S.C. Garg v. State of Uttar Pradesh

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Citation: 2025 INSC 493 : 2025 (4) KLR (SC) 77
Court: Supreme Court of India, Criminal Appellate Jurisdiction
Case Number: Criminal Appeal No. 438 of 2018; April 16, 2025
Judges: Pankaj Mithal, *Prashant Kumar Mishra

Criminal Law – Negotiable Instruments Act, 1881 – Section 138 – Indian Penal Code, 1860 – Section 420 – Criminal Procedure Code, 1973 – Section 482 – Res Judicata in Criminal Proceedings – Vicarious Liability – Quashing of Criminal Proceedings.

Appellant, Managing Director of a company, challenged prosecution under Section 420 IPC for allegedly cheating by encashing cheques despite prior payment through demand drafts – Held, principle of res judicata applies to criminal proceedings; findings in prior Section 138 NI Act proceedings, where respondent’s defence of payment was rejected, are binding – Prosecution of appellant without arraigning the company as accused is unsustainable as per Aneeta Hada v. Godfather Travels & Tours (P) Ltd. – Allegations vague and lacking specific attribution to appellant – Prosecution deemed a counterblast to concluded NI Act proceedings – Criminal proceedings quashed for being frivolous and vexatious.

Appeal allowed.

Facts

S.C. Garg, Managing Director of Ruchira Papers Ltd., appealed against the Allahabad High Court’s dismissal of his Section 482 Cr.P.C. petition to quash Criminal Case No. 7489 of 2002 under Section 420 IPC. The case stemmed from a business relationship between Ruchira Papers and ID Packaging, a partnership firm of respondent R.N. Tyagi. Tyagi issued 11 cheques between December 1997 and January 1998, which were dishonoured due to insufficient funds. After an agreement to re-present them, four cheques were encashed, but seven were dishonoured again. Ruchira Papers filed a complaint under Section 138 of the Negotiable Instruments Act, 1881 (NI Act), leading to Tyagi’s conviction in 2002, upheld in 2005. Tyagi alleged that Garg fraudulently encashed four cheques despite receiving payment via demand drafts, leading to an FIR against Garg under Section 420 IPC. The High Court refused to quash the chargesheet and summoning order, prompting this appeal.

Issues

  1. Whether the principle of res judicata applies to criminal proceedings, preventing re-litigation of issues decided in prior NI Act proceedings.
  2. Whether prosecution under Section 420 IPC against Garg, without arraigning the company, is maintainable.
  3. Whether the prosecution was a counterblast to the NI Act proceedings and lacked specific allegations against Garg.

Holding

The Supreme Court allowed the appeal and quashed the criminal proceedings, holding:

  1. The principle of res judicata applies to criminal proceedings, as established in Pritam Singh v. State of Punjab and other precedents. The trial court’s finding in the NI Act case—that demand drafts pertained to other liabilities, not the dishonoured cheques—was binding, barring Tyagi from re-litigating the same defence in the Section 420 IPC case.
  2. Prosecution of Garg without arraigning Ruchira Papers Ltd. was unsustainable, as per Aneeta Hada v. Godfather Travels & Tours (P) Ltd., which mandates the company’s inclusion for vicarious liability under statutes like the NI Act. No specific allegations were made against Garg personally, and the transactions were between companies.
  3. The prosecution was a counterblast to the NI Act proceedings, which concluded with a compromise. The FIR lacked merit, and the summoning order reflected non-application of mind, making the proceedings frivolous and vexatious.

Reasoning

The Court relied on precedents like Pritam Singh and Sambasivam v. Public Prosecutor to affirm res judicata’s applicability in criminal matters, distinguishing later cases like Devendra v. State of U.P., which dealt with pre-trial stages. The NI Act proceedings conclusively rejected Tyagi’s claim of payment via demand drafts, binding both parties. The Court emphasized that vicarious liability requires the company to be prosecuted, as clarified in Aneeta Hada, and found no evidence of Garg’s personal involvement. The prosecution’s timing and lack of specificity suggested it was retaliatory, warranting quashing under Section 482 Cr.P.C. to prevent abuse of process.

