Negotiable Instruments Act | Arbitration Proceedings And Section 138 NI Act Proceedings Can Continue Simultaneously: Delhi High Court

The Delhi High Court on Thursday ruled that arbitration proceedings and proceedings under Section 138 of the Negotiable Instruments Act (“NI Act”) arise from separate causes of action and pendency of one does not affect the other. Dismissing the petition, which sought quashing of a complaint u/s 138, Justice Amit Bansal observed, “There is no merit in the contention of the petitioners that the complaint under Section 138 of the NI Act is not maintainable in view of the ongoing arbitration proceedings between the parties.” In arriving at the conclusion, the following observation from the Supreme Court’s decision in Sri Krishna Agencies v. State of A.P. & Anr. was relied upon, “…there can be no bar to the simultaneous continuance of a criminal proceeding and a civil proceeding if the two arise from separate causes of action.” Notably, the petitioners had given a cheque to the respondent, which was later asked to not be deposited. The respondent, however, deposited the cheque and the same was dishonored. As such, the respondent preferred a complaint against the petitioners u/s 138 NI Act. The petitioners’ case was that the complaint case was not maintainable because in terms of an MoU signed between the parties, arbitration proceedings had already been initiated. The respondent, to the contrary, had argued that arbitration proceedings and proceedings u/s 138 NI Act are independent and could proceed simultaneously. Observing that the question whether cheque in question was given as a security or not could only be proved during trial, the court dismissed the petition. Advocates Rajiv Kumar and Sanjeev Gupta appeared for petitioners Advocates Ravi Prakash and Astu Khandelwal appeared for respondent Case Title: Newton Engineering and Chemicals Limited and Ors v. Uem India Pvt Ltd, CRL.M.C. 5931/2023Citation: 2023 LiveLaw (Del) 1189Click here to read/download judgment

Negotiable Instruments Act | Arbitration Proceedings And Section 138 NI Act Proceedings Can Continue Simultaneously: Delhi High Court

Debby Jain

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