Devdatt Bharadwaj vs Santosh Verma

Sujoy Paul, J.—This petition filed under Section 482 of the Code of Criminal Procedure (Cr.P.C.) challenges the order dated 2.11.2011, passed by the court below in Criminal Revision No. 140/2011. The petitioner has also challenged the order dated 1.7.2010, by which cognizance was taken on the complaint filed under Section 138 of Negotiable Instruments Act, 1881 (for short, the "NI Act").

Shri Rajesh Shukla, learned counsel for the petitioner, contended that as per the story mentioned in the complaint, a cheque was issued on 10.3.2010. The same was dishonoured for want of sufficient fund in the bank. The complainant resubmitted the said cheque. It was again dishonoured on 23.3.2010. The complainant further submitted it before the bank, which was dishonoured on 12.6.2010. Before this date, on 9.4.2010 a legal notice was issued to the petitioner for making the payment. However, complaint is filed on 21.6.2010. The complaint is hopelessly barred by time from the date of first dishonour of cheque or from the date of issuance of cheque on 10.3.2010. He relied on (2009) 1 SCC (Cri) 558 (S.L. Constructions and another vs. Alapati Srinivasa Rao and another) and Tameeshwar Vaishnav Vs. Ramvishal Gupta, . Lastly, reliance is placed on Yogendra Pratap Singh Vs. Savitri Pandey, .

On a specific query from the Bench, Shri Shukla contended that the judgments of Supreme Court in S.L. Constructions and Tameeshwar Vaishnav (supra) are still good law. By taking assistance from the judgment of Yogendra Pratap Singh (supra), he urged that the cheque was lastly bounced on 12.6.2010. After this, no notice was issued nor the complainant waited for stipulated time as per section 138 r/w section 142 of NI Act. Hence, the complaint is not maintainable.

Prayer is opposed by Shri D.S. Kushwaha, learned counsel for the respondent. He supported the order of revisional court. He placed reliance on Kamlesh Kumar Vs. State of Bihar and Another, .

No other point is pressed by learned counsel for the parties.

I have heard learned counsel for the parties present and perused the record.

At the threshold, I wonder how the judgments of S.L. Constructions and Tameeshwar Vaishnav (supra) were cited with confidence and with a specific stand that the said judgments are still good law. On the strength of these judgments, it was urged by Shri Shukla that the cheque may be produced before the bank on more than one occasion. So long as the validity/life of cheque is alive, the complainant can very well produce it but cause of action would arise only once when it was filed for the first time. Heavy reliance is placed on para 16 of the judgment in Tameeshwar Vaishnav (supra). It is noteworthy that the cases of S.L. Constructions and Tameeshwar Vaishnav (supra) were decided by Division Bench of the Supreme Court. Same question cropped up before a three-Judge Bench in MSR Leathers Vs. S. Palaniappan and Another, . Pages 183 and 184 of this judgment makes it clear that the judgments of S.L. Constructions and Tameeshwar Vaishnav (supra) are impliedly overruled. See also page 190(g). In MSR Leathers (supra), the apex Court opined as under:-

Neither Section 138 nor Section 142 or any other provision contained in the NI Act forbids the holder or payee of the cheque from presenting the cheque for encashment on any number of occasions within a period of six months of its issue or within the period of its validity, whichever is earlier.

The proviso to Section 138 is all important and stipulates three distinct conditions precedent which must be satisfied before the dishonour of a cheque can constitute an offence and become punishable. The first condition is that the cheque ought to have 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. The second condition is that the payee or the holder in due course of the cheque, as the case may be, ought to make 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. The third condition is that the drawer of such a cheque should have failed to make 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. It is only upon the satisfaction of all the three conditions mentioned above and enumerated under the proviso to Section 138 as clauses (a), (b) and (c) thereof that an offence under Section 138 can be said to have been committed by the person issuing the cheque.

As per Section 142 of the NI Act, a complaint under Section 138 can be filed only after cause of action to do so has accrued in terms of clause (c) of proviso to Section 138 (provided the other two conditions specified above are also satisfied) which right remains legally enforceable for a period of 30 days counted from the date on which the cause of action accrued to him. There is nothing in the provisions of the Act that forbids the holder/payee of the cheque to demand by service of fresh notice under clause (b) of the proviso to Section 138 of the Act, the amount covered by the cheque, should there be a second or a successive dishonour of the cheque on its presentation.