Disposition

The Supreme Court quashed Criminal Case No. 7489 of 2002 pending before the Chief Judicial Magistrate, Ghaziabad, and allowed the appeal.

Cited

  1. Pritam Singh & Anr. v. The State of Punjab (AIR 1956 SC 415)
    • A three-judge bench, relying on Sambasivam v. Public Prosecutor, Federal of Malaya, held that the principle of res judicata is applicable to criminal proceedings as it is to civil proceedings. In this case, the accused was acquitted in an earlier trial under the Arms Act for possession of a weapon. The Court ruled that the prosecution could not use the same recovery as evidence in a subsequent murder trial, as the acquittal was binding and conclusive in all subsequent proceedings between the parties. The maxim res judicata pro veritate accipitur applies to criminal matters.
  2. Bhagat Ram v. State of Rajasthan ((1972) 2 SCC 466)
    • A two-judge bench, approving Sambasivam and Pritam Singh, held that res judicata applies to criminal proceedings. The Court ruled that it was impermissible to convict an accused for an offence in a subsequent stage of the same proceedings if an acquittal had already been recorded for that offence. In this case, a single judge’s interference with an earlier acquittal by a Division Bench was deemed incompetent, reinforcing the binding nature of prior decisions.
  3. The State of Rajasthan v. Tarachand Jain ((1974) 3 SCC 72)
    • Referring to Bhagat Ram and Sambasivam, the Court held that res judicata applies in criminal proceedings, including to determine the binding effect of earlier judgments. Specifically, an earlier Division Bench judgment on the validity of a sanction for prosecution was binding in subsequent proceedings, preventing re-litigation of the same issue.
  4. Devendra & Ors. v. State of Uttar Pradesh & Anr. ((2009) 7 SCC 495)
    • A two-judge bench held that the principle of res judicata does not apply in criminal proceedings, specifically in the context of a second petition under Section 482 Cr.P.C. seeking quashing of an FIR after the first was dismissed. The Court rejected the argument that the earlier dismissal operated as res judicata, noting that the principles of res judicata under Section 11 of the Code of Civil Procedure have no application in criminal matters at the pre-trial stage.
  5. Muskan Enterprises & Anr. v. The State of Punjab & Anr. ((2024) INSC 1046)
    • A two-judge bench, including Justice Prashant Kumar Mishra, reiterated Devendra and held that res judicata has no application in criminal proceedings. In this case, a second Section 482 Cr.P.C. petition was dismissed as not maintainable after the first was withdrawn without liberty to reapply. The ruling was specific to the pre-trial stage and did not involve final adjudication on merits.
  6. Sambasivam v. Public Prosecutor, Federal of Malaya ((1950) AC 458)
    • A five-judge bench of the Judicial Committee held that a verdict of acquittal by a competent court after a lawful trial is binding and conclusive in all subsequent proceedings between the parties. The effect of an acquittal extends beyond preventing re-trial for the same offence, precluding the prosecution from challenging the correctness of the verdict in later proceedings. The maxim res judicata pro veritate accipitur applies equally to criminal and civil proceedings.
  7. Sharad Kumar Sanghi v. Sangita Rane ((2015) 12 SCC 781)
    • The Court held that criminal proceedings against a Managing Director without arraigning the company as an accused are unsustainable, especially when allegations are primarily against the company. Relying on Aneeta Hada, the Court emphasized that vicarious liability under statutes like the NI Act requires the company’s inclusion. Vague allegations without specific attribution to the Managing Director further justified quashing the proceedings.
  8. Dayle De’ Souza v. Government of India ((2021) 20 SCC 135)
    • The Court reiterated that prosecution of individuals (e.g., company officers) without arraigning the company is not maintainable unless the company itself is found to have committed the offence. Citing State of Madras v. C.V. Parekh, the Court clarified that vicarious liability under statutes presupposes the company’s involvement, and individual liability arises only when the company’s contravention is established.
