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S.C. Garg v. The State of Uttar Pradesh

Criminal Appeal · 2025 INSC 493Decided 16 Apr 2025
Crl.A. No.-000438-000438 - 2018
Justice Pankaj Mithal · Justice Prashant Kumar Mishra

Background

Garg, Managing Director of Ruchira Papers Ltd., had an ongoing business relationship with Tyagi's firm, ID Packaging. After several cheques from Tyagi were dishonoured, Tyagi was convicted under the NI Act, his defence that the amount had already been paid via separate demand drafts having been rejected by the criminal courts. Tyagi then filed a fresh FIR against Garg alleging that Garg had fraudulently encashed some of those very cheques despite having already received payment through the demand drafts: a cheating charge the High Court refused to quash.

Decision Breakdown

The Supreme Court quashed the criminal proceedings against Garg. It held that the finding already recorded by the criminal courts in the earlier Section 138 NI Act case, that the demand drafts related to other liabilities and not the cheques in question, was binding on the parties in this later prosecution, applying the principle that res judicata operates in criminal proceedings when there has been a final adjudication on merits (as in Pritam Singh, a three-judge bench ruling the Court held prevails over later two-judge bench decisions to the contrary). Separately, the Court held that since the alleged cheating was attributed to the company's conduct, the company itself needed to be made an accused before its director could be prosecuted individually, per the three-judge bench ruling in Aneeta Hada.

Lesson Learnt

A finding conclusively made by a criminal court on a specific factual issue binds the same parties in any later criminal case on that same issue, and a company must be named as an accused before criminal proceedings for its alleged wrongdoing can be maintained against its director or officer alone.

Official source (sci.gov.in)View Judgment (PDF)

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