Harshivinder Singh and Others vs Bhagat Trading Co.

Harphul Singh Brar, J.—This petition has been filed u/s 482, Cr.P.C., 1973 by Shri Harshivinder Singh, Rakesh Inder Singh, Managing partners of M/s. Hargobind Agro Products, Mohali and M/s. Hargobind Agro Products, Mohali through Harshivinder Singh, Managing partner (hereinafter called the petitioner-accused) for quashing the complaint filed by M/s. Bhagat Trading Co., New Market. Khanna through its partner Shri Surinder Ghai (hereinafter called the complainant-respondent) u/s 138 of the Negotiable Instruments Act, 1881 (amended by Banking Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988 (for short the ''Act'') in the Court of Judicial Magistrate First Class, Khanna.

This petition has come up for hearing before us for decision on a reference made by our learned brothers. S. Sudhalkar, J.

A brief reference to the facts of the case in hand is necessary for deciding the law point involved therein.

The complainant-respondent M/s. Bhagat Trading Co. is a registered firm-cum-shop concern duly registered with the Registrar of Firms, Punjab, Chandigarh and Surinder Ghai is its registered partner. A complaint has been filed by the complainant-respondent through its partner Shri Surinder Ghai.

The complainant-respondent is doing the business of sale and purchase of agricultural produce and also works as commission agents for the sale and purchases of agricultural produce at new grain market, Khanna.

The petitioner-accused are running a flour mill under the name and style of M/s. Hargobind Agro Products. The petitioner-accused Nos. 2 and 3 are the managing partners of petitioner-accused No. I. The petitioner-accused Nos. 2 and 3 are controlling the business affairs of the accused-company.

On 7-8-1989, petitioner-accused Nos. 2 and 3 approached the complainant-respondent at Khanna and settled the old account and acknowledged the liability of Rs. 3,50,370.62 p. including up-to-date interest.

Acknowledging the due debt of Rs. 3,50,370.62 petitioner-accused Nos. 2 and 3 issued 2 cheques bearing Machine Nos. 882332 and 882334 for a sum of Rs. 1,50,000/- and Rs. 2,00,000/- respectively, in favour of the complainant-respondent.

The complainant-respondent on 7-8-89 and 8-8-89 presented the abovesaid cheques in the bank for encashment but those cheques were returned to the complainant-respondent by the bank of the petitioner-accused (Canara Bank, Branch Office, Khanna) and no payment was made by the bankers of the petitioner-accused under the said cheques as there was no sufficient amount in the account to honour the cheques in question. After getting the information from the bank, the complainant-respondent personally approached the petitioner-accused Nos. 2 and 3.; They promised the complainant-respondent to pay the amount of cheques very soon. Thereafter, the complainant-respondent approached the: petitioner-accused so many times but they have been postponing the matter on one pretext or the other.

On 3-2-90, the complainant-respondent approached the petitioner-accused Nos. 2 and 3. They told the complainant-respondent for presenting the cheques again in the bank for encashment. The complainant-respondent again on 5-2-90, presented both the abovementioned cheques to the concerned bank for encashment but both the cheques were returned to the complainant-respondent and no payment was made by the bank of the petitioner-accused under the said cheques as there was no amount in the bank to honour the said cheques. The abovesaid cheques, thus, stood dishonoured.

The petitioner-accused had drawn the abovementioned cheques from their bank i.e. Canara Bank, Branch Office, Khanna and had issued the same to the complainant-respondent for payment of Rs. 3,50,000/- to the complainant-respondent firm for discharging in part of their debt of Rs. 3,50,370.62.

Thus, in this way, the concerned bank returned the above-mentioned cheques to the complainant-respondent without encashment. After receiving the intimation from the bank on 5-2-90 the complainant-respondent made a demand for the payment of Rs. 3,50,000/- by giving a notice under the Act on 8-2-90 in writing to the petitioner-accused under registered A.D. and postal UPC. The complainant-respondent firm informed the petitioner-accused regarding return of the cheques as unpaid and requested them to pay a sum of Rs. 3.50.000/-. The petitioner-accused received the notice sent under UPC but petitioner-accused Nos. 2 and 3 refused to take delivery of the notice sent by the complainant-respondent firm under, registered AD notice on 5-2-90.

After receipt of the abovesaid notice the petitioner-accused Nos. 2 and 3 approached the respondent complainant firm and started postponing the payment on one pretext or the other and at the same lime the complainant-respondent clearly and firmly demanded the payment of cheques from the petitioner-accused.