  9. State of Madras v. C.V. Parekh ((1970) 3 SCC 491)
    • A three-judge bench held that for vicarious liability under Section 10 of the Essential Commodities Act to apply, the company itself must be prosecuted for the contravention. Without evidence or a finding that the company committed the offence, individuals in charge cannot be held liable. The Court dismissed the prosecution of respondents as the company was not charged.
  10. Sheoratan Agarwal v. State of M.P. ((1984) 4 SCC 352)
    • The Court deviated from C.V. Parekh, holding that under Section 10 of the Essential Commodities Act, individuals (e.g., company officers) could be prosecuted without simultaneously arraigning the company, provided the company’s contravention is established. However, this ruling was later overruled by Aneeta Hada for contradicting the larger bench decision in C.V. Parekh.
  11. Anil Hada v. Indian Acrylic Ltd. ((2000) 1 SCC 1)
    • The Court held that while prosecuting the company is necessary for its punishment, individuals falling under vicarious liability provisions (e.g., Section 141 of the NI Act) could be prosecuted without the company if the offence by the company is proven. This ruling was later overruled by Aneeta Hada, which mandated the company’s arraignment as a prerequisite for vicarious liability.
  12. Aneeta Hada v. Godfather Travels & Tours (P) Ltd. ((2012) 5 SCC 661)
    • A three-judge bench overruled Sheoratan Agarwal and Anil Hada, holding that arraigning the company as an accused is imperative for maintaining prosecution under Section 141 of the NI Act. Vicarious liability of company officers arises only when the company itself commits the offence, as the provision’s deeming fiction presupposes the company’s involvement. The decision in C.V. Parekh was upheld as binding.
  13. Anil Gupta v. Star India (P) Ltd. ((2014) 10 SCC 373)
    • Relying on Aneeta Hada, the Court set aside proceedings against an individual where the company was not a party, as vicarious liability under Section 141 of the NI Act requires the company’s prosecution. The High Court’s ruling allowing proceedings against the individual in the absence of the company was erroneous.
  14. Himanshu v. B. Shivamurthy ((2019) 3 SCC 797)
    • The Court reaffirmed Aneeta Hada, holding that prosecution of a company director for a cheque issued on behalf of the company is not maintainable without arraigning the company. The commission of the offence by the company is a prerequisite for vicarious liability under Section 141 of the NI Act. The absence of a demand notice to the company further invalidated the prosecution.
  15. Hindustan Unilever Ltd. v. State of M.P. ((2020) 10 SCC 751)
    • Applying Aneeta Hada to a pari materia provision under the Prevention of Food Adulteration Act, the Court held that prosecution of a nominated person without convicting the company is unsustainable. The conjoint requirement of prosecuting both the company and the nominated person means that failure to convict the company renders the individual’s conviction invalid.
  16. Delhi Race Club (1940) Ltd. & Ors. v. State of Uttar Pradesh & Anr. ((2024) SCC Online SC 2248)
    • The Court held that vicarious liability for offences under the IPC, such as cheating or criminal breach of trust, cannot be imposed on company office-bearers merely due to their position without specific allegations of their involvement. The Magistrate must apply mind to the evidence and allegations to ensure a prima facie case against individuals, and statutes must explicitly provide for vicarious liability.
  17. Iqbal @ Bala & Ors. v. State of Uttar Pradesh & Ors. ((2023) 8 SCC 734)
    • The Court emphasized that when an accused challenges an FIR as frivolous or vexatious under Section 482 Cr.P.C. or Article 226, the court must closely examine the FIR and surrounding circumstances. In cases of ulterior motives, courts should look beyond the FIR’s averments, consider the overall context, and read between the lines to assess the legitimacy of the prosecution, especially when multiple FIRs suggest personal vendetta.

