Supreme Court: Jurisdictional Criminal Court’s Finding In S. 138 NI Act Proceedings Is Binding To Both Parties In Subsequent Proceedings Involving Same Issue

The Supreme Court observed that the finding recorded by the jurisdictional Criminal Court in proceedings under Section 138 of the Negotiable Instruments Act, 1881 (NI Act), is binding to both the parties in any subsequent proceedings involving the same issue.

The Court observed thus in a Criminal Appeal preferred against the Judgment of the Allahabad High Court by which the Petition seeking quashment of a criminal case under Section 420 of the Indian Penal Code, 1860 (IPC), was dismissed.

The two-Judge Bench of Justice Pankaj Mithal and Justice Prashant Kumar Mishra held, “It is thus apparent that the finding recorded by the jurisdictional criminal court in 138 NI Act proceedings between the parties would be binding to both the parties in any subsequent proceedings involving the same issue.”

Senior Advocate Siddharth Aggarwal appeared for the Appellant while Advocate Vikas Bansal appeared for the Respondents.

Facts of the Case

The Appellant was the Managing Director of a company which was engaged in manufacturing craft papers. The company had business dealings with a partnership concern of the Respondent. In conduct of business between two entities, the parties used to maintain a running account and the Respondent used to issue cheques from time to time in favour of the said partnership concern. The Respondent had issued 11 cheques which were initially dishonoured due to insufficiency of funds in the account. To maintain business relations, both parties agreed to present the cheques again at a later stage upon instructions from the Respondent. In relation to the liabilities other than the amount involved in the 11 cheques, the Respondent made payment by issuing 03 demand drafts in the name of the Appellant’s company. Thereafter, the cheques were again presented for encashment upon which only 4 cheques were cleared leaving the remaining 7 to be dishonoured again.

The Appellant’s company filed a Complaint under Section 138 NI Act against the Respondent in relation to the 7 dishonoured cheques. The Magistrate convicted the Respondent and sentenced him to imprisonment till rising of Court along with a fine of Rs. Rs. 3,20,385/- (i.e. cumulative amount of the 7 dishonoured cheques). The Appeal filed by the Respondent challenging his conviction, was dismissed by the Additional Sessions Judge. Thereafter, the High Court disposed of the Criminal Revision as well as two other proceedings between the parties. The Appellant had instituted a Suit for recovery of the amount involved in which an ex-parte Decree was passed and that too was compromised upon payment by Respondent. When Section 138 NI Act proceedings were pending, the Respondent moved an Application seeking registration of FIR against the Appellant and company. The Magistrate took cognizance of the same and the Appellant preferred a Petition for quashing of the chargesheet and summoning order, which was dismissed by the High Court. Being aggrieved, he was before the Apex Court.

Reasoning

The Supreme Court after hearing the arguments from both sides, noted, “The question as to the applicability of principle of res judicata in criminal matters have been considered by this Court in several decisions. In the matters of Pritam Singh & Anr. vs. The State of Punjab7, Bhagat Ram vs. State of Rajasthan8 & The State of Rajasthan vs. Tarachand Jain9, this Court has consistently laid down the principle that the principle of res judicata is equally applicable in criminal matters.”

The Court added that, however, in two later decisions, namely, Devendra & Ors. v. State of Uttar Pradesh & Anr. (2009) and Muskan Enterprises & Anr. v. The State of Punjab & Anr. (2024) in which Justice Prashant Kumar Mishra was a member, the Court observed in the context of maintainability of second Petition under Section 482 of the Criminal Procedure Code, 1973 (CrPC) that principle of res judicata has no application in a criminal matter.

“For the above reason it is absolutely clear that Tyagi cannot maintain a prosecution on the basis of allegations which were precisely his defence in the earlier proceedings wherein he was an accused. Thus, the present criminal proceedings deserve to be quashed on this ground alone”, it said.

The Court, therefore, concluded that it is a fit case for allowing the Appeal to quash the impugned criminal proceedings instituted against the Appellant for offences under Section 420 of the IPC.

Accordingly, the Apex Court allowed the Appeal and quashed the case against the Appellant.

Cause Title- S.C. Garg v. State of Uttar Pradesh & Anr. (Neutral Citation: 2025 INSC 493)

Appearance:

Appellant: Senior Advocate Siddharth Aggarwal, AOR Garima Bajaj, and Vishwajeet Singh.

Respondents: AOR Vijendra Singh, Advocates Vikas Bansal, Krishna Pandey, Apurva Mehndiyan, K. Abhinandan, Shubhangi Nasa, Divyakshi Singh, Prafulla Kumar Behera, S. S. Nehra, and Sanjay Singh.

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