Res Judicata Applies to Criminal Proceedings; “Prosecution Cannot Be Based on Defence Rejected in Earlier Trial”: Supreme Court Quashes Section 420 IPC Case
Kiran Raj
The Supreme Court Division Bench of Justice Pankaj Mithal and Justice Prashant Kumar Mishra quashed the criminal proceedings initiated against the appellant under Section 420 of the Indian Penal Code. The court held that the continuation of prosecution was impermissible as it was based on allegations previously adjudicated in proceedings under Section 138 of the Negotiable Instruments Act, 1881. It declared the subsequent criminal case to be an abuse of the process of law and observed that the vicarious liability sought to be imposed on the appellant, in the absence of the company being made an accused, was legally untenable.
The appellant, S.C. Garg, was the Managing Director of Ruchira Papers Ltd., a company engaged in the manufacture of craft papers. Business dealings were maintained with ID Packaging, a partnership firm represented by respondent R.N. Tyagi. These dealings involved a running account and the issuance of cheques from time to time by Tyagi in favour of Ruchira Papers Ltd.
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Between December 22, 1997, and January 30, 1998, a total of 11 cheques were issued by Tyagi. Upon initial presentation, all 11 cheques were dishonoured due to insufficient funds. Both parties agreed to re-present these cheques at a later date. In addition to the cheque transactions, Tyagi issued three separate demand drafts purportedly towards liabilities with the appellant’s company. On June 8, 1998, the same 11 cheques were re-presented. Of these, four cheques were cleared, while the remaining seven were once again dishonoured.
A criminal complaint was subsequently filed by the appellant under Section 138 of the Negotiable Instruments Act, 1881, in respect of the seven dishonoured cheques. The trial court, on October 25, 2002, convicted Tyagi under Section 138, rejecting his defence that the amounts covered by the cheques had already been paid through demand drafts. The court held that the demand drafts related to other liabilities and not to the ones under the impugned cheques. Tyagi was sentenced to imprisonment till the rising of the court and fined Rs. 3,20,385, the cumulative amount of the seven dishonoured cheques.
The appellate court, on March 17, 2005, upheld the trial court’s findings and sentence. Tyagi’s subsequent criminal revision was disposed of on October 10, 2012, on the basis of a compromise wherein the amount deposited in court was directed to be paid to Ruchira Papers Ltd. in full satisfaction of all claims, including those arising from a civil decree obtained ex parte by Garg.
Parallel to the 138 proceedings, Tyagi initiated criminal action against Garg by filing an application under Section 156(3) of the Cr.P.C., alleging that despite payment of the cheque amounts via demand drafts, Garg fraudulently encashed the four cleared cheques and thereby committed cheating. This led to FIR No. 549 of 1998 being registered, though the company Ruchira Papers Ltd. was not arrayed as an accused. A chargesheet was filed against Garg and another director, but again the company was not named. The Magistrate took cognizance on June 19, 2002, and issued a summoning order.
The appellant filed a petition under Section 482 Cr.P.C. seeking quashing of the chargesheet and summoning order, which was dismissed by the High Court. The present appeal before the Supreme Court arose from that dismissal.
The court recorded that, “in 138 NI Act proceedings between the parties, Tyagi raised a specific defence that there is no outstanding debt qua 07 cheques as the amount involved therein has already been paid by separate demand drafts.” This contention had been rejected by both the trial court and the appellate court.
In referencing the findings of the trial court, the judgment noted: “From this statement of account Ex.P-16, it can be safely presumed that these demand drafts pertaining to some other liability of the accused persons and these demand drafts were not issued to liquidate the liability of impugned cheques.”
The Supreme Court emphasized the applicability of res judicata, stating: “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.”
Citing precedents, the Bench observed: “The principle of res judicata is no less applicable to criminal than to civil proceedings,” and that a verdict of acquittal or conviction would be binding and conclusive in subsequent proceedings between the same parties.
The court recorded: “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.”
The Bench further noted the legal insufficiency of not arraying the company as an accused. Quoting from Sharad Kumar Sanghi v. Sangita Rane, it stated: “When a company has not been arrayed as a party, no proceeding can be initiated against it even where vicarious liability is fastened under certain statutes.”
Also quoting from Aneeta Hada v. Godfather Travels & Tours (P) Ltd., the court observed: “For maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative.”
The Supreme Court held that: “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.”
The court concluded its judgment with the following directive:
“For all the aforestated reasons, we unhesitatingly conclude that the present 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, Criminal Case No. 7489 of 2002 arising out of Crime No. 13 of 1998 pending in the Court of Chief Judicial Magistrate, Ghaziabad is quashed. The appeal is allowed.”
Advocates Representing the Parties
For the Petitioners: Mr. Siddharth Aggarwal, Sr. Adv.; Ms. Garima Bajaj, AOR; Mr. Vishwajeet Singh, Adv.
For the Respondents: Dr. Vijendra Singh, AOR; Mr. Krishna Pandey, Adv.; Mrs. Apurva Mehndiyan, Adv.; Mr. K. Abhinandan, Adv.; Ms. Shubhangi Nasa, Adv.; Ms. Divyakshi Singh, Adv.; Mr. Prafulla Kumar Behera, Adv.; Mr. S. S. Nehra, Adv.; Mr. Sanjay Singh, Adv.
Case Title: S.C. Garg v. State of Uttar Pradesh & Anr.
Neutral Citation: 2025 INSC 493
Case Number: Criminal Appeal No. 438 of 2018
Bench: Justice Pankaj Mithal, Justice Prashant Kumar Mishra
[Read/Download order]
