in the secondcomplaintpending on the file of the Seventh MetropolitanMagistrate.

16. On 3 June 2019, ACL filed an application[17] seeking reviewtogether with the clarification of the findings to the effect that they shallBnot influence the trial of the criminal complaint. The High Court passedan order thereon on 8 July 2019.17. The judgment of the High Court dated 10 April 2019 has givenrise to the special leave petitions before us. special leave petition[[18]]was instituted by the appellant before this Court against the quashing theC

17. The judgment of the High Court dated 10 April 2019 has givenrise to the special leave petitions before us. special leave petition[[18]]was instituted by the appellant before this Court against the quashing thesecond criminal complaint by the High Court. On the other hand, ACLfiled special leave petition[19 ]against the judgment of the High Courtallowing the proceedings under the first complaint to continue. Both thespecial leave petitions were tagged and heard together.

DEFG

18. The Single Judge, while allowing the petition under Section482 and quashing the proceedings in the second complainthas providedthe following reasons:

“19. […] without going into the validity of the deed of compromisethe cheques issued on the deed of compromise culminated in C.C.No. 389 of 2017. Though part of compromise deed executed bythe parties, the complaint initiated on the cheques issued on thedeed of compromise cannot be sustained. Since originally thepetitioners issued the first set of cheques on their liability ofpayment towards the three HSS Agreements is still pending asper the proceedings under the Negotiable Instruments Act.Therefore the second set of cheques issued only on the basis ofdeed of compromise and those are not issued for any liability.Alsowhen the very deed of compromise itself is challenged in thesuit, the cheques issued on the said deed of compromise cannotbe construed as those cheques were issued for discharging theirliability.”

17 Crl MP Nos. 8157, 8158, 8163, 8165, 8167, 8168 of 2019 in Crl OP No. 21731-37of 2018

18 SLP (Criminal) No. 6564 of 2019

19 SLP (Criminal) Nos. 7632-7638 of 2019

A19. In the above extract, the High Court has held that since thecriminal complaints in respect of the dishonor of the first set of chequesissued against the liability under the HSSA are still pending, the secondset of cheques issued on the basis of the deed of compromise “are notissued for any liability”.The High Court has also held that since the validityof the deed of compromise is challenged in the suit pending before theBHigh Court, the cheques issued on the basis of the deed of compromisecannot be construed towards the discharge of liability. In this batch oftwo appeals, the appeal by Gimpex Private Limited (appellant) assailsthe decision of the High Court to quash the second complaint underSection 138 on the ground that the cheques which were issued inCpursuance of the deed of compromise could not be construed to be indischarge of liability. In the companion appeal, which has been institutedby ACL and its directors (Manoj Goel and Mukesh Goel), the order ofthe High Court allowing the first complaint in respect of the first set ofcheques to continue has been assailed.

DB Submissions of parties

20. Mr V Giri, learned Senior Counsel appearing on behalf of theappellants (Gimpex Private Limited) with Ms Liz Mathewhas urged the following submissions:

(i)The offence under Section 138 of the NI Act, 1881 iscomplete once its ingredients are fulfilled;

(ii)Once the offence is complete and prosecution is launched,it must proceed to trial and it was not open to the Highcourt in the exercise of its jurisdiction under Section 482FCrPC to quash the prosecution on the basis of the deed ofcompromise which has not been implemented due to thedefault of the accused;

(iii)Whether liability exists and whether the cheques (as setup in the defence) were issued as and by way of securityGare matters for trial;

(iv)In view of the presumption under Section 139 of the NIAct, at this stage the Court has to proceed on the basis thatthe cheques were issued in discharge of legally enforceabledebt;

(v)The mere pendency of suit seeking to challenge the deedAof compromise is not ground to quash the criminalcomplaint given the clear distinction in law between an orderof conviction and an order at an anterior stage seekingquashing of criminal complaint; and

(vi)There is no embargo under Section 138 of the NI Act onparallel proceedings for distinct offences involving thedishonor of cheques. Both sets of criminal complaints inrespect of the first set of cheques and the second set ofcheques are being tried by the same court. It is notlegitimately open to the accused who committed breachof the settlement to seek quashing of the criminalcomplaints. The Magistrate at the end of the trial wouldundoubtedly determine the nature of the sentence that shouldbe imposed.

21. On the other hand, Mr Jayant Bhushan, learned Senior Counselhas urged the following submissions.

(i)The essential issue is whether criminal trial can go onwith both sets of cheques;

(ii)The crucial ingredient of Section 138 is that cheque mustbe for the discharge, in whole or in part of any debt or otherliability. There cannot be two prosecutions for the sameliability;

(iii)The liability under the first set of cheques was replacedfollowing the deed of compromise by the second set ofcheques;

(iv)As consequence of the deed of compromise there was anovated contracted between the parties;

(v)In terms of the provisions of Section 39 of the IndianContract Act 1872 it is open to the appellant as the promiseeto elect whether to repudiate the agreement or continuewith its performance on breach of the agreement by theother party (respondents);

(vi)The appellant has in fact repudiated the deed of compromiseby failing to withdraw the criminal complaint and the arbitralproceedings;

A(vii)The appellant can in the circumstances only enforce theliability in respect of the first set of cheques as aconsequence of which the criminal prosecution in respectof only the first set may proceed; and

(viii) In the cross appeal, Mr Jayant Bhushan, learned SeniorBCounsel submitted that the principal contention of theaccused is that the transaction was not as matter of facta sale on high seas. However, learned Senior Counselsubmitted that this cannot be fairly agitated in proceedingsunder Section 482 CrPC and it will be appropriate if theissue is left open to be urged at the trial.

