# M/S GIMPEX PRIVATE LIMITED v. MANOJ GOEL

- **Citation:** [2021] 11 S.C.R. 432
- **Court:** Supreme Court of India
- **Decided:** 2021-10-08
- **Case number:** Criminal Appeal No. 1068 of 2021
- **Bench:** Dr. Dhananjaya Y Chandrachud, Vikram Nath, B. V. Nagarathna
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/m-s-gimpex-private-limited-v-manoj-goel-34760
- **Pages:** 36

## Headnote

Negotiable Instruments Act, 1881 - ss. 138, 139 - Parallel
prosecutions arising from a single transaction u/s.138 -
Impermissibility of - Dishonour of cheques - First set of complaints
filed - Compromise - First complaint pending, cheques issued
pursuant to the compromise deed also dishonoured - Second
complaint filed - Both the complaints if can be pursued
simultaneously - Held: No - A settlement agreement effaces the
original complaint - Non-compliance of the terms of the settlement
agreement or dishonour of cheques issued subsequent to it gives
rise to a fresh cause of action - Allowing prosecution under both
sets of complaints would be contrary to the purpose of the enactment
- First complaint quashed - Further, Single Judge erred in quashing
the criminal complaint on a priori reasoning that the second set of
cheques issued in pursuance of the compromise deed were not in
discharge of a liability - Mere fact that a suit was instituted
challenging the compromise deed would not justify exercising
jurisdiction u/s.482 - It would continue to be valid until a decree of
the appropriate court setting it aside is passed - High Court failed
to notice the import of the presumption u/s.139 which can only be
displaced on the basis of evidence adduced at the trial - Judgment
of the Single Judge quashing the second complaint is set aside -
Code of Criminal Procedure, 1973 - s.482 - Penal Code, 1860 -
ss. 409, 506(1).
Negotiable Instruments Act, 1881:
s.138 - Ingredients of - Discussed.
s.138 - Purpose of - Held: Primary purpose of s.138 is to
ensure compensation to the complainant - The Act also allows for
parties to enter into a compromise, both during the pendency of the
complaint and even after the conviction of the accused.
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s.138 - Nature of offence under - Held: It is quasi-criminal,
while it arises out of a civil wrong, the law however, imposes a
criminal 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 Act
is quasi-criminal in that, while it arises out of a civil wrong, the
law, however, imposes a criminal penalty in the form of
imprisonment or fine. The purpose of the enactment is to provide
security to creditors and instil confidence in the banking system
of the country. 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 compromise, both during
the pendency of the complaint and even after the conviction of
the accused. [Paras 27, 28][450-D-E; 451-B]
1.2 Allowing prosecution under both sets of complaints
would be contrary to the purpose of the enactment. 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. A complainant enters into
a settlement with open eyes and undertakes the risk of the
accused failing to honour the cheques issued pursuant to the
settlement, based on certain benefits that the settlement
agreement postulates. Once parties have voluntarily entered into
such an agreement and agree to abide by the consequences of
non-compliance of the settlement agreement, they cannot be
allowed to reverse the effects of the agreement by pursuing both
the original complaint 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 dishonour of cheques issued subsequent to it, would
then give rise to a fresh cause of action attracting liability under
Section 138 of the NI Act and other remedies under civil law and
M/S GIMPEX PRIVATE LIMITED v. MANOJ GOEL
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432
[2021] 11 S.C.R. 432
M/S GIMPEX PRIVATE LIMITED
v.
MANOJ GOEL
(Criminal Appeal No. 1068 of 2021)
OCTOBER 08, 2021
[DR. DHANANJAYA Y CHANDRACHUD, VIKRAM NATH
AND B. V. NAGARATHNA, JJ.]
