Can a Person be prosecuted under both Section 420 of IPC & Section 138 of NI Act?
If a cheque is dishonoured, the alternatives available with the drawee is to either file a civil suit or to file a complaint under section 138 of the Negotiable Instruments Act, 1881 or to file complaint under section 420 for cheating under the Indian Penal Code.

It is often being debated whether the payee/holder of the cheque, which has been dishonoured, can file criminal case under section 138 of Negotiable Instrument Act, 1881 against the drawer of the cheque and also simultaneously prosecute the defaulter under Section 420 of IPC. It is often pleaded that a person cannot be prosecuted for offence both under Section 420 of IPC as also for offence under Section 138 of NI Act on the same set of facts as the same tantamount to double jeopardy. It is argued on behalf of the accused that continuance of proceedings in the criminal complaints against the accused under both the sections of different Acts would be an abuse of process of law and it would amount of forum shopping as the facts & circumstances are the same.

Before deliberating on the subject, it would be relevant to reproduce section 138 of the Negotiable Instruments Act, 1881 and Section 420 of the Indian Penal Code, which read as under:

Section 138- Dishonour of cheque for insufficiency, etc., of funds in the account
Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for a term which may be extended to two years, or with fine which may extend to twice the amount of the cheque, or with both:

Provided that nothing contained in this section shall apply unless:

1. the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier
2. the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice; in writing, to the drawer of the cheque, within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and
3. the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.

Explanation: For the purposes of this section, debt of other liability means a legally enforceable debt or other liability.

Section 420 in The Indian Penal Code, 1860
420. Cheating and dishonestly inducing delivery of property:
Whoever cheats and thereby dishonestly induces the person deceived to deliver any property to any person, or to make, alter or destroy the whole or any part of a valuable security, or anything which is signed or sealed, and which is capable of being converted into a valuable security, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine.

One of the most important ingredients needed to establish the offence of cheating under Section 420 of the IPC is the making of a false representation. It is not enough to show that a false representation was made to establish a case under Section 420 of IPC for cheating; moreover, it must be shown that the accused knew the representation to be false and that it was made with the intent to deceive the complainant. Section 420 of the IPC for Cheating can only be used after that.

From the plain reading of both these sections, it is amply clear that the ambit & scope of both the sections in both the Acts is entirely different and there is no synchronization or unanimity or overlapping in the contents of both these sections. Thus, a Person can be prosecuted under both section 420 of IPC & section 138 of NI Act. The Courts have univocally held that offences under Section 138 of the NI Act and Section 420 of IPC are distinct from each other because ingredients of the two offences are different and therefore a defaulting person can be prosecuted under both the said sections separately.

It is relevant that in a prosecution under Section 138 of NI Act, fraudulent or dishonest intention at the time of issuance of cheque need not be proved but in a prosecution under Section 420 of IPC, such intention is an important ingredient which is required to be established. For proving offence u/s 138 of NI Act, it has to be established that the cheque has been issued by the accused to discharge a legally enforceable debt or liability and the same has been dishonoured for insufficiency of funds and despite receipt of statutory notice of demand, the accused has failed to pay the amount of cheque within the stipulated time.

It is only when accused fails to make the payment within the stipulated time upon receipt of notice of demand that the offence under Section 138 of NI Act is made out against an accused. In the case of prosecution for the charge under Section 420 of IPC, these ingredients need not be proved by the prosecution. However, it has to be proved by prosecution that at the very inception i.e. at the time of issuance of the cheque by the accused, he had a dishonest intention.

Thus, offence under Section 420 of IPC is made out at the time of issuance of the cheque itself which is not the case with offence under Section 138 of NI Act. Thus, the two offences are distinct from each other and the principle of double jeopardy or rule of estoppel does not come into play.

It would be trite to refer to Maqbool Hussain v. State of Bombay, AIR 1953 SC 325, wherein a Constitution Bench of the Apex Court dealt with the issue of double jeopardy. The Court held thus:

"the fundamental right which is guaranteed under Article 20 (2) enunciates the principle of "autrefois convict" or "double jeopardy" i.e. a person must not be put in peril twice for the same offence. The doctrine is based on the ancient maxim "nemo debet bis punire pro uno delicto", that is to say that no one ought to be twice punished for one offence. The plea of "autrefois convict" or "autrefois acquit" avers that the person has been previously convicted or acquitted on a charge for the same offence as that in respect of which he is arraigned.

The test is whether the former offence and the offence now charged have the same ingredients in the sense that the facts constituting the one are sufficient to justify a conviction of the other and not that the facts relied on by the prosecution are the same in the two trials. A plea of "autrefois acquit" is not proved unless it is shown that the verdict of acquittal of the previous charge necessarily involves an acquittal of the latter.