There is nothing either in Section 138 or Section 142 of the N.I. Act to curtail the said right of the payee, leave alone a forfeiture of the said right for no better reason than the failure of the holder of the cheque to institute prosecution against the drawer when the cause of action to do so had first arisen. Simply because the prosecution for an offence under Section 138 , must, on the language of Section 142 be instituted within one month from the date of the failure of the drawer to make the payment does not in our view militate against the accrual of multiple causes of action to the holder of the cheque upon failure of the drawer to make the payment of the cheque amount. In the absence of any juristic principle on which such failure to prosecute on the basis of the first default in payment should result in forfeiture, it cannot be held that the payee would lose his right to institute such proceedings on a subsequent default that satisfies all the three requirements of Section 138 .

The holder of the cheque can present it before a bank any number of times within the period of six months or during the period of its validity, whichever is earlier. This right of the holder to present the cheque for encashment carries with it a corresponding obligation on the part of the drawer to ensure that the cheque drawn by him is honoured by the bank which stands in the capacity of an agent of the drawer vis-�-vis the holder of the cheque. If the holder of the cheque has a right there is no reason why the corresponding obligation of the drawer should also not continue every time the cheque is presented for encashment if it satisfies the requirements stipulated in clause (a) of the proviso to Section 138 . There is nothing in that proviso to even remotely suggest that clause (a) would have no application to a cheque presented for the second time if the same has already been dishonoured once. Indeed if the legislative intent was to restrict prosecution only to cases arising out of the first dishonour of a cheque nothing prevented the legislature from stipulating so in clause (a) itself. In the absence of any such provision, a dishonour whether based on a second or any successive presentation of a cheque for encashment would be a "dishonour" within the meaning of Section 138 and clause (a) of the proviso thereto. Hence so long as the cheque remains unpaid it is the continuing obligation of the drawer to make good the same by either arranging the funds in the account on which the cheque is drawn or liquidating the liability otherwise. It is true that a dishonour of the cheque can be made a basis for prosecution of the offender but once, but that is far from saying that the holder of the cheque does not have the discretion to choose out of several such defaults, one default, on which to launch such a prosecution. The omission or the failure of the holder to institute prosecution does not, therefore, give any immunity to the drawer so long as the cheque is dishonoured within its validity period and the conditions precedent for prosecution in terms of the proviso to Section 138 are satisfied.

There is anything in Section 142(b) to suggest that prosecution based on subsequent or successive dishonour is impermissible. While a complaint based on a default and notice to pay must be filed within a period of one month from the date the cause of action accrues, which implies the date on which the period of 15 days granted to the drawer to arrange the payment expires, there is nothing in Section 142 to suggest that expiry of any such limitation would absolve the drawer of his criminal liability should the cheque continue to get dishonoured by the bank on subsequent presentations. So long as the cheque is valid and so long as it is dishonoured upon presentation to the bank, the holder''s right to prosecute the drawer for the default committed by him remains valid and exercisable. The argument that the holder takes advantage by not filing a prosecution is unacceptable. By reason of a fresh presentation of a cheque followed by a fresh notice in terms of Section 138 , proviso clause (b), the drawer gets an extended period to make the payment and thereby benefits in terms of further opportunity to pay to avoid prosecution. Such fresh opportunity cannot help the defaulter on any juristic principle, to get a complete absolution from prosecution.

A prosecution based on a second or successive default in payment of the cheque amount should not be impermissible simply because no prosecution based on the first default which was followed by a statutory notice and a failure to pay had not been launched. If the entire purpose underlying Section 138 of the Negotiable Instruments Act is to compel the drawers to honour their commitments made in the course of their business or other affairs, there is no reason why a person who has issued a cheque which is dishonoured and who fails to make payment despite statutory notice served upon him should be immune to prosecution simply because the holder of the cheque has not rushed to the court with a complaint based on such default or simply because the drawer has made the holder defer prosecution promising to make arrangements for funds or for any other similar reason. There is no real or qualitative difference between a case where default is committed and prosecution immediately launched and another where the prosecution is deferred till the cheque presented again gets dishonoured for the second or successive time. The prosecution based upon second or successive dishonour of the cheque is permissible so long as the same satisfies the requirements stipulated in the proviso to Section 138 of the Negotiable Instruments Act.

