In a significant ruling, the Supreme Court has reiterated that the principle of res judicata applies equally to criminal proceedings, making the findings of one case binding in subsequent cases involving the same matter.
The decision came in the case of S.C. Garg vs. State of Uttar Pradesh & Anr., where the bench of Justices Pankaj Mithal and Prashant Kumar Mishra allowed an appeal and quashed a criminal case under Section 420 IPC, citing abuse of legal process.
“For the above reason it is absolutely clear that Tyagi cannot maintain a prosecution on the basis of allegations which were precisely his defence in the earlier proceedings wherein he was an accused. Thus, the present criminal proceedings deserve to be quashed on this ground alone,”
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Background of the Case
S.C. Garg, the Managing Director of Ruchira Papers Ltd., was involved in business dealings with R.N. Tyagi, partner at ID Packaging. Tyagi issued eleven cheques to Garg’s company, of which seven were dishonoured due to insufficient funds. Later, Tyagi issued three demand drafts to settle liabilities unrelated to the dishonoured cheques.
When the cheques were re-presented, only four were honoured. Ruchira Papers filed a case under Section 138 of the Negotiable Instruments Act, 1881, against Tyagi. In 2002, a Magistrate convicted Tyagi, rejecting his defence that the demand drafts covered the cheque amounts. The court recorded a clear finding that the demand drafts were meant to discharge separate liabilities.
Tyagi’s appeal and subsequent revision against the conviction were dismissed. Eventually, the parties settled their disputes, and the High Court disposed of the civil and criminal matters based on a compromise, with Tyagi paying ₹3,20,385 to Ruchira Papers.
Despite this resolution, Tyagi filed an FIR under Section 420 IPC, alleging that Garg fraudulently re-presented and encashed the cheques even after payment through demand drafts. A chargesheet was filed, and Garg approached the High Court under Section 482 CrPC, seeking to quash the case. The High Court refused, leading to the appeal before the Supreme Court.
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The Supreme Court highlighted that the findings from the earlier NI Act proceedings were binding on both parties. Since the court had already concluded that the demand drafts were unrelated to the dishonoured cheques, the same issue could not be reopened in a different proceeding.
“It is thus apparent that the finding recorded by the jurisdictional criminal court in 138 NI Act proceedings between the parties would be binding to both the parties in any subsequent proceedings involving the same issue.”
— Supreme Court
The Court clarified that the principle of res judicata applies in criminal matters, especially when findings are recorded after a full-fledged trial. It relied on precedents like Pritam Singh vs. State of Punjab (AIR 1956 SC 415), Bhagat Ram vs. State of Rajasthan, and Tarachand Jain vs. State of Rajasthan, which upheld the application of res judicata in criminal cases.
At the same time, it distinguished later cases like Devendra vs. State of UP and Muskan Enterprises vs. State of Punjab, noting that those were based on procedural dismissals and not full trials, and thus, did not contradict the earlier rulings.
“Reading three earlier decisions vis-à-vis the two later decisions, we do not think... there is any diversion in the applicability of the principle of res judicata.”
— Supreme Court
The Supreme Court also found fault with the prosecution for not arraying the company—ID Packaging—as an accused. It held that Garg could not be prosecuted in his personal capacity for alleged acts done by the company, particularly when there was no specific allegation of personal involvement.
Citing Aneeta Hada vs. Godfather Travels & Tours (2012) 5 SCC 661, the Court reaffirmed that a person cannot be held vicariously liable unless the company is prosecuted first.
“When a company has not been arraigned as an accused, such an order could not have been passed... The High Court should have been well advised to quash the criminal proceedings.”
— Supreme Court
The Court also observed that the magistrate had not applied judicial mind when issuing the summoning order and noted that it lacked reasoning.
Holding that the case against Garg was a counterblast to the earlier concluded proceedings under the NI Act, the Supreme Court quashed the chargesheet and the ongoing criminal proceedings under Section 420 IPC.
“The present is a fit case for allowing the appeal to quash the impugned criminal proceedings... Criminal Case No. 7489 of 2002 arising out of Crime No. 13 of 1998... is quashed. The appeal is allowed.”
— Supreme Court Judgment, April 16, 2025
Case Title: S.C. GARG VERSUS STATE OF UTTAR PRADESH & ANR.
Appearance:
For Appellant(s) Mr. Siddharth Aggarwal, Sr. Adv. Ms. Garima Bajaj, AOR Mr. Vishwajeet Singh Bhatti, Adv. Ms. Vismita Diwan, Adv. Mr. Sajal Awasthi, Adv. Mr. S. S. Nehra, AOR Mr. Chetan Sharma, Adv.
For Respondent(s) Mr. Vikas Bansal, Adv. Dr. Vijendra Singh, AOR Mr. Deepak Goel, Adv. Mr. Shailesh Sharma, Adv. M/S. Gaur & Nehra Law Firm, AOR Mr. Prafulla Kumar Behera, Adv. Mr. S S Nehra, Adv. Dr. K S Bhati, Adv. Mr. Sanjay Singh, Adv. Mr. Vikrant Nehra, Adv. Mr. H L Nimba, Adv.