It would be apropos to refer to the Constitution Bench of the Apex Court in the case of State of Bombay vs. S. L. Apte and anr. AIR 1961 SC 578, wherein the Court dealing with the issue of double jeopardy under Article 20(2), held thus:

To operate as a bar the second prosecution and the consequential punishment thereunder, must be for "the same offence". The crucial requirement therefore for attracting the Article is that the offences are the same i.e. they should be identical. If, however, the two offences are distinct, then notwithstanding that the allegations of facts in the two complaints might be substantially similar, the benefit of the ban cannot be invoked. It is, therefore, necessary to analyse and compare not the allegations in the two complaints but the ingredients of the two offences and see whether their identity is made out. ..........

The next point to be considered is as regards the scope of Section 26 of the General Clauses Act. Though Section 26 in its opening words refers to "the act or omission constituting an offence under two or more enactments", the emphasis is not on the facts alleged in the two complaints but rather on the ingredients which constitute the two offences with which a person is charged. This is made clear by the concluding portion of the section which refers to "shall not be liable to be punished twice for the same offence". If the offences are not the same but are distinct, the ban imposed by this provision also cannot be invoked.

It would be befitting to refer to Apex Court judgment in A.A. Mulla & Ors. v. State of Maharashtra & Anr., AIR 1997 SC 1441 wherein the appellants were charged under Section 409 IPC and Section 5 of the Prevention of Corruption Act, 1947. The Apex Court dismissing the appeal and held thus:

After giving our careful consideration to the facts and circumstances of the case and the submissions made by the learned counsel for the respective parties, it appears to us that the ingredients of the offences for which the appellants were charged in the first trial are entirely different.

The second trial with which we are concerned in this appeal, envisages a different fact-situation and the enquiry for finding out facts constituting offences under the Customs Act and the Gold (Control) Act in the second trial is of a different nature. Not only the ingredients of offences in the previous and the second trial are different, the factual foundation of the first trial and such foundation for the second trial is also not indented (sic). Accordingly, the second trial was not barred under Section 403 Cr. P. C of 1898 as alleged by the appellants.

The Apex Court in the case of Sangeetaben Mahendrabhai Patel vs. State of Gujarat & anr. (2012) 7 SCC 621 dealt with the precise question as to whether prosecution for offence under Section 138 of the NI Act and offences under Section 406, 420 of IPC can be simultaneously pursued against an accused on the same set of facts, observed thus:

23. This Court has time and again explained the principle of issue estoppel in a criminal trial observing that where an issue of fact has been tried by a competent court on an earlier occasion and a finding has been recorded in favour of the accused, such a finding would constitute an estoppel or res judicata against the prosecution, not as a bar to the trial and conviction of the accused for a different or distinct offence, but as precluding the acceptance/reception of evidence to disturb the finding of fact when the accused is tried subsequently for a different offence.

This rule is distinct from the doctrine of double jeopardy as it does not prevent the trial of any offence but only precludes the evidence being led to prove a fact in issue as regards which evidence has already been led and a specific finding has been recorded at an earlier criminal trial. Thus, the rule relates only to the admissibility of evidence which is designed to upset a finding of fact recorded by a competent court in a previous trial on a factual issue...

27. Admittedly, the appellant had been tried earlier for the offences punishable under the provisions of Section 138 NI Act and the case is subjudice before the High Court. In the instant case, he is involved under Sections 406/420 read with Section 114 IPC. In the prosecution under Section 138 N.I. Act, the mens rea i.e. fraudulent or dishonest intention at the time of issuance of cheque is not required to be proved.

However, in the case under IPC involved herein, the issue of mens rea may be relevant. The offence punishable under Section 420 IPC is a serious one as the sentence of 7 years can be imposed. In the case under N.I. Act, there is a legal presumption that the cheque had been issued for discharging the antecedent liability and that presumption can be rebutted only by the person who draws the cheque.

Such a requirement is not there in the offences under IPC. In the case under N.I. Act, if a fine is imposed, it is to be adjusted to meet the legally enforceable liability. There cannot be such a requirement in the offences under IPC. The case under N.I. Act can only be initiated by filing a complaint. However, in a case under the IPC such a condition is not necessary.

28. There may be some overlapping of facts in both the cases but ingredients of offences are entirely different. Thus, the subsequent case is not barred by any of the aforesaid statutory provisions.

The Apex Court followed the judgment of Sangeetaben (supra) in the case of State of Uttar Pradesh vs Aman Mittal (2019) 12 SCALE 41, (2019) and reiterated that the prosecution for an offence under Section 420 IPC is maintainable even after the prosecution under Section 138 of the Negotiable Instruments Act, 1881 has been lodged.

The Apex Court also followed Sangeetaben (supra) in the cases of J. Vedhasingh vs R.M. Govindan 2022 LiveLaw (SC) 669 ; Ashwani Kumar @ Ashu & Anr vs State of Punjab (2015) 5 SCALE 265; State Of Jharkhand vs Sajal Chakraborty decided on 8 May, 2017 & Shivala Bhikhamsar vs Bablir Kumar Jatti and ors. decided on 8 May, 2017.

