The Supreme Court of India on October 8, 2021 gave its verdict in the matter of, Messrs. Gimpex Private Limited v. Manoj Goel, [Criminal Appeal No. 1068 of 2021], setting aside the judgment of the single judge quashing the second complaint (CC No. 389/2017). The said order established that a complainant cannot seek two simultaneous prosecutions for the same underlying transaction under Section 138 of the Negotiable Instruments Act (“NI Act”).

Brief Facts:

In the present case, a series of cheques were dishonoured, prompting the filing of the first complaint under Section 138 of the NI Act. Following that, the parties entered into a deed of compromise to settle the case. While the first complaint was pending, the cheques provided in accordance with the compromise agreement were dishonoured, prompting the second complaint under Section 138 of the NI Act. Both proceedings were on-going at the same time.

Issue:

Whether the complainant can be allowed to pursue both the on-going cases under Section 138 of the NI Act or whether one of them must be quashed?

Key Observations by the Court:

1. At the very outset the Court raised concerns over the multiplicity of proceedings under the NI Act, especially over the matters of dishonouring of cheques. The Supreme Court reiterated the legislative objective behind the NI Act which is to ensure credibility of transactions by negotiable instruments and to ensure adequate compensation to the victim party, while leaving the scope for compromise both during the pendency of proceedings and after the conviction. Thus, the purpose of the statute is more inclined towards doing right to the victim than penalizing the perpetrator.
2. The Court also observed that prolonged pendency and multiplicity defies this objective and dampens the ease of doing business in India. Further, analysing the legal proposition before it, the Court held that, a complainant cannot be allowed to pursue two proceedings one emanating from the original complaint and the other from the compromise agreement between the two and that, allowing the former proceedings shall render the issuance of fresh cheques and any payment towards the compromise agreement meaningless.
3. The Court noted that, the two complaints will compel the accused to undergo trial for two complaints arising out of the same legal liability. Furthermore, the accused shall then face criminal liability not just for the original offence, which has been settled by the parties, but also pursuant to one under compromise deed. Such recourse will defy the objective of speedy recovery and shall add to the burden of trial courts.
4. The Court thereafter opined that when a party agrees to a compromise agreement basis its benefits, it also has knowledge of the associated risks due to failure to meet the terms of such compromise by the accused. Every party undertakes both the benefits and the risks with open eyes. Therefore, once such compromise is made, either of parties cannot be allowed to reverse its effects by pursuing both the complaints as the compromise deed subsumes the original complaint.

Decision by the Court:

The Supreme Court thus, held that, non-compliance with the conditions of the settlement agreement or dishonour of subsequent cheques, would give rise to a new cause of action imposing liability under Section 138 of the NI Act as well as other civil and criminal remedies. Therefore, a complainant cannot be allowed to pursue two proceedings one emanating from the original complaint and the other from the compromise agreement between the two.

Please find attached a copy of the judgment.

This update has been contributed by Harshita Jagwani (Senior Associate, Designate).