The Supreme Court set aside the conviction under the Section 138 NI Act case based on the civil court's declaration that the cheque was issued solely for security purposes.
The Supreme Court bench comprising Justices Sanjay Karol and Aravind Kumar was hearing an appeal and observed that the civil court decisions are binding on criminal courts, especially in matters of sentence and damages. The Bech noted that the criminal court must adhere to the ruling of the civil court, which determined that the disputed cheque was solely intended as a security.
In the case at hand, the appellant contested a judgment passed in Criminal Revision Petition No.1111 of 2011 by the High Court of Kerala. The appellant challenged this judgment, which only partially allowed his Revision Petition against a prior judgment issued by the Additional Sessions Judge, Thrissur, in Criminal Appeal No.673 of 2007. This Criminal Appeal upheld the appellant's conviction, which was initially handed down by the Judicial First Class Magistrate in CC No.51 of 2003, under Section 138 of the Negotiable Instruments Act, 1881.
The main issue revolved around whether a criminal proceeding could proceed when a civil decree related to the same transaction had already been issued by a competent civil court. The appellant had borrowed Rs.2,00,000 from the complainant and issued a cheque which was dishonoured due to insufficient funds. The complainant then initiated both civil and criminal proceedings against the appellant.
The Civil Court decreed in favour of the appellant, declaring the cheque to be a security cheque. However, the Criminal Court convicted the appellant based on the dishonour of the cheque.
The Supreme Court held that when civil and criminal proceedings arise from the same transaction, the decision of the civil court, especially concerning the nature of the transaction, is binding on the criminal court. The court emphasized that while civil court decisions are generally binding on criminal courts, this principle particularly applies to matters of sentence and damages.
Based on these principles, the Supreme Court concluded that the criminal proceedings stemming from the dishonoured cheque were unsustainable, as the civil court had already determined it to be a security cheque. Consequently, the conviction and judgment against the appellant were quashed, and pending applications were disposed of accordingly.