22. The rival submissions will now be considered.

Analysis

23. The question before this Court is whether parallel prosecutionsarising from single transaction under Section 138 of the NI Act can beDsustained. In this case, set of cheques were dishonoured, leading tofiling of the first complaint under Section 138 of the NI Act. The partiesthereafter entered into deed of compromise to settle the matter. Whilethe first complaint was pending, the cheques issued pursuant to thecompromise deed were dishonoured leading to the second complaintEunder Section 138 of the NI Act. Both proceedings are pendingsimultaneously and it is for this Court to decide whether the complainantcan be allowed to pursue both the cases or whether one of them must bequashed and the consequences resulting from such quashing.

C.1 Parallel prosecutions

F24. Section 138 of the NI Act stipulates thus:

“Dishonour of cheque for insufficiency, etc., of funds in theaccount.

Where any cheque drawn by person on an account maintainedby him with banker for payment of any amount of money toGanother person from out of that account for the discharge, in wholeor in part, of any debt or other liability, is returned by the bankunpaid, either because of the amount of money standing to thecredit of that account is insufficient to honour the cheque or thatit exceeds the amount arranged to be paid from that account byHan agreement made with that bank, such person shall be deemed

to have committed an offence and shall, without prejudice to anyother provision of this Act, be punished with imprisonment for aterm which may be extended to two years, or with fine whichmay 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 period ofsix months from the date on which it is drawn or within the periodof its validity, whichever is earlier;

(b) the payee or the holder in due course of the cheque, as thecase may be, makes demand for the payment of the said amountof money by giving notice; in writing, to the drawer of thecheque, within thirty days of the receipt of information by himfrom the bank regarding the return of the cheque as unpaid; and

(c) the drawer of such cheque fails to make the payment of thesaid amount of money to the payee or, as the case may be, to theholder in due course of the cheque, within fifteen days of thereceipt of the said notice.

Explanation.— For the purposes of this section, debt of otherliability means legally enforceable debt or other liability.”

25. The ingredients of the offence under Section 138 are:

(i)The drawing of cheque by person on an account maintainedby him with the banker for the payment of any amount ofmoney to another from that account;

(ii)The cheque being drawn for the discharge in whole or inpart of any debt or other liability;

(iii)Presentation of the cheque to the bank;

(iv)The return of the cheque by the drawee bank as unpaideither because the amount of money standing to the creditof that account is insufficient to honour the cheque or thatit exceeds the amount arranged to be paid from that account;

(v)A notice by the payee or the holder in due course making ademand for the payment of the amount to the drawer ofthe cheque within 30 days of the receipt of information fromthe bank in regard to the return of the cheque; and

A(vi)The drawer of the cheque failing to make payment of theamount of money to the payee or the holder in due coursewithin 15 days of the receipt of the notice.

26. The ingredients of the offence were summarized in fairly similarterms in judgment of two judge Bench of this Court in K BhaskaranBv. Sankaran Vaidhyan Balan[20]. Justice K T Thomas observed:

“14. The offence under Section 138 of the Act can be completedonly with the concatenation of number of acts. The followingare the acts which are components of the said offence: (1) drawingof the cheque, (2) presentation of the cheque to the bank, (3)Creturning the cheque unpaid by the drawee bank, (4) giving noticein writing to the drawer of the cheque demanding payment of thecheque amount, (5) failure of the drawer to make payment within15 days of the receipt of the notice.”

27. The nature of the offence under Section 138 of the NI Act isDquasi-criminal in that, while it arises out of civil wrong, the law, however,imposes criminal penalty in the form of imprisonment or fine. Thepurpose of the enactment is to provide security to creditors and instilconfidence in the banking system of the country. The nature of theproceedings under Section 138 of the NI Act was considered by threejudge Bench decision of this Court in P Mohanraj and Others v. ShahEBrothers Ispat Private Limited[21], where Justice RF Nariman, afteradverting to the precedents of this Court, observed that:

“53. 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 civil proceeding is notFnecessarily proceeding which begins with the filing of suit andculminates in execution of decree. It would include revenueproceeding as well as writ petition filed under Article 226 of theConstitution, if the reliefs therein are to enforce rights of civilnature. Interestingly, criminal proceedings are stated to beGproceedings in which the larger interest of the State is concerned.Given these tests, it is clear that Section 138 proceeding can besaid to be “civil sheep” in “criminal wolf’s” clothing, as it isthe interest of the victim that is sought to be protected, the larger

20 (1999) 7 SCC 510H21 (2021) 6 SCC 258

interest of the State being subsumed in the victim alone moving acourt in cheque bouncing cases, as has been seen by us in theanalysis made hereinabove of Chapter XVII of the NegotiableInstruments Act.”

28. Given that the primary purpose of Section 138 of the NI Act isto ensure compensation to the complainant, the NI Act also allows forparties to enter into compromise, both during the pendency of thecomplaint and even after the conviction of the accused. The decision ofthis Court in Meters and Instruments (P) Ltd. v. KanchanMehta[22]summarises the objective of allowing compounding of an offenceunder Section 138 of the NI Act:

“18.2. The object of the provision being primarily compensatory,punitive element being mainly with the object of enforcing thecompensatory element, compounding at the initial stage has to beencouraged but is not debarred at later stage subject to appropriatecompensation as may be found acceptable to the parties or thecourt.”

