In Brief
The appellant borrowed Rs. 2 lakh and issued a cheque as payment. The cheque was dishonoured. He was prosecuted under Section 138 of the Negotiable Instruments Act and convicted with imprisonment and damages. However, the appellant had separately filed a civil suit claiming the cheque was merely security and obtained a decree declaring it so, with an injunction against its encashment. The Supreme Court held that the criminal court is bound by the civil court's declaration that the cheque was security-only. Therefore, the criminal proceedings based on cheque dishonour became unsustainable, the conviction was quashed, and damages were to be returned. The Court clarified that civil findings on the nature of the transaction bind the criminal court in such matters.
The lawyer headnote and full judgment text are available to registered users.