Negotiable Instruments Act, 1881 - ss. 138, 139 - Parallel
prosecutions arising from a single transaction u/s.138 -
Impermissibility of - Dishonour of cheques - First set of complaints
filed - Compromise - First complaint pending, cheques issued
pursuant to the compromise deed also dishonoured - Second
complaint filed - Both the complaints if can be pursued
simultaneously - Held: No - A settlement agreement effaces the
original complaint - Non-compliance of the terms of the settlement
agreement or dishonour of cheques issued subsequent to it gives
rise to a fresh cause of action - Allowing prosecution under both
sets of complaints would be contrary to the purpose of the enactment
- First complaint quashed - Further, Single Judge erred in quashing
the criminal complaint on a priori reasoning that the second set of
cheques issued in pursuance of the compromise deed were not in
discharge of a liability - Mere fact that a suit was instituted
challenging the compromise deed would not justify exercising
jurisdiction u/s.482 - It would continue to be valid until a decree of
the appropriate court setting it aside is passed - High Court failed
to notice the import of the presumption u/s.139 which can only be
displaced on the basis of evidence adduced at the trial - Judgment
of the Single Judge quashing the second complaint is set aside -
Code of Criminal Procedure, 1973 - s.482 - Penal Code, 1860 -
ss. 409, 506(1).
Negotiable Instruments Act, 1881:
s.138 - Ingredients of - Discussed.
s.138 - Purpose of - Held: Primary purpose of s.138 is to
ensure compensation to the complainant - The Act also allows for
parties to enter into a compromise, both during the pendency of the
complaint and even after the conviction of the accused.
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s.138 - Nature of offence under - Held: It is quasi-criminal,
while it arises out of a civil wrong, the law however, imposes a
criminal 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 Act
is quasi-criminal in that, while it arises out of a civil wrong, the
law, however, imposes a criminal penalty in the form of
imprisonment or fine. The purpose of the enactment is to provide
security to creditors and instil confidence in the banking system
of the country. 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 compromise, both during
the pendency of the complaint and even after the conviction of
the accused. [Paras 27, 28][450-D-E; 451-B]
1.2 Allowing prosecution under both sets of complaints
would be contrary to the purpose of the enactment. 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. A complainant enters into
a settlement with open eyes and undertakes the risk of the
accused failing to honour the cheques issued pursuant to the
settlement, based on certain benefits that the settlement
agreement postulates. Once parties have voluntarily entered into
such an agreement and agree to abide by the consequences of
non-compliance of the settlement agreement, they cannot be
allowed to reverse the effects of the agreement by pursuing both
the original complaint 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 dishonour of cheques issued subsequent to it, would
then give rise to a fresh cause of action attracting liability under
Section 138 of the NI Act and other remedies under civil law and
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criminal law. A contrary interpretation, which allows for the
complainant to pursue both the original complaint and the
consequences arising out of the settlement agreement, would
lead to contradictory results. First, it would allow for the accused
to be prosecuted 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.
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 court. Thus, a complainant
cannot pursue two parallel prosecutions for the same underlying
transaction. Once a settlement agreement has been entered into
by the parties, the proceedings in the original complaint cannot
be sustained and a fresh cause of action accrues to the complainant
under the terms of the settlement deed. Once the compromise
deed dated 12 March 2013 was agreed, the original complaint
must be quashed and parties must proceed with the remedies
available 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 of
the NI Act 1881 Decision of Supreme Court dtd.16th
April 2021 in Suo Motu Writ Petition (Crl.) No. 2 of
2020 - followed.
Lalit Kumar Sharma v. State of Uttar Pradesh (2008) 5
SCC 638 : [2008] 7 SCR 797 - held inapplicable.
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Arun Kumar v. Anita Mishra (2020) 16 SCC 118 -
referred to.
2.1 Liability arising from the settlement agreement
Once a settlement agreement has been entered into
between the parties, the parties are bound by the terms of the
agreement and any violation of the same may result in
consequential action in civil and criminal law. In the present case,
the first set of cheques which were issued allegedly towards
discharge of the liability under the HSSA were dishonoured. A
deed of compromise was entered into thereafter on 12 March
2013. The deed of compromise was partially 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 'MG'. 'MG' 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. [Paras 46, 47][462-E-H]
2.2 Once the ingredients of Section 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, a distinct offence arises
in respect of the dishonour of the cheques in question. There
was no basis for the Single Judge to conclude, particularly in the
course of the hearing of a petition under Section 482 of the CrPC
that the second set of cheques issued in pursuance of the deed of
compromise cannot be construed as being towards the discharge
of a liability. The question as to whether the liability exists or not
is clearly a matter of trial. There was a serious error on the part
of the Single Judge in allowing the petition under Section 482 to
quash the prosecution on the basis that the deed of compromise
would not constitute a legally enforceable liability. The mere fact
that a suit is pending before the High Court challenging the validity
of the compromise deed would furnish no cogent basis to quash
the proceedings under Section 138. A settlement agreement
effaces the original complaint and thus, it is not up to the parties,
either complainant or accused, to simply reverse the effects of
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that agreement and relitigate the original complaint relating to
the same underlying transaction under Section 138 of the NI Act.