29. In Prakash Gupta v. SEBI[23 ]a two judge Bench of this Courtof which one of us (Justice DY Chandrachud) was part, analysed thedecision in Meters and Instruments (supra) in the context of adiscussion on whether compounding of an offence requires the consentof an aggrieved party (para 78). The decision in Meters andInstruments (supra) is cited above in regard to the rationale behindcompounding of offences punishable under Section 138. In Damodar SPrabhu v. Sayed Babalal[24] three judge Bench of this Court observedthat the effect of an offence under Section 138 of the NI Act is limitedto two private parties involved in commercial transaction. However,the intent of the legislature in providing criminal sanction for dishonourof cheques is to ensure the credibility of transactions involving negotiableinstruments. The Court observed:

“4. It may be noted that when the offence was inserted in thestatute in 1988, it carried the provision for imprisonment up to oneyear, which was revised to two years following the amendment tothe Act in 2002. It is quite evident that the legislative intent was to

22 (2018) 1 SCC 560

23 (2021) SCC Online SC 485

24 (2010) 5 SCC 663

Aprovide strong criminal remedy in order to deter the worryinglyhigh incidence of dishonour of cheques. While the possibility ofimprisonment up to two years provides remedy of punitivenature, the provision for imposing “fine which may extend totwice the amount of the cheque” serves compensatory purpose.What must be remembered is that the dishonour of cheque canBbe best described as regulatory offence that has been createdto serve the public interest in ensuring the reliability of theseinstruments. The impact of this offence is usually confined to theprivate parties involved in commercial transactions.”

30. However, this Court also noted that the introduction of criminalCremedy has given rise to worrying trend where cases under Section138 of the NI Act are disproportionately burdening the criminal justicesystem. This Court observed:

“5. Invariably, the provision of strong criminal remedy hasencouraged the institution of large number of cases that areDrelatable to the offence contemplated by Section 138 of the Act.So much so, that at present disproportionately large number ofcases involving the dishonour of cheques is choking our criminaljustice system, especially at the level of Magistrates’ Courts. Asper the 213[th] Report of the Law Commission of India, more thanE38 lakh cheque bouncing cases were pending before various courtsin the country as of October 2008. This is putting an unprecedentedstrain on our judicial system.”

31. Thus, under the shadow of Section 138 of the NI Act, partiesare encouraged to settle the dispute resulting in ultimate closure of theFcase rather than continuing with protracted litigation before the court.This is beneficial for the complainant as it results in early recovery ofmoney; alteration of the terms of the contract for higher compensationand avoidance of litigation. Equally, the accused is benefitted as it leadsto avoidance of conviction and sentence or payment of fine. It alsoleads to unburdening of the judicial system, which has huge pendencyGof complaints filed under Section 138 of the NI Act. In Damodar S.Prabhu (supra) this Court had emphasised that the compensatory aspectof the remedy under Section 138 of the NI Act must be preferred andhas encouraged litigants to resolve disputes amicably. The Court observed:

“18. It is quite obvious that with respect to the offence of dishonourHof cheques, it is the compensatory aspect of the remedy which

should be given priority over the punitive aspect. There is alsosome support for the apprehensions raised by the learned AttorneyGeneral that majority of cheque bounce cases are indeed beingcompromised or settled by way of compounding, albeit during thelater stages of litigation thereby contributing to undue delay injustice delivery. The problem herein is with the tendency of litigantsto belatedly choose compounding as means to resolve theirdispute. Furthermore, the written submissions filed on behalf ofthe learned Attorney General have stressed on the fact that unlikeSection 320 CrPC, Section 147 of the Negotiable InstrumentsAct provides no explicit guidance as to what stage compoundingcan or cannot be done and whether compounding can be done atthe instance of the complainant or with the leave of the court.19. As mentioned earlier, the learned Attorney General’ssubmission is that in the absence of statutory guidance, partiesare choosing compounding as method of last resort instead ofopting for it as soon as the Magistrates take cognizance of thecomplaints. One explanation for such behaviour could be that theaccused persons are willing to take the chance of progressingthrough the various stages of litigation and then choose the routeof settlement only when no other route remains. While suchbehaviour may be viewed as rational from the viewpoint of litigants,the hard facts are that the undue delay in opting for compoundingcontributes to the arrears pending before the courts at variouslevels. If the accused is willing to settle or compromise by way ofcompounding of the offence at later stage of litigation, it isgenerally indicative of some merit in the complainant’s case. Insuch cases it would be desirable if parties choose compoundingduring the earlier stages of litigation. If however, the accused hasa valid defence such as mistake, forgery or coercion amongother grounds, then the matter can be litigated through the specifiedforums.

