One bounced cheque. Two prosecutions. The Supreme Court couldn't decide which is legal.

One bounced cheque, two prosecutions, and a question the Supreme Court couldn't settle

J. Vedhasingh, a civil engineer who returned from Saudi Arabia, bought a site from R.M. Govindan's father. Then he invested Rs. 62,32,754 in developing seven other sites owned by the respondents under a profit-sharing agreement. The respondents neither shared the profits nor returned the money. To settle the debt, respondent no.1 gave a cheque for Rs. 87,00,000. It bounced.

Vedhasingh did what any prudent creditor would do. He filed a complaint under Section 138 of the Negotiable Instruments Act, 1881 before the Fast Track Magistrate No.1, Coimbatore on 7 December 2015. And he got an FIR registered for cheating and criminal conspiracy under the Indian Penal Code — Sections 120B, 406, 420 and 34 IPC — through a complaint under Section 156(3) CrPC before the Judicial Magistrate No. III, Coimbatore on 30 October 2015.

That second move triggered a legal war that ended up before the Supreme Court, with the Court itself admitting it couldn't resolve the conflict. On 11 August 2022, a two-judge bench of Justice S. Abdul Nazeer and Justice J.K. Maheshwari referred the entire question to a larger bench. The stakes? Whether every person who receives a dishonoured cheque can also file an FIR for cheating — or whether the NI Act proceeding bars the IPC prosecution.

What the High Court did

The respondents — R.M. Govindan and others — moved the High Court of Judicature at Madras under Section 482 CrPC. They argued that since the NI Act case on the same facts was already pending, the IPC prosecution was an abuse of process. The High Court agreed. On 6 December 2018, it quashed the IPC proceedings entirely.

Vedhasingh appealed to the Supreme Court. The question was deceptively simple: can a person be prosecuted under both the Negotiable Instruments Act and the Indian Penal Code for the same set of facts?

The two lines of precedent that collided

The Supreme Court found itself staring at two irreconcilable lines of two-judge bench judgments.

Line one: IPC prosecution is barred. In G. Sagar Suri & Anr. v. State of UP & Others (2000) 2 SCC 636, the Court held that where a complaint under Section 138 NI Act is already pending, separate prosecution under Sections 406/420 IPC on the same facts is an abuse of process and liable to be quashed. Then came Kolla Veera Raghav Rao v. Gorantla Venkateswara Rao & Anr. (2011) 2 SCC 703, which went further. It held that Section 300(1) CrPC — which bars a second trial on the same facts even for a different offence — is wider than Article 20(2) of the Constitution. So if an NI Act conviction exists on the same facts, a prosecution under Section 420 IPC is barred.

Line two: IPC prosecution is not barred. In Sangeetaben Mahendrabhai Patel v. State of Gujarat & Anr. (2012) 7 SCC 621, the Court took the opposite view. It held that the ingredients of NI Act offences and IPC offences are entirely different. Mens rea is not required for Section 138 NI Act but is essential for Section 420 IPC. There may be overlapping facts, but the subsequent IPC case is not barred by any statutory provision. This view was followed in M/s V.S. Reddy and Sons v. Muthyala Ramalinga Reddy & Anr. (Criminal Appeal No. 1285 of 2015, decided 28.09.2015).

The respondents relied on G. Sagar Suri and Kolla Veera Raghav Rao. The appellant relied on Sangeetaben Patel and V.S. Reddy. Both sides had Supreme Court judgments in their favour.

The provision at the heart of the conflict

Section 300(1) of the Code of Criminal Procedure, 1973 states: "A person who has once been tried by a court of competent jurisdiction for an offence and convicted or acquitted of such offence shall, while such conviction or acquittal remains in force, not be liable to be tried again for the same offence, nor on the same facts for any other offence for which a different charge from the one made against him might have been made under sub-section (1) of Section 221, or for which he might have been convicted under sub-section (2) thereof."

The key phrase is "on the same facts for any other offence." The Kolla Veera Raghav Rao bench read this as a complete bar. The Sangeetaben Patel bench read it as inapplicable because the ingredients of the two offences are different — so the "same facts" test doesn't apply in the same way.

The Court also noted Article 20(2) of the Constitution: "No person shall be prosecuted and punished for the same offence more than once." But the question is whether "same offence" means the same legal ingredients or the same factual transaction.

Why the Supreme Court couldn't decide

Justice J.K. Maheshwari, writing for the bench, identified the problem. Two two-judge benches had taken conflicting views. Judicial decorum, the Court held, demands that when judgments of equal-strength benches conflict, the issue must be referred to a larger bench. The Court cited District Manager, APSRTC, Vijaywada v. K. Sivaji (2001) 2 SCC 135 and Chandra Prakash v. State of U.P. (2002) AIR SCW 1573 for this proposition.

The Court also flagged a deeper problem. A bench of the same strength should not take a conflicting view from a previous judgment of equal strength on the pretext that the issue was not raised or considered in the earlier judgment. That, the Court said, is improper.

THE QUESTION: Can a person be tried under both the Negotiable Instruments Act and the Indian Penal Code on the same set of facts, unaffected by Section 300(1) CrPC? The Supreme Court has referred this to a larger bench — until then, both lines of precedent remain good law, and the answer depends on which High Court you appear before.

What the Court actually observed — and didn't decide

The Court noted, almost in passing, that the ingredients of Section 138 NI Act and Section 420 IPC are different. Mens rea is not required for the former but is essential for the latter. This observation — found in paragraph 8 of the judgment — is technically obiter. The Court did not decide the issue. It left it for the larger bench.

But this observation is significant. It signals that the Court is aware that the ingredient-based analysis in Sangeetaben Patel has force. If the larger bench adopts this reasoning, it could mean that parallel prosecutions under the NI Act and IPC are permissible — as long as the ingredients of the offences are different, even if the underlying facts are the same.

On the other hand, if the larger bench adopts the Kolla Veera Raghav Rao approach, it could mean that once an NI Act case is filed on a set of facts, no IPC prosecution on those same facts can survive — regardless of whether the ingredients are different.

Why this matters for every advocate, CFO, and founder

For advocates: This is a live conflict. Until the larger bench decides, you need to check which line of precedent your High Court follows. In Madras, the High Court followed G. Sagar Suri and quashed the IPC proceedings. In Gujarat, the High Court might follow Sangeetaben Patel and allow parallel prosecutions. Forum shopping is a real possibility.

For CFOs and founders: If you receive a dishonoured cheque, you have two options. You can file a complaint under Section 138 NI Act — which is a strict liability offence, quick to prove, but with a cap on punishment (up to two years imprisonment or fine). Or you can file an FIR for cheating under Section 420 IPC — which requires proof of dishonest intention from the start, but carries a higher punishment (up to seven years imprisonment). Or you can do both. But if you do both, you risk the IPC proceedings being quashed — at least until the larger bench decides.

For defendants: If you are being prosecuted under both the NI Act and the IPC for the same bounced cheque, you have a strong argument that the IPC proceedings should be quashed — at least in High Courts that follow G. Sagar Suri. But if you are in a High Court that follows Sangeetaben Patel, you may have to fight both cases.

The bottom line

The Supreme Court has referred two questions to a larger bench: (1) Whether the G. Sagar Suri/Kolla Veera Raghav Rao line or the Sangeetaben Patel/V.S. Reddy line lays down the correct law; and (2) Whether on similar facts an accused can be tried under both the NI Act and IPC unaffected by Section 300(1) CrPC. Until the larger bench answers, the law remains uncertain — and every bounced cheque case carries the risk of a parallel criminal prosecution that may or may not survive.