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. Section 139 of the NI Act raises the presumption,
unless the contrary is proved that the holder of a cheque receives
the cheque of the nature referred to in Section 138 for the
discharge, in whole or in part, of any debt or other liability. Section
139 raises the presumption "unless the contrary is proved". Once
the complainant discharges the burden of proving that the
instrument was executed by the accused; the presumption under
Section 139 shifts the burden on the accused. The expression
"unless the contrary is proved" would demonstrate that it is only
for the accused at the trial to adduce evidence of such facts or
circumstances on the basis of which the burden would stand
discharged. These are matters of evidence and trial. The
determination of whether a cheque pursuant to a settlement
agreement arises out of a legal liability would be dependent on
various factors, such as the underlying settlement agreement,
the nature of the original transaction and whether an adjudication
on the finding of liability was arrived at in the original complaint,
the defence raised by the accused, etc. The Single Judge was in
error in proceeding to quash the criminal complaint on a priori
reasoning that the second set of cheques issued in pursuance of
the deed of compromise were not in discharge of a liability and
on that basis proceeding to quash the proceedings under Section
482 CrPC. The mere fact that a suit has been instituted before
the High Court challenging the deed of compromise would furnish
no justification for exercising the jurisdiction under Section 482.
The deed of compromise would continue to be valid until a decree
of the appropriate court setting it aside is passed. The High Court
failed to notice the true meaning and import of the presumption
under Section 139 which can only be displaced on the basis of
evidence adduced at the trial. The judgment of the Single Judge
quashing the complaint CC No. 389/2017 is set aside. The
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complaint CC Nos.3326-3329 of 2012 and CC Nos.99-101 of 2013
is 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 SCC
510:[1999] 3 Suppl. SCR 271; P Mohanraj and Others
v. Shah Brothers Ispat Private Limited (2021) 6 SCC
258; Meters and Instruments (P) Ltd. v. Kanchan Mehta
(2018) 1 SCC 560 : [2017] 10 SCR 66; Damodar S
Prabhu v. Sayed Babalal (2010) 5 SCC 663 : [2010] 5
SCR 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; Sampelly
Satyanarayana Rao v. Indian Renewable Energy
Development 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
[1999] 3 Suppl. SCR 271
relied on
Para 26
(2021) 6 SCC 258
relied on
Para 27
[2017] 10 SCR 66
relied on
Para 28
[2010] 5 SCR 678
relied on
Para 29
[2011] 14 SCR 712
relied on
Para 37
[2008] 7 SCR 797
held inapplicable
Para 41
(2020) 16 SCC 118
referred to
Para 41
CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No.
1068 of 2021.
From the Judgment and Order dated 10.04.2019 of the High Court
of Judicature at Madras in Criminal Original Petition No.25398 of 2018.
With
Criminal Appeal Nos. 1069-1075 of 2021.
M/S GIMPEX PRIVATE LIMITED v. MANOJ GOEL
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V. Giri, Jayant Bhushan, Sr. Advs., Ms. Liz Mathew, Ms. Ankita
Gandhi, Shrirang Varma, Navneet R., Ms. Sonali Jain, Ms. Vasudha
Jain, Diwakar Maheshwari, Karun Mehta, Shreyas Edupuganti, Amartya
Bhushan, Tushar Bhushan, Ketan Paul, Advs. for the Appearing Parties.
The Judgment of the Court was delivered by
DR. DHANANJAYA Y CHANDRACHUD, J.