23. We are also in agreement with the learned Attorney General’ssuggestions for controlling the filing of multiple complaints thatare relatable to the same transaction. It was submitted thatcomplaints are being increasingly filed in multiple jurisdictions in avexatious manner which causes tremendous harassment and

ABC

454SUPREME COURT REPORTS

Aprejudice to the drawers of the cheque. For instance, in the sametransaction pertaining to loan taken on an instalment basis to berepaid in equated monthly instalments, several cheques are takenwhich are dated for each monthly instalment and upon thedishonour of each of such cheques, different complaints are beingfiled in different courts which may also have jurisdiction in relationBto the complaint. In light of this submission, we direct that it shouldbe mandatory for the complainant to disclose that no othercomplaint has been filed in any other court in respect of the sametransaction. Such disclosure should be made on sworn affidavitwhich should accompany the complaint filed under Section 200CCrPC. If it is found that such multiple complaints have been filed,orders for transfer of the complaint to the first court should begiven, generally speaking, by the High Court after imposing heavycosts on the complainant for resorting to such practice. Thesedirections should be given effect prospectively.”

D32. This concern has been reiterated recently by ConstitutionBench of this Court in Re: Expeditious Trial of Cases under Section138 of the NI Act 1881[25], where it was observed that

“5. The situation has not improved as courts continue to strugglewith the humongous pendency of complaints under Section 138Eof the Act. The preliminary report submitted by the learned AmiciCuriae shows that as on 31.12.2019, the total number of criminalcases pending was 2.31 crores, out of which 35.16 lakh pertainedto Section 138 of the Act. The reasons for the backlog of cases,according to the learned Amici Curiae, is that while there is asteady increase in the institution of complaints every year, theFrate of disposal does not match the rate of institution of complaints.Delay in disposal of the complaints under Section 138 of the Acthas been due to reasons which we shall deal with in this order.

G23. Though we have referred all the other issues which are notdecided herein to the Committee appointed by this Court on10.03.2021, it is necessary to deal with the complaints under

25 Suo Motu Writ Petition (Crl.) No. 2 of 2020, 16 April 2021, available athttps://main.sci.gov.in/supremecourt/2020/9631/9631_2020_31_501_27616_HJudgement_16-Apr-2021.pdf.

Section 138 pending in Appellate Courts, High Courts and in thisCourt. We are informed by the learned Amici Curiae that casespending at the appellate stage and before the High Courts andthis Court can be settled through mediation. We request the HighCourts to identify the pending revisions arising out of complaintsfiled under Section 138 of the Act and refer them to mediation atthe earliest. The Courts before which appeals against judgmentsin complaints under Section 138 of the Act are pending should bedirected to make an effort to settle the disputes through mediation.”

33. The pendency of court proceedings under Section 138 of theNI Act and the multiplicity of complaints in which cause of actionarising from one transaction is litigated has dampened the ease of doingbusiness in India, impacted business sentiments and hindered investmentsfrom investors. Recognising these issues, the Ministry of Finance by anotice[26] dated 8 June 2020, has sought comments regardingdecriminalisation 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 issueregarding pendency of parallel proceedings for complaints under Section138 of the NI Act. The question that arises for our consideration iswhether once the settlement has been entered into, the complainant canbe allowed to pursue the original complaint under Section 138 of the NIAct.

35. The narration of facts would indicate that initially 18 chequesdated 8 August 2012 of total value of Rs.9 crores were issued by ACLin favour of the appellant (Gimpex Private Limited). The dishonour ofthe cheques on 21 August 2012 on the ground that the payment hadbeen stopped by the drawer or, as the case may be, for insufficiency offunds led to the issuance of legal notices under Section 138 of the NIAct and the institution of the first criminal complaint before the SeventhMetropolitan Magistrate. It was at that stage that Mukesh Goel, directorof ACL was arrested by the Central Crime Branch on 3 March 2013, inconnection with Crime No. 21/2013 which was registered for offencesunder Sections 409 and 506(1) of the IPC. In this backdrop, the deed ofcompromise was entered into on 12 March 2013. The deed ofcompromise envisages that:

26 https://financialservices.gov.in/sites/default/files/Decriminalization%20-%20Public%20Comments.pdf

A(i)A demand draft of Rs. 3 crores was handed over to thecomplainant on 11 March 2013;

(ii)On receipt of the amount of Rs.3 crores, the complainantwould not object to the bail application filed by Manoj Goel;

(iii)Apart from the amount of Rs.3 crores, the balance of Rs.7Bcrores would be paid within three months in three equalmonthly instalments each of Rs.2,33,33,333/- commencingfrom 11 April 2013 and ending on 11 June 2013;

(iv)The amount of Rs.2.33 crores would be divided equallybetween Sitaram Goel, Manoj Goel and ACL who wouldCissue cheques in favour of the complainant in complianceof the settlement;

(v)Towards discharge of the liability, post-dated cheques dated11 April 2013, 11 May 2013 and 11 June 2013 had beenhanded over; and

(vi)Any default in complying with the conditions set out in thecompromise deed would entitle the complainant to file afresh criminal complaint under the NI Act against the drawerof the cheques and to proceed against the other directors;and

(vii)Upon the payment of the entire settlement amount of Rs.10crores, all criminal complaints, suits, arbitration proceedingsand Section 138 proceedings would be withdrawn.

36. It is not in dispute that following the receipt of an amount ofRs. 3 crores, in pursuance of the compromise deed, Mukesh Goel wasFgranted bail by the competent court. The balance due and payable underthe deed of compromise has admittedly not been paid and the second setof cheques has been dishonoured. ACL proceeded to institute suitbefore the Madras High Court to challenge the deed of compromise.While the suit is pending, the interim application stands dismissed. In thisGbackdrop, there are two sets of criminal complaints under Section 138of the NI Act based on the dishonour of the first set of cheques and thesecond set respectively.

