SC ruling in cheque dishonour case

By T. Padmanabha Rao

NEW DELHI, JULY 22. If the `dishonour' of a cheque remains without any further escalation and does not snowball into a `cause of action' for launching a criminal complaint against the `drawer' (of the cheque) under Section 138 of the Negotiable Instrument Act (NI Act), the payee is not prevented from presenting the cheque once again within the permitted time (to the bank concerned for payment) and to make use of such presentation and `subsequent dishonour' for a `cause of action' to be founded for a launching a criminal complaint against the `drawer' of the cheque, the Supreme Court has ruled.

``If no complaint is filed `on the first cause of action' the payee (in a given case) is disentitled to create `another cause of action' to file a complaint for the purpose of launching a prosecution on it,'' the Bench said, citing an earlier SC ruling in Sadanandan case (1998).

Delivering the judgment, Mr. Justice K.T. Thomas dismissed an appeal from an appellant-company, its managing director and another (appellants) against a verdict of the Delhi High Court (HC) which, on the facts and circumstances of the case, upheld, an order of the trial court (Metropolitan Magistrate) holding that the complaint filed on April 11, 1996, by the respondent- concern against the appellant in the `cheque bouncing' case was not beyond the time prescribed by law and consequently, the trial court was not barred from taking cognizance of the `offence' under the NI Act upon the said complaint.

A cheque for Rs. 50 lakhs and another cheque for above Rs. 3 lakhs were drawn by the appellant (company) in favour of the respondent-complainant. The cheques were presented before a Scheduled Bank but they were dishonoured by the bank as per memo dated February 23, 1996. Notice was sent to the appellants by the respondent on March 2, 1996, calling upon them to pay the amount. As the appellants did not pay the amount within the `statutory period,' a complaint before a Metropolitan Magistrate was filed on April 11, 1996.

The appellants' plea before the trial court was that the cheque was earlier presented by the payee and then it was `dishonoured' by the bank and thereafter a notice was issued to the `drawer' (appellant) on December 1, 1995 but the payee did not file a complaint within one month of the expiry of 15 days after the said notice and hence the payee ``cannot create one more cause of action by presenting the cheque once again''. At any rate, the complaint filed on April 11, 1996, was beyond the time prescribed by law, the appellants urged.

The court repelled the plea on the premise that the notice issued on December 1, 1995, was under Section 434 of the Companies Act (for purpose of winding up of the company, if it is unable to pay its debts) which could not be treated as a notice under 138 of the NI Act. The court's view was upheld by the High Court. Hence the present appeal.

The Bench, which included Mr. Justice R.P. Sethi, noted that ``if any notice was issued under Section 434 of the Companies Act within 15 days of the information from the bank regarding return of the cheque drawn by a company as unpaid, such a notice would as well be good enough under clause (b) of the proviso to Section 138 of the NI Act.''

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