Multiple Choice Questions (MCQs)

  1. What was the primary legal issue addressed by the Supreme Court in S.C. Garg v. State of Uttar Pradesh & Anr.?
    a) Applicability of double jeopardy in criminal proceedings
    b) Applicability of res judicata in criminal proceedings
    c) Validity of cheque dishonour under Section 138 of the NI Act
    d) Jurisdiction of the High Court under Section 482 Cr.P.C.
    Answer: b) Applicability of res judicata in criminal proceedings
    Explanation: The Court primarily addressed whether the principle of res judicata applies to criminal proceedings, holding that findings in prior NI Act proceedings were binding in the subsequent Section 420 IPC case.
  2. Why was the prosecution under Section 420 IPC against S.C. Garg quashed?
    a) Lack of evidence of cheque dishonour
    b) Failure to arraign the company as an accused and applicability of res judicata
    c) Absence of a valid FIR under Section 156(3) Cr.P.C.
    d) Non-compliance with Section 138 NI Act procedures
    Answer: b) Failure to arraign the company as an accused and applicability of res judicata
    Explanation: The Court quashed the proceedings because the company was not prosecuted, as required for vicarious liability (per Aneeta Hada), and the respondent’s allegations were barred by res judicata due to prior NI Act findings.
  3. Which precedent was upheld as binding regarding the applicability of res judicata in criminal proceedings?
    a) Devendra v. State of U.P.
    b) Pritam Singh v. The State of Punjab
    c) Muskan Enterprises v. The State of Punjab
    d) Anil Hada v. Indian Acrylic Ltd.
    Answer: b) Pritam Singh v. The State of Punjab
    Explanation: The Court relied on Pritam Singh (a three-judge bench decision) and Sambasivam to affirm that res judicata applies in criminal proceedings, distinguishing later cases like Devendra and Muskan Enterprises.
  4. What was the Court’s reasoning for finding the prosecution frivolous and vexatious?
    a) The FIR was filed without a magistrate’s order
    b) It was a counterblast to concluded NI Act proceedings
    c) The complainant lacked locus standi
    d) The cheques were not presented within the statutory period
    Answer: b) It was a counterblast to concluded NI Act proceedings
    Explanation: The Court found the prosecution to be retaliatory, initiated after Tyagi’s conviction under Section 138 NI Act, and lacking specific allegations against Garg personally.
  5. Under which provision was the company required to be arraigned for the prosecution to be valid?
    a) Section 420 of the Indian Penal Code
    b) Section 141 of the Negotiable Instruments Act
    c) Section 156(3) of the Cr.P.C.
    d) Section 10 of the Essential Commodities Act
    Answer: b) Section 141 of the Negotiable Instruments Act
    Explanation: The Court, citing Aneeta Hada, held that Section 141 NI Act mandates arraigning the company for vicarious liability of its officers, a principle extended to the present case.
  6. Which case was overruled by Aneeta Hada v. Godfather Travels & Tours (P) Ltd.?
    a) Pritam Singh v. The State of Punjab
    b) Sheoratan Agarwal v. State of M.P.
    c) Sambasivam v. Public Prosecutor
    d) Bhagat Ram v. State of Rajasthan
    Answer: b) Sheoratan Agarwal v. State of M.P.
    Explanation: Aneeta Hada overruled Sheoratan Agarwal and Anil Hada, clarifying that prosecution of company officers under Section 141 NI Act requires the company to be arraigned.
  7. What did the Court observe about the summoning order issued by the Magistrate?
    a) It was issued without jurisdiction
    b) It lacked reasoning, showing non-application of mind
    c) It was based on sufficient evidence
    d) It complied with Section 200 Cr.P.C.
    Answer: b) It lacked reasoning, showing non-application of mind
    Explanation: The Court noted that the summoning order was issued without proper reasoning, indicating a failure to apply judicial mind to the allegations and evidence.
  8. Which case emphasized the court’s duty to closely examine an FIR in frivolous prosecutions?
    a) Aneeta Hada v. Godfather Travels & Tours (P) Ltd.
    b) Iqbal @ Bala & Ors. v. State of Uttar Pradesh & Ors.
    c) Sharad Kumar Sanghi v. Sangita Rane
    d) Hindustan Unilever Ltd. v. State of M.P.
    Answer: b) Iqbal @ Bala & Ors. v. State of Uttar Pradesh & Ors.
    Explanation: The Court cited Iqbal @ Bala to stress that courts must scrutinize FIRs and surrounding circumstances closely when allegations appear frivolous or motivated by vengeance.