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Factual Background..................................................3*
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Submissions of parties.............................................12*
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Analysis................................................................15*
C.1
Parallel prosecutions.............................................15*
C.2
Liability arising from the settlement agreement....33*
D
Conclusion............................................................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 complaint1under Section 138 of the Negotiable
Instruments Act 18812, pending on the fileof 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 19733.
2. On 17 and 27 April 2012, the appellant entered into three High
Seas Sale Agreements4 with Aanchal Cement Limited5. 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 inthe amount of Rs.50 lakhs, for a 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"
5 "ACL"
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in favour of the appellant in part payment of the outstanding liability. On
21 August 2012, the 18 cheques were dishonoured upon presentation
with an endorsement: "payments stopped by drawer"/ "insufficient
funds". A complaint was lodged by the appellant on 10 September
2012,with the Commissioner of Police, Egmore, Chennai, against ACL
and its directors for offences under Sections 409 and 506(1) of the Indian
Penal Code 18606, which was registered as an FIR in Central Crime
Branch on 1 February 2013as Crime No.21 of 2013. Between 22
September 2012 and 5 October 2012, the appellant issued legal notices
under Section 138 of the NI Act to ACL and its directors - Sitaram Goel,
Manoj Goel (the respondent) and Mukesh Goel in respect of the dishonor
of the 18 cheques.
3. On 22 October 2012 and 6 November 2012, the appellant filed
criminal complaints7 under Section 138 of the NI Act, in respect of the
dishonour of the cheques of the value of Rs.9 crores.This is the first set
of complaints filed by the appellant.
4. In 2013,Sitaram Goel filed petitions8 under Section 482 of the
Cr PC for quashing the complaints qua him.On 3 March 2013,Mukesh
Goel, a director of ACL was arrested by the Central Crime Branch. A
bail application was filed by Mukesh Goel on 5 March 2013.
5. During the pendency of the bail application, ACL approached
the appellant to settle the matter and arrive at a compromise. On 12
March 2013, the appellant and ACL entered into a deed of compromise
containing,inter alia, the following stipulations:
"1.
Based on the above agreement the "PARTY OF THE
FIRST PART" hand over DD No:271351, dt: 11/03/2013
for Rs. 3,00,00,000/- (Rupees Three Crore Only) drawn on
The Kapur Vysya Bank Limited, in favour of the "PARTY
OF THE SECOND PART", to the PARTY OF THE
SECOND PART" on 11/03/2013
2.
On receipt of Rs. 3 crore mentioned above, the "PARTY
OF THE SECOND PART" shall say no objection for the
bail application filed by the "PARTY OF THE FIRST
PART"
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
M/S GIMPEX PRIVATE LIMITED v. MANOJ GOEL
[DR. DHANANJAYA Y CHANDRACHUD, J.]
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3.
The "PARTY OF THE FIRST PART" agrees and undertake
to pay the balance amount of Rs. 7 crore within 3 months
in 3 equal instalments of Rs. 2,33,33,333/- (Rupees Two
Crore Thirty Three Lakh Thirty Three Thousand Three
Hundred and Thirty Three Only) every month to the
"PARTY OF THE SECOND PART". The monthly
instalment shall be paid on or before 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
signingthis 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 Part".
7.
The "PARTY OF THE FIRST PART" agrees and
undertakes that if any of the conditions agreed in this
compromise deed is not honoured that would amount to
cheating, fraud, breach of trust, etc. and the bail granted to
Sri. Mukesh Goel shall be deemed to have cancelled
automatically and the "PARTY OF THHE SECOND
PART" is also entitled to cancel the bail and also entitle to
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file a fresh criminal complaint besides NI Act, against the
drawer of cheques and also against other directors of the
"PARTY OF THE FIRST PART" and M/s Aanchal
Collection Limited".
8.
The "PARTY OF THE SECOND PART", on receipt of
Rs. 5,33,33,333/- which would be completed after honouring
all the cheques dt: 11/04/2013, shall withdraw the Garnishee
application filed in Arbitration proceedings filed against the
"PARTY OF THE FIRST PART" inA.No. 312/2013 and
ANo. 313/2013 inO.A. No. 42/2013, pending before the
Hon'ble High Court of Madras.