The petitioner-accused failed to make the payment of the said amount of Rs. 3,50,000/- to the complainant-respondent within fifteen days from the date of receipt of the abovesaid notice sent by the complainant-respondent to the petitioner-accused. The petitioner-accused failed to make the payment of the said amount despite repeated demands and requests, made by the complainant-respondent firm.

Since no payment was made by the petitioner-accused to the complainant-respondent, a complaint under the Act, as staled above, was filed by the complainant-respondent before the Judicial Magistrate, Khanna.

The Magistrate, after recording the evidence, issued summons to the petitioner-accused.

The petitioner-accused, thus, filed this petition u/s 482, Cr.P.C. for quashing the complaint filed by the complaint-respondent u/s 138 of the Act and the subsequent proceedings thereon including the summoning order issued by the Judicial Magistrate First Class, Khanna.

When this Criminal Misc. Petition came up for hearing before the learned single Judge of this Court, the learned Judge after hearing the learned Counsel noted the contentions of the counsel for the parties. The contentions of the parties before the learned single Judge and the observations made by the learned single Judge which became the basis of this Reference arc reproduced as under :-

The main contention of learned Counsel for the petitioners is that is the present case the cheques issued were presented and dishonoured but after the said dishonour, no action was taken by the respondent. However, the respondent presented the cheques again and after dishonour for the second time, he gave a notice and then filed the impugned complaint. According to learned Counsel for the petitioners, no action for the offence u/s 138 of the Act can be taken because the provisions of the Act do not refer to the second presentation and dishonour of the cheques.

Learned counsel for the respondent has argued that the cheque can be presented any number of times during its validity and, therefore, the respondent was justified in presenting the cheques again and the second dishonour can be treated as cause of action u/s 138 of the Act.

The point in question has been dealt with by various Courts. A Full Bench of the Kerala High Court in the case of S.K.D. Lakshmanan Fireworks Industries and Another Vs. K.V. Sivarama Krishnan and Another, has held that there is nothing in the provisions in Chapter XVII of the Act which will preclude the creation of successive causes of action on the basis of one and the same cheque. It was also held in that case that successive causes of action may arise on the basis of one and the same cheque for filing complaint u/s 142 of the Act subject to the restrictions contained in Sections 138 and 142 of the Act. It was, however, observed that even if successive causes of action arise, only one prosecution and conviction or acquitlal is possible in view of Section 300 of the Code of Criminal Procedure.

A Division Bench of the Andhra Pradesh High Court in the case of Syed Rasool and Sons and Others Vs. Aildas and Company and Another, has held that a cheque can be presented to bank for any number of times within the period of its validity but action for filing complaint under Sections 138 and 142 of the Act can be taken only once.

Learned single Judges of this Court have taken different views on the point in question. In the case of K.P.V. Textiles v. Malook Chanel Naresh Chanel 1992 (2) RCR 425, it has been held that when a cheque which is returned unpaid is resubmitted and again returned uncashed, the complainant cannot have second cause of action on the same cheque as no complaint was filed when the cheque in question bounced for the first time constituting the first cause of action.

In the case of Sunil Behal v. Berlina Constructions House 1994 (2) RCR 653 (P&H), it has been held that when the cheque was presented again on assurance of drawer that the cheque will be encashed but the cheque was again dishonoured, complaint u/s 138 of the Act on second dishonour was maintainable. However, in a subsequent judgment in the case of Gulshan Rai v. Darshan Lal 1994 ISJ 687 it has been held that in such a position as mentioned above, the petition for quashing the complaint deserves to be allowed.

In the case of K.P. V. Textiles v. Malook Chand Naresh Chanel 1992 (2) RCR 425 (supra) reliance was placed on the judgment on the Division Bench case of Kerala High Court in Kumaresan v. Ameerappa 1991 (3) RCR 172. wherein it has been held that more than one cause of action on the same cheque is not contemplated. However, the said judgment has been referred to in the Full Bench judgment of the Kerala High Court in the case of S.K.D. Lakshmanan Fireworks Industries and Another Vs. K.V. Sivarama Krishnan and Another, . The Full Bench in that case has held that the decision in Kumaresan''s case cannot be approved as correct.

So far as the judgments of this Court, referred to above are concerned, there is conflict of opinion. Also similar question has arisen in Criminal Appeal No. 358-DBA of 1992 tilled Kanwal Krishan v. Fateh Chanel, wherein the following order was passed by the DB of this Court. Admittedly, there is a conflict of judicial opinion on the question which needs examination. Already a view has been taken by a learned single Judge of this Court, but learned Counsel for the appellant has seriously doubted the correctness of the judgment. We, therefore, admit this appeal to a Division Bench.