37. Allowing prosecution under both sets of complaints would becontrary to the purpose of the enactment. As noted above, it is theHcompensatory aspect of the remedy that should be given priority as

opposed to the punitive aspect. The complainant in such cases is primarilyconcerned with the recovery of money, the conviction of the accusedserves little purpose. In fact, the threat of jail acts as stick to ensurepayment of money. This Court in R. Vijayan v. Baby[27 ]has emphasisedhow punishment of the offender is of secondary concern for thecomplainant in the following terms:

“17. The apparent intention is to ensure that not only the offenderis punished, but also ensure that the complainant invariably receivesthe amount of the cheque by way of compensation Under Section357(1)(b) of the Code. Though complaint Under Section 138 ofthe Act is in regard to criminal liability for the offence ofdishonouring the cheque and not for the recovery of the chequeamount (which strictly speaking, has to be enforced by civilsuit), in practice once the criminal complaint is lodged UnderSection 138 of the Act, civil suit is seldom filed to recover theamount of the cheque. This is because of the provision enablingthe court to levy fine linked to the cheque amount and the usualdirection in such cases is for payment as compensation, the chequeamount, as loss incurred by the complainant on account ofdishonour of cheque. Under Section 357(1)(b) of the Code andthe provision for compounding the offences Under Section 138 ofthe Act most of the cases (except those where liability is denied)get compounded at one stage or the other by payment of thecheque amount with or without interest. Even where the offenceis not compounded, the courts tend to direct payment ofcompensation equal to the cheque amount (or even somethingmore towards interest) by levying fine commensurate with thecheque amount. stage has reached when most of thecomplainants, in particular the financing institutions (particularlyprivate financiers) view the proceedings under Section 138 of theAct, as proceeding for the recovery of the cheque amount, thepunishment of the drawer of the cheque for the offence ofdishonour, becoming secondary.”

38. When complainant party enters into compromise agreementwith the accused, it may be for multitude of reasons – highercompensation, faster recovery of money, uncertainty of trial and strengthof the complaint, among others. complainant enters into settlement

Awith open eyes and undertakes the risk of the accused failing to honourthe cheques issued pursuant to the settlement, based on certain benefitsthat the settlement agreement postulates. Once parties have voluntarilyentered into such an agreement and agree to abide by the consequencesof non-compliance of the settlement agreement, they cannot be allowedto reverse the effects of the agreement by pursuing both the originalBcomplaint and the subsequent complaint arising from such non-compliance. The settlement agreement subsumes the original complaint.Non-compliance of the terms of the settlement agreement or dishonourof cheques issued subsequent to it, would then give rise to fresh causeof action attracting liability under Section 138 of the NI Act and otherCremedies under civil law and criminal law.

39. contrary interpretation, which allows for the complainant topursue both the original complaint and the consequences arising out ofthe settlement agreement, would lead to contradictory results. First, itwould allow for the accused to be prosecuted and undergo trial for twoDdifferent complaints, which in its essence arise out of one underlyinglegal liability. Second, the accused would then face criminal liability fornot just the violation of the original agreement of the transaction whichhad resulted in issuance of the first set of cheques, but also the chequesissued pursuant to the compromise deed. Third, instead of reducinglitigation and ensuring faster recovery of money, it would increase theEburden of the criminal justice system where judicial time is being spenton adjudicating an offence which is essentially in the nature of civilwrong affecting private parties – problem noted in multiple judgementsof this Court cited above. Most importantly, allowing the complainant topursue parallel proceedings, one resulting from the original complaintFand the second emanating from the terms of the settlement would makethe settlement and issuance of fresh cheques or any other partial paymentmade towards the original liability meaningless. Such an interpretationwould discourage settlement of matters since they do not have any effecton the status quo, and in fact increase the protracted litigation beforethe court.G

40. Thus, in our view, complainant cannot pursue two parallelprosecutions for the same underlying transaction. Once settlementagreement has been entered into by the parties, the proceedings in theoriginal complaint cannot be sustained and fresh cause of action accruesto the complainant under the terms of the settlement deed. It has beenHurged by Mr V Giri, learned Senior Counsel, and Ms Liz Mathew, learned

counsel, that parallel prosecutions would not lead to multiplicity ofproceedings, as in the present case, both complaints are being tried bythe same court. This may be true for the case before us, however, thisCourt in Damodar S. Prabhu (supra) and Re: Expeditious Trial ofCases (supra) has recognized multiplicity of complaints as one of themajor reasons for delay in trial of cases under Section 138 of the NI Actand the consequent choking of the criminal justice system by adisproportionate number of Section 138 cases. While it is true that thetrial in this case is before one court, that is not necessarily the groundreality in all cases.41. At this stage, it may be necessary to dwell on the decision ofthis Court in Lalit Kumar Sharma v. State of Uttar Pradesh[28]andArun Kumar v. Anita Mishra[29]. In Lalit Kumar Sharma (supra), acompany, with two directors (Manish Arora and Ashish Narula), hadobtained loan for the amount of Rs.5,00,000/- and drew two chequesin an equivalent amount in favour of the first respondent. The chequeswere returned unpaid for “insufficiency of funds”. complaint wasinstituted under Section 138 of the NI Act against the two directors. Theappellants, who were also directors of the said company, were notsignatories to the cheques and had not been made parties to the complaint.During the pendency of the complaint, an agreement was entered intobetween Manish Arora, Ashish Narula and the complainant under whichit was envisaged that if cheque for Rs.5,02,050/- was issued, thecomplaint would be withdrawn. Manish Arora issued cheque whichwas returned on presentation for insufficiency of funds. Meanwhile,Ashish Narula and the company entered into an agreement stating thatthe liability arising from the said transaction was of the director personally,and not of the company. Another complaint was filed on the basis of thereturn of the subsequent cheque, where Manish Arora and Ashish Narulaand the appellants were made parties. In this backdrop, the Court notedthat in respect of the first cheques, the appellants were not proceededagainst and though compromise was entered into between ManishArora and Ashish Narula and the complainant, the complaint had notbeen withdrawn and the two directors had been found guilty of an offenceunder Section 138 of NI Act. Manish Arora had issued the second chequein terms of the settlement between the parties. It was in this backdrop,that the Court observed:

