In a recent key ruling by the Supreme Court of India in SLP(Crl.) No. 9778 of 2018, titled Prem Raj vs Poonamma Mennon, and another, it was observed that the outcome of the proceedings initiated under civil law would not have any binding effect on the outcome of the proceedings initiated under criminal law. However, it is clarified that the outcome of civil proceedings would be binding on the criminal proceedings only to the extent of holding the sentences or damages arising from criminal proceedings as unsustainable in law.
Under the facts of the case, the Appellant gave a cheque amounting to Rs. 2 lakhs to the Respondent in the form of security for payment of an outstanding debt. The cheque was dishonoured due to “insufficient funds and payment stopped by the drawer” when encashed by the Respondent. The Respondent filed a Complaint under Section 138 of the Negotiable Instruments Act, 1881, against the Appellant, thereby setting the criminal law into motion. On the other hand, the Appellant initiated a civil proceeding seeking a restraining order against the Respondent from encashing the cheque and a declaration to the effect that the cheque was issued as a security cheque.
The Civil Court decreed the suit in favour of the Appellant and restrained the Respondent from encashing the cheque, holding that the cheque was given only for security purposes. However, the criminal court convicted the Appellant for the offence of dishonouring the cheques and directed the Appellant to undergo simple imprisonment for one year as well as to pay compensation of Rs. 2 lakhs. When the decree of the civil court was cited before the criminal court, the criminal court observed that the order of the civil court was not binding upon the criminal court and that the hands of the criminal court could not be fettered by the civil court.
The Supreme Court referred to numerous authorities to determine the question posed before it, i.e., “Can the decision of the civil Court be binding upon the criminal courts?” In M/s Karam Chand Ganga Prasad and another v. Union of India and others (1970) 3 SCC 694, the Supreme Court held that the decisions of the civil courts are binding on the criminal courts, and the converse is not true. This position adopted in the Karam Chand case was overruled in the case of Satish Chander Ahuja v. Sneha Ahuja, wherein the Supreme Court opined that there is no embargo for a civil Court to consider the evidence led in the criminal proceedings.
In K.G. Premshanker v. Inspector of Police and another (2002) 8 SCC 87, it was held that no straight-jacket formula could be laid down and conflicting decisions of civil and criminal Courts would not be a relevant consideration except for the limited purpose of sentence and damages. Approving the view taken in K.G. Premshanker case, the 5-judge Constitution bench of the Supreme Court in Iqbal Marwah v. Meenakshi Marwah (2005) 4 SCC 370 held that there is no statutory provision or any legal principle that the findings recorded in one proceeding may be treated as final or binding in the other, as both the cases have to be decided on the basis of the evidence adduced therein. The Constitution bench further reiterated that the decision of one court would be binding on another to the limited extent of sentence or damages.
The Supreme Court, after considering the ratio of the aforesaid cases, held that since the subject of the dispute in civil and criminal proceedings was the cheque and once the civil court restrained the Respondent from encashing the cheque, holding that the cheque was issued only for the purposes of security, and the criminal court has imposed both sentence and damages, therefore, the outcome/ decision of the civil court would be binding on the criminal proceedings initiated under the Negotiable Instruments Act, 1882 for dishonouring of the cheque. Thus, the punishment imposed by the criminal court for cheque dishonour was held to be unsustainable in law.
Conclusion
This judgment of the Supreme Court has laid to rest the issue concerning the authority of decision of civil Courts in civil proceedings upon the criminal Courts, arising out of similar subject matter of dispute for certain limited purposes such as sentence or damages. The standard of proof required in the two proceedings is entirely different as the civil cases are decided on the basis of preponderance of probability, and in criminal cases, proof beyond a reasonable doubt is to be given. However, it is in the public interest that the conflicting decisions of civil and criminal courts should be avoided, and the decision of one court should be binding on another when the litigant faces the threat of sentence or damages.
Authors: Manisha Singh and Nisha Sharma
First Published by: Mondaq here