Frequently Asked Questions (FAQs)

  1. What was the main ground for quashing the criminal proceedings against S.C. Garg?
    The criminal proceedings were quashed on two primary grounds: (1) the principle of res judicata applied, as the respondent’s allegations (that payments were made via demand drafts) were rejected in prior Section 138 NI Act proceedings, making them binding; and (2) the prosecution was unsustainable without arraigning the company, Ruchira Papers Ltd., as an accused, as required for vicarious liability under precedents like Aneeta Hada. Additionally, the prosecution was deemed a counterblast to the NI Act case, lacking specific allegations against Garg.
  2. Does the principle of res judicata apply to criminal proceedings?
    Yes, the Supreme Court held that res judicata applies to criminal proceedings, relying on Pritam Singh v. The State of Punjab and Sambasivam v. Public Prosecutor. The Court clarified that findings in prior criminal proceedings, such as the NI Act case, are binding in subsequent proceedings involving the same issue, preventing re-litigation. However, cases like Devendra v. State of U.P. and Muskan Enterprises were distinguished as they dealt with pre-trial stages without final adjudication.
  3. Why was the company’s inclusion necessary for the prosecution under Section 420 IPC?
    Although the prosecution was under Section 420 IPC, the Court applied the principle from Aneeta Hada v. Godfather Travels & Tours (P) Ltd., which mandates arraigning the company for vicarious liability under statutes like Section 141 of the NI Act. Since the transactions were between companies and no specific allegations were made against Garg personally, prosecuting him alone without the company was unsustainable. The Court emphasized that vicarious liability requires the company’s involvement as a principal accused.
  4. How did the Court address the conflict between earlier and later precedents on res judicata?
    The Court reconciled the divergence by noting that earlier cases (Pritam Singh, Bhagat Ram, Tarachand Jain), decided after acquittals, supported res judicata in criminal proceedings, while later cases (Devendra, Muskan Enterprises), decided at pre-trial stages, did not involve final adjudication. The Court upheld Pritam Singh (a three-judge bench decision) as binding over the two-judge bench decisions in Devendra and Muskan Enterprises, affirming res judicata’s applicability.
  5. What role did the prior NI Act proceedings play in the judgment?
    The prior NI Act proceedings were central, as the trial court and sessions court had rejected Tyagi’s defence that the dishonoured cheques were paid via demand drafts, finding the drafts pertained to other liabilities. The Supreme Court held that these findings were binding under res judicata, preventing Tyagi from re-raising the same issue in the Section 420 IPC prosecution. This underscored the frivolous nature of the subsequent FIR.
  6. Why was the prosecution considered a counterblast?
    The prosecution was deemed a counterblast because it was initiated after Tyagi’s conviction under Section 138 NI Act and appeared retaliatory. The FIR was filed when the NI Act proceedings were pending, and the allegations mirrored Tyagi’s failed defence in the earlier case. The Court, citing Iqbal @ Bala, noted that the timing and lack of specific allegations against Garg suggested an ulterior motive to wreak vengeance.
  7. What was the significance of Aneeta Hada v. Godfather Travels & Tours (P) Ltd. in this case?
    Aneeta Hada was pivotal, as it established that for vicarious liability under Section 141 of the NI Act, the company must be arraigned as an accused. The Court extended this principle to the present case, holding that prosecuting Garg alone, without Ruchira Papers Ltd., was invalid, as the transactions were corporate and no personal liability was attributed to Garg.
  8. What did the Court say about the Magistrate’s summoning order?
    The Court criticized the summoning order as reflecting “complete non-application of mind,” as it lacked reasoning and failed to demonstrate that the Magistrate had scrutinized the allegations and evidence. Citing Pepsi Foods Ltd. v. Special Judicial Magistrate, the Court emphasized that summoning an accused is a serious matter requiring careful judicial consideration.
  9. Can an individual be prosecuted for company-related offences without specific allegations?
    No, the Court, citing Delhi Race Club (1940) Ltd. v. State of U.P. and Sharad Kumar Sanghi v. Sangita Rane, held that individuals, such as company office-bearers, cannot be prosecuted for offences like cheating under the IPC merely based on their position. Specific allegations of their involvement or direct actions are required, and vicarious liability requires statutory provisions and the company’s prosecution.
  10. How did the Court ensure the proceedings were not abused?
    The Court exercised its powers under Section 482 Cr.P.C. to quash the proceedings, preventing abuse of the judicial process. By applying res judicata, ensuring the company’s inclusion for vicarious liability, and scrutinizing the FIR for frivolousness (per Iqbal @ Bala), the Court safeguarded against vexatious prosecutions motivated by personal grudges.
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