Supreme Court Sets Aside Conviction In S.138 NI Act Case Based On Civil Court's Declaration That Cheque Was Only For Security

Observing that a judgment of the civil court will be binding on the criminal court to the extent of sentences or damages, the Supreme Court on Tuesday (April 2) set aside a conviction in a criminal case for cheque dishonour under Section 138 of the Negotiable Instruments Act based on a finding in a civil suit between the same parties that the cheque was offered as a security.

While civil court judgments are not binding on criminal courts, the Court clarified that the ratio of the civil proceedings would be binding on criminal proceedings for certain limited purposes such as sentence or damages imposed by the criminal court.

“The position as per K.G. Premshanker vs. Inspector of Police & Anr is that sentence and damages would be excluded from the conflict of decisions in civil and criminal jurisdictions of the Courts. Therefore, in the present case, considering that the Court in criminal jurisdiction has imposed both sentence and damages, the ratio of the above-referred decision dictates that the Court in criminal jurisdiction would be bound by the civil Court having declared the cheque, the subject matter of dispute, to be only for the purposes of security.”, the Bench comprising Justices Sanjay Karol and Aravind Kumar said.

Reversing the findings of the High Court and Trial Court, the Judgment authored by Justice Sanjay Karol stated that the law doesn't envisage that the proceedings initiated under civil law and criminal law would be binding on each other, as the cases under both the proceedings have to be decided based on the evidence adduced therein.

Background

In the instant case, the criminal proceedings for cheque dishonor under Section 138 of the Negotiable Instruments Act, 1882 were initiated against the appellant/accused by the complainant/respondent. Conversely, the appellant/accused had initiated civil proceedings restraining the complainant/respondent to encash the said cheque given by the appellant/accused.

The appellant was found guilty of cheque dishonor and was awarded a punishment to suffer one-year imprisonment and a Rs. 2 lakhs fine. Whereas, the civil court decreed the suit against the complainant/respondent and restrained them from encashing the cheque amount.

The conviction of the appellant/accused was upheld by the High Court, following which a criminal appeal was preferred before the Supreme Court.

Supreme Court's Observation

At the outset, the Supreme Court observed that the conflicting decisions of the civil court and criminal court aren't binding on each other, however, the decision of the civil court will be binding on the criminal court only for limited purposes such as sentence or damages imposed by the criminal court, to make such sentence or damages unsustainable in law.

The court placed reliance on the Constitution Bench judgment of Iqbal Singh Marwah vs. Meenakshi Marwah which had endorsed the view taken in K.G. Premshanker. The court in Iqbal Singh Marwah held that there is neither any statutory provision nor any legal principle that the findings recorded in one proceeding may be treated as final or binding in the other, as both cases have to be decided based on the evidence adduced therein.

“No hard-and-fast rule can be laid down but we do not consider that the possibility of conflicting decisions in the civil and criminal courts is a relevant consideration. The law envisages such an eventuality when it expressly refrains from making the decision of one court binding on the other, or even relevant, except for certain limited purposes, such as sentence or damages.”, the court added in Iqbal Singh Marwah.

Based on the aforesaid observations, the court in the present case noted that due to the restrain imposed by the civil court in encasing the cheque amount, the criminal proceedings resulting from the cheque being returned unrealized due to the closure of the account would be unsustainable in law and, therefore, are to be quashed and set aside.

Accordingly, the appeal was allowed and the damages imposed by the trial court under the NI Act were directed to be returned to the appellant/accused.

Counsel For Petitioner(s) Mr. K.parameshwar, AOR Ms. Arti Gupta, Adv. Ms. Kanti, Adv. Mr. Chinmay Kalgaonkar, Adv. Ms. Raji Gururaj, Adv.

Counsel For Respondent(s) Mr. Pranjal Kishore, Adv. Mr. Atul Shankar Vinod, Adv. Mr. Dilip Pillai, Adv. Mr. Ajay Jain, Adv. Ms. Madiya Mushtaq Nadroo, Adv. Mr. M. P. Vinod, AOR Mr. Alim Anvar, Adv. Mr. Nishe Rajen Shonker, AOR Mrs. Anu K Joy, Adv.

Case Title: PREM RAJ VERSUS POONAMMA MENON & ANR.

Citation : 2024 LiveLaw (SC) 272

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