28 (2008) 5 SCC 638

29 (2020) 16 SCC 118

“15. Evidently, therefore, the second cheque was issued in termsof the compromise. It did not create new liability. As thecompromise did not fructify, the same cannot be said to havebeen issued towards payment of debt.

17. Thus, the second cheque was issued by Manish Arora for thepurpose of arriving at settlement. The said cheque was not issuedin discharge of the debt or liability of the Company of which theappellants were said to be the Directors. There was only onetransaction between Shri Ashish Narula, Shri Manish Arora,CDirectors of the Company and the complainant. They have alreadybeen punished. Thus, the question of entertaining the secondcomplaint did not arise. It was, in our opinion, wholly misconceived.The appeal, therefore, in our opinion, must be allowed. It is directedaccordingly. The respondent shall bear the costs of the appellants.Counsel’s fee assessed at Rs. 25,000.”

42. The Court noted that the second cheque was issued by ManishArora for arriving at the settlement in his personal capacity and not indischarge of debt or liability of the company. There was only onetransaction between Manish Arora and Ashish Narula and the complainantfor which there was an order of conviction and punishment. It was inEthis background that the Court held that the question of entertaining thesecond complaint against the appellants did not arise because the chequesissued pursuant to the settlement were not issued in discharge of thedebt or liability of the company of which the appellants were the directors.Thus, the decision in Lalit Kumar Sharma (supra) is not applicable inFthe present case as there was already an adjudication on the question ofliability and conviction with respect to the first cheque. The secondcomplaint was misconceived as the trial in the first complaint had beentaken to its logical conclusion and there remained no pending liability.Thus, there were no parallel proceedings that were pending with regardsto the same transaction. The first complaint had concluded, only afterGwhich the Court observed that the second complaint could not be initiated.In fact, Lalit Kumar Sharma (supra) bolsters the case that multipleprosecutions cannot arise from one legal liability under Section 138 ofthe NI Act and parties must either go to trial or compromise and settlethe matter.

43. The above decision has been subsequently considered in avery recent decision of two judge Bench in Arun Kumar v. AnitaMishra[30]. In that case, complaint was filed by the appellant underSection 138 against the respondent. The Judicial Magistrate, First Class,convicted and sentenced the respondent to six months’ imprisonmentand to fine. During the pendency of the criminal appeal, compromisewas arrived at before the Lok Adalat in terms of which the respondentissued post-dated cheque in favour of the appellant. The cheque wasdishonoured on presentation and this led to the institution of complaintunder Section 138. The respondent filed an application for dismissal ofthe complaint. The application and revision were dismissed. petitionunder Section 482 CrPC thereafter was allowed by the High Court onthe ground that the question of quashing the second complaint did notarise when the cheque was not issued in discharge of any debt or liabilitybut on account of settlement. Distinguishing the earlier judgment inLalit 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, inthat the cheque had not been issued in discharge of any debt orliability of the company of which the accused were said to be theDirectors. The cheque was found to have been issued for thepurpose of arriving at settlement.

10. In the instant case, the respondent clearly had liability. Asobserved above, there was an earlier adjudication whichled to the conviction of the respondent accused. Thus therewas adjudication of liability of the respondent accused.While the appeal was pending, the matter was settled inthe Lok Adalat in acknowledgment of liability of therespondent-accused to the appellant complainant.

11. The cheque issued pursuant to the order of the Lok Adalat,was also dishonoured. This clearly gave rise to fresh cause ofaction under Section 138 of the Negotiable Instruments Act.”

(emphasis supplied)

44. In the decision in Arun Kumar (supra), the subsequent cheque,following the conviction of the appellant in an earlier complaint underSection 138, was issued towards settlement which was arrived at before

Athe Lok Adalat during the pendency of the appeal. The Court distinguishedthe decision in Lalit Kumar Sharma (supra) by holding that the dishonourof the cheques in pursuance of the order of the Lok Adalat gave rise toa fresh cause of action under Section 138. Moreover, the Court waspersuaded to act on the second complaint as the first complaint hadresulted in clear finding of guilt, however no punishment had beenBgranted owing to the compromise. Thus, there was no doubt regardingthe existence of debt or liability in furtherance of which the chequewas issued. Hence, the decision in Arun Kumar (supra)would indicatethat the question as to whether the dishonour of subsequent cheque (inthat case pursuant to settlement before the Lok Adalat) gives rise to aCfresh cause of action is 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 principlethat cheque issued subsequently in terms of settlement, after thedishonour of an earlier cheque does not create new liability. LalitKumar Sharma (supra) was decided on the facts of the case, as noticedDearlier in the present judgment.