9.
After payment of the entire settlement amount of Rs. 10
crore by the "PARTY OF THE FIRST PART" to the
"PARTY OF THE SECOND PART", the PARTY OF THE
SECOND 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 before
VIIth, MM, George Town, Chennai against the "PARTY
OF THE FIRST PART". It is also assured and agreed by
the "PARTY OF THE FIRST PART" shall withdraw the
case 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 "PARTY
OF THE FIRST PART" either party shall have no claim
against each other on the issue of purchase of Clinker
purchased under the HSS agreements dt: 17/04/2013, 27/
04/2013 and 27/04/2013 and all the cases filed against each
other shall be withdrawn."
6. On the basis of the above compromise, Mukesh Goel was
granted bail. Sitaram Goel and the respondent were granted anticipatory
bail by the Metropolitan Magistrate on 26 March 2013 and 3 April 2013
on the basis of the deed of compromise.
7. On 8 April 2013, a suit9 was instituted by ACL and one of its
directors before the High Court of Judicature at Madras challenging the
deed of compromise as illegal, null and void, and for return of the cheques
9 CS No. 234 of 2013
M/S GIMPEX PRIVATE LIMITED v. MANOJ GOEL
[DR. DHANANJAYA Y CHANDRACHUD, J.]
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issued to the appellant pursuant to it. Initially, an interim injunction was
issued and the cheques 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
complaintsunder 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 complaint10
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 under Section 138 of the NI Act.
11. On 10 March 2017, ACL and its directors (Manoj Goel and
Mukesh Goel) instituted proceedings11 before the Madras High Court
under Section 482 of the CrPC to quash the proceedings pending against
them under Section 138 of the NI Act in the first set of complaints.On
19 August 2017, ACL and its directors instituted another proceeding12
before the Madras High Court under Sections 482 CrPC to quash the
proceedings initiated under Section 138 of the NI Act in the second
complaint. The latter was disposed of by the High Court by quashing the
proceedings as against ACL, Manoj Goel, and Vijay Srivastav, with the
complainant agreeing to proceed with the trial as against the respondent
who was the signatory of the cheques in question.
12. The High Court also disposed of the proceedings which were
instituted 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 2017
12 Crl. O.P. No. 17255 of 2017 and Crl. M.P. Nos 10587 and 10588 of 2017
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complaints. The orders of the High Court were challenged by ACL in
special leave petitions13. By its order dated 18 May 2018, this Court
granted liberty to ACL to approach the High Court in respect of the
specific plea that the compromise deed (and the 15 cheques issued
pursuant to it) was entered into under coercion.The order of this Court
reads as follows:
"Delay condoned.
It is argued by Mr. K.V. Viswanathan, learned senior counsel
appearing for the petitioners, that the petitioners have sought
quashing of the proceedings on altogether different grounds. He
has referred to Ground 'D' of the petition (Pg. 67 of the paper
book) wherein it is stated that under coercion deed of compromise
was signed between the petitioners and the respondent and
pursuant to which the petitioners had issued 15 fresh cheques in
full settlement of all claims of the respondent. This aspect, he
submits has not been looked into by the High Court while passing
the common order. The petitioners are granted liberty to approach
the High Court again to take up this plea and we expect the High
Court to deal with the issue on its own merits.
We make it clear that this Court has not expressed any opinion on
the merits of the issue and it is for the High Court to 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 complaintwas 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
proceedings14 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 petition15
instituted before this Court against the order of the High Court dated 24
November 2017, liberty was granted to the respondent, Manoj Goel, in
13 SLP (Criminal) Diary No.17687 and 17257 of 2018
14 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
M/S GIMPEX PRIVATE LIMITED v. MANOJ GOEL
[DR. DHANANJAYA Y CHANDRACHUD, J.]
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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
set of cheques on which the present prosecutions are initiated
were issued on the basis of a Deed of Compromise for the
discharge of the same liability for which the earlier 18 cheques
each of Rs. 50 lacs were issued. The counsel points out that in
respect of the prosecution relating to earlier cheques, this Court
had vide order dated 18.05.2018 granted leave to the petitioner to
reagitate the contention before the High Court that two separate
prosecutions under Section 138 of the Negotiable Instruments Act
in respect of two sets of cheques - both issued for the discharge
of the same liability cannot simultaneously stand. The petitioner is
granted liberty to approach the High Court again to take up this
plea and we expect the High Court to deal with the issue on its
own merits.