It would be befitting to refer to a judgment of the Andhra Pradesh High Court in the case of V. Kutumba Rao vs. Chandrasekhar Raso and anr. 2003 CriLJ 4405 wherein the Court observed thus:

11. In my considered opinion the offences under Section 420, IPC and Section 138 of the Act are distinct and separate offences. If a person fraudulently or dishonestly induces another person to deliver any property or to do or omit to do anything which he would not do or omit if he were not deceived and such act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property commits an offence of cheating. Such a person commits the offence punishable under Section 420, IPC. In a prosecution under Section 138, Negotiable Instruments Act any inducement so as to make the other person to deliver any property etc. as defined in Section 415, IPC, is not an ingredient.

If a person issues a cheque and subsequently if the cheque was dishonoured by the Bank for want of funds, etc. and thereafter even after issuance of demand notice, the said person fails to pay the amount covered by the cheque within the time stipulated by Negotiable Instruments Act, that person commits an offence punishable under Section 138 of the Act.

The question of inducement to other person to part with any property to do or omit to do anything does not at all arise for a decision in a prosecution under Section 138 of the Act. The offence under Section 138 of the Act is not committed on the date of issuing the cheque.

The offence happens after it was dishonoured by the Bank for specified reasons and thereafter even after demand the person concerned fails to pay the amount covered by the cheque to the other person. These facts do not fall for a decision in a prosecution under Section 420, I.P.C. Some times at the time of issuing the cheque a person may induce the other person to part with property, etc. If such inducement is dishonest or fraudulent he may be committing the offence of cheating and thereby he becomes liable for prosecution.

If such a person later within the time stipulated under the provisions of Negotiable Instruments Act repays the other person amount covered by the cheque he will not be liable for prosecution for the offence under Section 138 of the Act but still he can be prosecuted for the offence of cheating if at the time of issuing the cheque he had fraudulently or dishonestly induced the other person to part with property, etc.

In a prosecution under Section 138, Negotiable Instruments Act, the mens rea viz., fraudulent or dishonest intention at the time of issuance of cheque need not be proved. However, in a prosecution under Section 420,I.P.C. mens rea is an important ingredient to be established. In the former case the prosecution has to establish that the cheque was issued by accused to discharge a legally enforceable debt or other liability. This ingredient need not be proved in a prosecution for the charge under Section 420, I.P.C.

Therefore, the two offences covered by Section 420, IPC and Section 138, Negotiable Instruments Act are quite distinct and different offences even though sometimes there may be overlapping and sometimes the accused person may commit both the offences. The two offences cannot be construed as arising out of same set of facts. Therefore, Section 300, Cr.P.C. is not a bar for separate prosecutions for the offences punishable under Section 420, IPC and Section 138 of the Negotiable Instruments Act. The question of application of the principles of double jeopardy or rule estoppel does not come into play.

The acquittal of the accused for the charge under Section 420, IPC does not operate as estoppel or res judicata for a finding of fact or law to be given in prosecution under Section 138 of the Negotiable Instruments Act. The issue of fact and law to be tried and decided in prosecution under Section 420, IPC are not the same issue of fact and law to be tried in a prosecution under Section 138 of the Act. 15) From the aforesaid analysis of law on the subject, it is clear that offences under Section 138 of the NI Act and Section 420 of IPC are distinct from each other because ingredients of the two offences are different.

While in a prosecution under Section 138 of NI Act, fraudulent or dishonest intention at the time of issuance of cheque need not be proved but in a prosecution under Section 420 of IPC, such intention is an important ingredient to be established. For proving offence under Section 138 of NI Act, it has to be established that the cheque has been issued by the accused to discharge a legally enforceable debt or liability and the same has been dishonoured for insufficiency of funds etc. and despite receipt of statutory notice of demand, the accused has failed to pay the amount of cheque within the stipulated time.

It is only when accused fails to make the payment within the stipulated time upon receipt of notice of demand that the offence under Section 138 of NI Act is made out against an accused. In the case of prosecution for the charge under Section 420 of IPC, these ingredients need not be proved by the prosecution.

However, it has to be proved by prosecution that at the very inception i.e. at the time of issuance of the cheque by the accused, he had a dishonest intention. Thus, offence under Section 420 of IPC is made out at the time of issuance of the cheque itself which is not the case with offence under Section 138 of NI Act. Therefore, the two offences are distinct from each other and the principle of double jeopardy or rule of estoppel does not come into play."

Thus, it is no longer 'Res Integra' that complaint under section 138 of the NI Act and under section 420 of the Indian Penal Code are both simultaneously maintainable.

Written By: Inder Chand Jain
M: 8279945021, Email: [email protected]