45. Based on the discussion above, in our opinion, once thecompromise deed dated 12 March 2013 was agreed, the original complaintmust be quashed and parties must proceed with the remedies availablein law under the settlement agreement.E

C.2 Liability arising from the settlement agreement

46. Once settlement agreement has been entered into betweenthe parties, the parties are bound by the terms of the agreement and anyviolation of the same may result in consequential action in civil and criminallaw.F

47. In the present case, the first set of cheques which were issuedallegedly towards discharge of the liability under the HSSA weredishonoured. deed of compromise was entered into thereafter on 12March 2013. The deed of compromise was partially implemented by theGpayment 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 Limitedwas to grant its no objection to the plea of bail of Manoj Goel. ManojGoel undertook to pay the balance of Rs. 7 crores within three months ininstalments. The second set of cheques issued pursuant to the deed ofcompromise were also dishonoured. The Single Judge of the High CourtHadverted to clause 9 of the deed of compromise which stipulated that

upon the payment of the entire settlement amount of Rs. 10 crores, allproceedings including the criminal complaints would have to bewithdrawn. The Single Judge was persuaded to quash the criminalcomplaint instituted against Manoj Goel on the basis of the second set ofcheques on the ground that:

(i)Since the proceedings under the NI Act for the dishonourof the first set of cheques was pending, the second set ofcheques issued only on the basis of the deed of compromisecould not be construed as being towards the discharge of aliability; and

(ii)The validity of the deed of compromise had been challengedin the suit pending before the High Court.

48. Each of these grounds which weighed with the Single Judgeof the High Court in our view is misplaced. Once the ingredients ofSection 138 of the NI Act are fulfilled, the statute clearly stipulates that“such person shall be deemed to have committed an offence”. Thus,once the ingredients of Section 138 are fulfilled, distinct offence arisesin respect of the dishonour of the cheques in question. There was nobasis for the learned Single Judge to conclude, particularly in the courseof the hearing of petition under Section 482 of the CrPC that thesecond set of cheques issued in pursuance of the deed of compromisecannot be construed as being towards the discharge of liability. Thequestion as to whether the liability exists or not is clearly matter oftrial. There was serious error on the part of the Single Judge in allowingthe petition under Section 482 to quash the prosecution on the basis thatthe deed of compromise would not constitute legally enforceable liability.The mere fact that suit is pending before the High Court challengingthe validity of the compromise deed would furnish no cogent basis toquash the proceedings under Section 138.

49. Mr Jayant Bhushan, learned Senior Counsel has made anearnest attempt to urge that under Section 39 of the Indian Contract Act1872 when party to contract has refused to perform his promise in itsentirety; the promisee has the option of putting an end to the contractunless he signifies his acquiescence in its continuance. Learned SeniorCounsel submitted that since proceedings under Section 138 are in thenature of civil wrong, though the legislature has imparted criminalsanctions. The deed of compromise, according to the submission,represented novation. Extending this line of argument, it was urged

Athat it was the appellant who did not withdraw the criminal proceedingsand pursued with the arbitration in which event its conduct must beconstrued to amount to repudiation of the settlement. Thus, it has beenurged that the appellant can only insist on the enforcement of the liabilityin relation to the first set of cheques.B50. We are unable to accept the line of argument on two grounds.First, as held above, settlement agreement effaces the original complaintand thus, it is not up to the parties, either complainant or accused, tosimply reverse the effects of that agreement and relitigate the originalcomplaint relating to the same underlying transaction under Section 138of the NI Act. Second, the breach of the deed of compromise has arisenCdue to the dishonour of the cheques which were issued by the accusedtowards discharge of the remaining balance of Rs. 7 crores. In thisbackdrop, it was farfetched for the High Court to have quashed theproceedings in exercise of its jurisdiction under Section 482. For as atwo judge Bench of this Court held in HMT Watches Ltd. v. M.A.DAbida[31]:

“10. […] Whether the cheques were given as security or not, orwhether there was outstanding liability or not is question of factwhich could have been determined only by the trial court afterrecording evidence of the parties. In our opinion, the High CourtEshould not have expressed its view on the disputed questions offact in petition under Section 482 of the Code of CriminalProcedure, to come to conclusion that the offence is not madeout. The High Court has erred in law in going into the factualaspects of the matter which were not admitted between theparties.”FFollowing the above principle, another decision of two judgeBench in Sampelly Satyanarayana Rao v. Indian Renewable EnergyDevelopment Agency Ltd.[32] held:“16. As is clear from the above observations of this Court, it iswell settled that while dealing with quashing petition, the courtGhas ordinarily to proceed on the basis of averments in the complaint.The defence of the accused cannot be considered at this stage.The court considering the prayer for quashing does not adjudicateupon disputed question of fact.”