We make it clear that this Court has not expressed any opinion on
the merits of the issue and it is for the High Court to take its own
view.
With the aforesaid observations the Special Leave Petition is
disposed of.
Pending application(s), if any, stands disposed of accordingly."
15. On 18 September 2018, the respondent instituted proceedings16
before the Madras High Court to quash the proceedings pending against
him under Section 138 of the NI Act in the second complaint. By its
judgment dated 10 April 2019, the High Court disposed of the petitions
filed under Section 482 of the CrPC in respect of both the first and the
second complaints. The High Court:
(i)
Dismissed the proceedings instituted by ACL and its
directors against the first complaint and directed the Fast
Track Court No.IV George Town, Chennai to complete the
trial in the first set of complaints within three months;
16 Crl O.P No. 25398 of 2018
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(ii)
Allowed the proceedings instituted by the respondent, Manoj
Goeland quashed the proceedings in the second
complaintpending on the file of the Seventh Metropolitan
Magistrate.
16. On 3 June 2019, ACL filed an application17 seeking review
together with the clarification of the findings to the effect that they shall
not influence the trial of the criminal complaint. The High Court passed
an order thereon on 8 July 2019.
17. The judgment of the High Court dated 10 April 2019 has given
rise to the special leave petitions before us. A special leave petition18
was 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 petition19 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 complainthas 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.
Alsowhen the very deed of compromise itself is challenged in the
suit, the cheques issued on the said deed of compromise cannot
be construed as those cheques were issued for discharging their
liability."
17 Crl MP Nos. 8157, 8158, 8163, 8165, 8167, 8168 of 2019 in Crl OP No. 21731-37
of 2018
18 SLP (Criminal) No. 6564 of 2019
19 SLP (Criminal) Nos. 7632-7638 of 2019
M/S GIMPEX PRIVATE LIMITED v. MANOJ GOEL
[DR. DHANANJAYA Y CHANDRACHUD, J.]
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19. In the above extract, the High Court has held that since the
criminal complaints in respect of the dishonor of the first set of cheques
issued against the liability under the HSSA are still pending, the second
set of cheques issued on the basis of the deed of compromise "are not
issued for any liability".The High Court has also held that since the validity
of the deed of compromise is challenged in the suit pending before the
High Court, the cheques issued on the basis of the deed of compromise
cannot be construed towards the discharge of liability. In this batch of
two appeals, the appeal by Gimpex Private Limited (appellant) assails
the decision of the High Court to quash the second complaint under
Section 138 on the ground that the cheques which were issued in
pursuance of the deed of compromise could not be construed to be in
discharge of a liability. In the companion appeal, which has been instituted
by ACL and its directors (Manoj Goel and Mukesh Goel), the order of
the High Court allowing the first complaint in respect of the first set of
cheques to continue has been assailed.
B Submissions of parties
20. Mr V Giri, learned Senior Counsel appearing on behalf of the
appellants (Gimpex Private Limited) with Ms Liz Mathew
has urged the following submissions:
(i)
The offence under Section 138 of the NI Act, 1881 is
complete once its ingredients are fulfilled;
(ii)
Once the offence is complete and a prosecution is launched,
it must proceed to trial and it was not open to the High
court in the exercise of its jurisdiction under Section 482
CrPC to quash the prosecution on the basis of the deed of
compromise which has not been implemented due to the
default of the accused;
(iii)
Whether a liability exists and whether the cheques (as set
up in the defence) were issued as and by way of security
are matters for trial;
(iv)
In view of the presumption under Section 139 of the NI
Act, at this stage the Court has to proceed on the basis that
the cheques were issued in discharge of a legally enforceable
debt;
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(v)
The mere pendency of a suit seeking to challenge the deed
of compromise is not a ground to quash the criminal
complaint given the clear distinction in law between an order
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 was a
novated contracted between the parties;
(v)
In terms of the provisions of Section 39 of the Indian
Contract Act 1872 it is open to the appellant as the promisee
to elect whether to repudiate the agreement or continue
with its performance on breach of the agreement by the
other party (respondents);
(vi)
The appellant has in fact repudiated the deed of compromise
by failing to withdraw the criminal complaint and the arbitral
proceedings;
M/S GIMPEX PRIVATE LIMITED v. MANOJ GOEL
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(vii)
The appellant can in the circumstances only enforce the
liability in respect of the first set of cheques as a
consequence of which the criminal prosecution in respect
of only the first set may proceed; and
(viii) In the cross appeal, Mr Jayant Bhushan, learned Senior
Counsel submitted that the principal contention of the
accused is that the transaction was not as a matter of fact
a sale on high seas. However, learned Senior Counsel
submitted that this cannot be fairly agitated in proceedings
under Section 482 CrPC and it will be appropriate if the
issue is left open to be urged at the trial.
