In a judgment delivered by a Bench comprising Justice Pankaj Mithal and Justice Prashant Kumar Mishra, the Supreme Court has ruled that the principle of res judicata applies to criminal proceedings, and that findings recorded by a competent criminal court are binding on the parties in subsequent proceedings involving the same issue. Allowing a criminal appeal filed by a company director, the Court quashed proceedings under Section 420 IPC on the ground that the issue had already been conclusively adjudicated in earlier proceedings under Section 138 of the Negotiable Instruments Act.
Background
The appellant, S.C. Garg, was the Managing Director of Ruchira Papers Ltd., which had commercial dealings with respondent R.N. Tyagi’s firm, ID Packaging. During the course of business, Tyagi issued 11 cheques, seven of which were dishonoured. Ruchira Papers filed a complaint under Section 138 of the Negotiable Instruments Act, 1881. Tyagi’s defence—that the liabilities were already discharged via demand drafts—was rejected by both the Trial Magistrate and the Sessions Court. He was convicted and fined.
While these proceedings were pending, Tyagi filed a complaint under Section 156(3) CrPC alleging cheating, leading to the registration of an FIR in 1998 against Garg under Section 420 IPC. The basis of the allegation was that Garg had encashed four cheques despite having received the amount earlier through demand drafts. The company was not made an accused in the FIR.
Garg’s petition under Section 482 CrPC seeking quashing of the proceedings was dismissed by the High Court. He then approached the Supreme Court.
Supreme Court’s Observations on Res Judicata
The Court observed that the very issue forming the basis of the cheating allegations had already been adjudicated in the Section 138 NI Act proceedings, where it was conclusively held that the demand drafts were not in discharge of the liabilities arising out of the dishonoured cheques.
Citing Pritam Singh v. State of Punjab, Bhagat Ram v. State of Rajasthan, and State of Rajasthan v. Tarachand Jain, the Bench reaffirmed:
“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.”
The Court also distinguished the contrary views taken in Devendra v. State of U.P. and Muskan Enterprises v. State of Punjab, holding that those cases dealt with technical maintainability of second petitions under Section 482 CrPC and did not amount to a final adjudication on merits.
Non-Arraignment of Company Fatal to Prosecution
The Court further held that Garg, as Managing Director, could not be prosecuted in his personal capacity when the company was neither made an accused nor were there specific allegations against him individually.
Referring to the judgments in Aneeta Hada v. Godfather Travels & Tours (P) Ltd. and Dayle De’Souza v. Government of India, the Court reiterated that:
“For maintaining the prosecution under Section 141 of the [Negotiable Instruments] Act, arraigning of a company as an accused is imperative.”
In the absence of prosecution against the company, vicarious liability could not be fastened upon its director.
Final Decision
On these grounds, the Supreme Court allowed the appeal and quashed the proceedings:
“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.”
Criminal Case No. 7489 of 2002, arising out of Crime No. 13 of 1998 and pending before the Chief Judicial Magistrate, Ghaziabad, was accordingly quashed. The appeal was allowed.
Criminal Appeal No. 438 of 2018 | S.C. Garg vs State of U.P. & Anr.