31 (2015) 11 SCC 776H32 (2016) 10 SCC 458

51. Section 139 of the NI Act raises the presumption, unless thecontrary is proved that the holder of cheque receives the cheque ofthe nature referred to in Section 138 for the discharge, in whole or inpart, of any debt or other liability. Interpreting the provisions of Section139 in Kumar Exports v. Sharma Carpets[33] this Court has observed:

“18. Applying the definition of the word “proved” in Section 3 ofthe Evidence Act to the provisions of Sections 118 and 139 of theAct, it becomes evident that in trial under Section 138 of the Acta presumption will have to be made that every negotiable instrumentwas made or drawn for consideration and that it was executedfor discharge of debt or liability once the execution of negotiableinstrument is either proved or admitted. As soon as the complainantdischarges the burden to prove that the instrument, say note,was executed by the accused, the rules of presumptions underSections 118 and 139 of the Act help him shift the burden on theaccused. The presumptions will live, exist and survive and shallend only when the contrary is proved by the accused, that is, thecheque was not issued for consideration and in discharge of anydebt or liability. presumption is not in itself evidence, but onlymakes prima facie case for party for whose benefit it exists.

19. The use of the phrase “until the contrary is proved” in Section118 of the Act and use of the words “unless the contrary is proved”in Section 139 of the Act read with definitions of “may presume”and “shall presume” as given in Section 4 of the Evidence Act,makes it at once clear that presumptions to be raised under boththe provisions are rebuttable. When presumption is rebuttable, itonly points out that the party on whom lies the duty of going forwardwith evidence, on the fact presumed and when that party hasproduced evidence fairly and reasonably tending to show that thereal fact is not as presumed, the purpose of the presumption isover.”

52. The accused, the Court held, may adduce direct evidence toprove that the cheque in question was not supported by considerationand that there was no debt or liability to be discharged. To disprove thepresumption, the accused has to bring on the record circumstances whichmay lead the court to believe that the consideration and debt did not

Aexist or it was so probable that prudent man would act upon the pleathat they did not exist. After adverting to these decisions, two judgeBench in Kishan Rao v. Shankargouda[34], noted in that case that:

“21. In the present case, the trial court as well as the appellatecourt having found that cheque contained the signatures of theBaccused and it was given to the appellant to present in the Bank,the presumption under Section 139 was rightly raised which wasnot rebutted by the accused. The accused had not led any evidenceto rebut the aforesaid presumption. The accused even did notcome in the witness box to support his case. In the reply to thenotice which was given by the appellant, the accused took theCdefence that the cheque was stolen by the appellant. The saiddefence was rejected by the trial court after considering theevidence on record with regard to which no contrary view hasalso been expressed by the High Court.”53. Section 139 raises the presumption “unless the contrary isDproved”. Once the complainant discharges the burden of proving thatthe instrument was executed by the accused; the presumption underSection 139 shifts the burden on the accused. The expression “unlessthe contrary is proved” would demonstrate that it is only for the accusedat the trial to adduce evidence of such facts or circumstances on theEbasis of which the burden would stand discharged. These are matters ofevidence and trial. As held in Arun Kumar (supra) and discussed above,the determination of whether cheque pursuant to settlementagreement arises out of legal liability would be dependent on variousfactors, such as the underlying settlement agreement, the nature of theoriginal transaction and whether an adjudication on the finding of liabilityFwas arrived at in the original complaint, the defence raised by the accused,etc. The Single Judge was in error in proceeding to quash the criminalcomplaint on priori reasoning that the second set of cheques issued inpursuance of the deed of compromise were not in discharge of liabilityand on that basis proceeding to quash the proceedings under SectionG482 CrPC. The mere fact that suit has been instituted before the MadrasHigh Court challenging the deed of compromise would furnish nojustification for exercising the jurisdiction under Section 482. The deedof compromise would continue to be valid until decree of the appropriatecourt setting it aside is passed. The High Court, as we have explained

above, has failed to notice the true meaning and import of the presumptionunder Section 139 which can only be displaced on the basis of evidenceadduced at the trial.

54. submission was urged by the appellants that in the event thesecond complaint is found to be non-maintainable and the compromisedeed is held to be invalid, they would be left remediless and thus, the firsttrial should be allowed to continue. We do not find any merit in thissubmission. In the event that the compromise deed is found to be voidab initio on account of coercion, the very basis for quashing of the firstcomplaint is removed since the settlement agreement is deemed to havenever existed and hence it had no effect on the liability subsisting underthe first complaint. The appellants may then approach the competentcourt for reinstatement of the original complaint and the trial can proceedon that basis.

Conclusion

55. For the above reasons, we hereby pass the following order:

(i)We are of the view that the Single Judge was in error inquashing the complaint CC No. 389/2017 pending on thefile of the Seventh Metropolitan Magistrate, Chennai. Thejudgment of the Single Judge quashing the complaint is setaside;

(ii)Based on our analysis in Section C.1 above, we herebyquash the complaint CC Nos.3326-3329 of 2012 and CCNos.99-101 of 2013.

56. As regards the companion appeal, we have already noted thesubmission of Mr Jayant Bhushan that the issue as to whether thetransaction was not sale or otherwise could not have been enquiredinto in the course of the proceedings under Section 482 CrPC. All therights and contentions of the parties are kept open in the course of thetrial. Accordingly Criminal Appeal No. 1068 of 2021 arising out of SLP(Criminal) No. 6564 of 2019 and Criminal Appeal Nos.1069-1075 of2021 arising out of SLP (Criminal) Nos.7632-7638 of 2019 shall standpartially allowed in the above terms.

57. Pending application(s), if any, stand disposed of.

Divya Pandey