There is nothing in the proviso to to Section 138 or Section 142 for that matter, to oblige the holder/payee of a dishonoured cheque to necessarily file a complaint even when he has acquired an indefeasible right to do so. The fact that an offence is complete need not necessarily lead to launch of prosecution especially when the offence is not a cognizable one. It follows that the complainant may, even when he has the immediate right to institute criminal proceedings against the drawer of the cheque, either at the request of the holder/payee of the cheque or on his own volition, refrain from instituting the proceedings based on the cause of action that has accrued to him. Such a decision to defer prosecution may be impelled by several considerations but more importantly it may be induced by an assurance which the drawer extends to the holder of the cheque that given some time, the payment covered by the cheques would be arranged, in the process rendering a time consuming and generally expensive legal recourse unnecessary. It may also be induced by a belief that a fresh presentation of the cheque may result in encashment for a variety of reasons including the vicissitudes of trade and business dealings where financial accommodation given by the parties to each other is not an unknown phenomenon. There is no reason why the parties should, by a process of interpretation, be forced to launch complaints where they can or may like to defer such action for good and valid reasons. After all, neither, the courts nor the parties stand to gain by institution of proceedings which may become unnecessary if cheque amount is paid by the drawer. The magistracy in this country is over-burdened by an avalanche of cases under Section 138 of Negotiable Instruments Act. If the first default itself must, in terms of the decision in Sadanandan Bhadran Vs. Madhavan Sunil Kumar, , result in filing of prosecution, avoidable litigation would become an inevitable bane of the legislation that was intended only to bring solemnity to cheques without forcing the parties to resort to proceedings in the courts of law. While there is no empirical data to suggest that the problems of overburdened magistracy and judicial system at the district level is entirely because of the compulsions arising out of the decisions in Sadanandan case, it is difficult to say that the law declared in that decision has not added to court congestion.

Hence, Sadanandan case, erroneously held that the second or subsequent dishonour of the cheque would not entitle the holder/payee to issue a statutory notice to the drawer nor would it entitle him to institute legal proceedings against the drawer in the event he fails to arrange the payment. It was erroneously held therein that while a cheque is presented afresh the right to prosecute the drawer if the cheque is dishonoured, is forfeited only because the previous dishonour had not resulted in immediate prosecution of the offender even when a notice under clause (b) of the proviso to Section 138 had been served upon the drawer. Hence, Sadanandan case is overruled.

(Emphasis Supplied)

In MSR Leathers (supra), the Apex Court opined that in Sadanandan Bhadran Vs. Madhavan Sunil Kumar, it was erroneously held that the second or subsequent dishonour of the cheque would not entitle the holder/payee to issue a statutory notice to the drawer nor would it entitle him to institute legal proceedings against the drawer in the event he fails to arrange the payment. But the Supreme Court specifically held that it was erroneously held in Sadanandan''s case that while a cheque is presented afresh the right to prosecute the drawer if the cheque is dishonoured, is forfeited only because the previous dishonour had not resulted in immediate prosecution of the offender even when a notice under clause (b) of the proviso to Section 138 had been served upon the drawer. Hence, Sadanandan case was overruled.

For this reason, I am unable to agree with the contention based on the judgments of S.L. Constructions and Tameeshwar Vaishnav (supra), wherein it is held that subsequent dishonour of cheque does not give cause of action and limitation is to be counted from the initial dishonour of the cheque.

During the course of argument, Shri Shukla argued that if limitation is to be counted from last date of dishonour of cheque, i.e., 12.6.2010 then the complainant should have issued a fresh notice and should have waited for stipulated time.

A perusal of the revision filed by the petitioner shows that this point was not raised and pressed by him before the revisional court. In the revision, it is submitted that complaint is barred by time. It suffers from delay. The petitioner for the first time has raised this ground before this Court. He can very well raise this ground in his defence before the court below. Since this point was not pressed into service before the court below, therefore, the court below had no occasion to deal with this aspect. I am not inclined to deal with this aspect for the first time in this matter. Liberty is reserved to the petitioner to take this ground before the trial court. It is observed that if such ground is taken, the trial court will deal with it in accordance with law.

Apart from this observation, I find no reason to interfere in this matter. Petition is dismissed with aforesaid observation.