22. The rival submissions will now be considered.
C Analysis
23. The question before this Court is whether parallel prosecutions
arising from a single transaction under Section 138 of the NI Act can be
sustained. In this case, a set of cheques were dishonoured, leading to
filing of the first complaint under Section 138 of the NI Act. The parties
thereafter entered into a deed of compromise to settle the matter. While
the first complaint was pending, the cheques issued pursuant to the
compromise deed were dishonoured leading to the second complaint
under Section 138 of the NI Act. Both proceedings are pending
simultaneously and it is for this Court to decide whether the complainant
can be allowed to pursue both the cases or whether one of them must be
quashed and the consequences resulting from such quashing.
C.1 Parallel prosecutions
24. Section 138 of the NI Act stipulates thus:
"Dishonour of cheque for insufficiency, etc., of funds in the
account.
Where any cheque drawn by a person on an account maintained
by him with a banker for payment of any amount of money to
another person from out of that account for the discharge, in whole
or in part, of any debt or other liability, is returned by the bank
unpaid, either because of the amount of money standing to the
credit of that account is insufficient to honour the 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
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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 purposes of this section, debt of other
liability means a legally enforceable debt or other liability."
25. The ingredients of the offence under Section 138 are:
(i)
The drawing of a cheque by person on an account maintained
by him with the banker for the payment of any amount of
money to another from that account;
(ii)
The cheque being drawn for the discharge in whole or in
part 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 unpaid
either because the amount of money standing to the credit
of that account is insufficient to honour the cheque or that
it exceeds the amount arranged to be paid from that account;
(v)
A notice by the payee or the holder in due course making a
demand for the payment of the amount to the drawer of
the cheque within 30 days of the receipt of information from
the bank in regard to the return of the cheque; and
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(vi)
The drawer of the cheque failing to make payment of the
amount of money to the payee or the holder in due course
within 15 days of the receipt of the notice.
26. The ingredients of the offence were summarized in fairly similar
terms in a judgment of a two judge Bench of this Court in K Bhaskaran
v. Sankaran Vaidhyan Balan20. Justice K T Thomas observed:
"14. The offence under Section 138 of the Act can be completed
only with the concatenation of a number of acts. The following
are the acts which are components of the said offence: (1) drawing
of the cheque, (2) presentation of the cheque to the bank, (3)
returning the cheque unpaid by the drawee bank, (4) giving notice
in writing to the drawer of the cheque demanding payment of the
cheque amount, (5) failure of the drawer to make payment within
15 days of the receipt of the notice."
27. The nature of the offence under Section 138 of the NI Act is
quasi-criminal in that, while it arises out of a civil wrong, the law, however,
imposes a criminal penalty in the form of imprisonment or fine. The
purpose of the enactment is to provide security to creditors and instil
confidence in the banking system of the country. The nature of the
proceedings under Section 138 of the NI Act was considered by a three
judge Bench decision of this Court in P Mohanraj and Others v. Shah
Brothers Ispat Private Limited21, where Justice RF Nariman, after
adverting to the precedents of this Court, observed that:
"53. A perusal of the judgment in Ishwarlal Bhagwandas [S.A.L.
Narayan Row v.