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Bindhu A.V. Vs. Sree Gokulam Chit and Finance Co. (P) Ltd. and Ors. - (High Court of Kerala) (17 Jan 2020)

Mere fact of arbitration clause in agreement cannot prevent criminal prosecution against accused, if an act constituting a criminal offence is prima facie made out



In facts of present case, the complainant is a company conducting chitty business. Mr. M.L. George was the subscriber of four chitties conducted by the complainant company. Mr. George had bid the chitties for Rs. 18,75,000 each and the amount was paid to him. Thereafter, he failed to repay the balance chitty amount of Rs. 45,27,242 to the complainant Company. The accused was the surety of Mr. George in the chitty transactions. She agreed to repay the amount and issued a cheque for Rs. 45,27,242 to the complainant in discharge of the liability.

The complainant presented the cheque in the bank. It was returned unpaid due to lack of sufficient amount in the account of the accused. The complainant sent a lawyer notice to the accused demanding payment of the amount of the cheque. The accused received the notice. She did not send any reply. She did not pay the amount of the cheque. Present petition under Section 482 of of Code of Criminal Procedure, (CrPC) is filed by the accused for quashing the proceedings initiated against her on the ground that the complainant has initiated arbitration proceedings against her and Mr. George.

It is elementary that, the civil proceedings or arbitration proceedings for recovery of money and the criminal proceedings under Section 138 of the Negotiable Instrument Act, 1881 are based on independent cause of action. Merely because, there is an arbitration clause in the agreement, that cannot prevent criminal prosecution against the accused, if an act constituting a criminal offence is, prima facie, made out.

In Trisuns Chemical Industry v. Rajesh Agarwal , it was held that merely because an act has a civil profile is not sufficient to denude it of its criminal outfit. Arbitration proceedings and criminal proceedings against a person, based on the same transaction, can be conducted or continued simultaneously.

The other factual disputes involved in the complaint filed against the Petitioner cannot be decided in a petition filed under Section 482 of CrPC. In the aforesaid circumstances, the prayer for quashing the proceedings against the Petitioner cannot be allowed. The petition is dismissed.

Relevant : Trisuns Chemical Industry vs. Rajesh Agarwal and others MANU/SC/0581/1999


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