Similar order was also passed in Criminal Misc. No. 5658-M of 1993 by a learned single Judge of this Court titled Avtar Singh v. Joginder Singh. In view of the above position, I also find that this case is required to be decided by a Division Bench. The registry is, therefore, directed to place this case before a Division Bench for disposal.

It is in these circumstances that this petition has been placed before us for final disposal,

The main question which needs determination by this Bench is as to whether the payee or the holder in due course of a dishonoured cheque can validly initiate prosecution for an of fence u/s 138 of the Act with reference to a second cause of action if he had not taken advantage of the first cause of action accrued to him.

It has been contended by the learned Counsel for the petitioners before us that when the payee or the holder of a cheque has presented the same before the concerned Bank and it is dishonoured then if the same cheque is presented to the Bank again after sometime and it is dishonoured again then the second cause of action due to the subsequent dishonour of the cheque, does not allow the payee or the holder of the cheque to take any action against the drawer of the cheque for an offence u/s 138 of the Act because the provisions of the Act do not refer to the second presentation and dishonour of the cheque.

On the other hand, the learned Counsel for the respondent-claimant has argued that a cheque can be presented any number of limes during its validity. It could be presented again and again and second dishonour could be treated as a cause of action u/s 138 of the Act.

Before examining the rival contentions of the learned Counsel for the parties we consider it appropriate to have a close look at the relevant provisions of the Act which arc reproduced as under :-

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 provisions of this Act, be punished with imprisonment for a term which may extend to one year, or with fine which may extend to twice the amount of the cheque, or with both :

Provided that nothing contained in his Section shall apply unless-

(a) 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;

(b) 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 fifteen days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and

(c) the drawer of such cheque fails to make (he 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 or other liability" means a legally enforceable debt or other liability.

Cognizance of offences- Notwithstanding anything contained in the Code of Criminal Procedure. 1973 (2 of 1974),-

(a) no Court shall take cognizance of any of fence punishable u/s 138 except upon a complaint, in writing made by the payee, or, as the case may be, the holder in due course of the cheque;

(b) such complaint is made within one month of the date on which the cause of action arises under Clause (c) of the proviso to Section 138;

(c) no Court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the First Class shall try any offence punishable u/s 138.

The Banking Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988 (66 of 1988) (hereinafter called the ''Amendment Act''). 1988, has inserted Chapter VII comprising of Sections 138 to 142 with effect from 1-4-1989 with a view to enhance the acceptability of cheques in settlement of liabilities by making the drawer liable for penalties in case of bouncing of cheques due to insufficiency of funds in the accounts or for the reasons that it exceeds the arrangements made by the drawer with adequate safeguards to prevent harassment of honest drawers.

Salient features of the New Chapter as referred to above are described as under :-

(a) The cheque in question should have been issued in discharge of whole or part of a debt or liabilities.

(b) The cheque in question should be presented within six months or its specific validity period whichever is earlier.

(c) The payee or holder should give notice demanding payment within 15 days of his receiving information of dishonour which should be for no other reasons than for insufficiency of funds.

(d) Drawer can claim payment within 15 days of receipt of the notice and only if he fails to do so he is liable to be prosecuted.

(e) Complaint can be made only by the payee or holder in due course within one month of the arising of the cause of action.

From the scheme of provisions of Sections 138 and 142 of Chapter VII of the Amendment Act, 1988, as referred to above, it is clear that a cheque can be presented to the Bank within the period of six months from the date on which it is drawn or within the period of its validity whichever is earlier. Clause (a) of proviso (2) of Section 138 does not lay down as to the number of times a cheque can be presented to the bank. So where a cheque which has been presented to the Bank is. returned the payee or the holder in due course of the cheque is obliged to give a notice in writing to the drawer within fifteen days of the receipt of information from the Bank and the drawer of the cheque must make the payment of the amount to the payee or the holder of the cheque within 15 days of the receipt of the said notice. The person who has issued the cheque may approach the payee in whose favour the cheque was issued and convince him that he will pay the amount or he will arrange to see that the amount will be paid and may request for postponement of time. The cheque can be presented to the Bank within a period of six months from the clay on which it is drawn or within the period of its validity whichever is earlier. During the validity period the cheque can be presented any number of times but the action by filing a complaint u/s 138 read with Section 142 can be taken only once. The payee can take into account the final cause of action as the one to base his claim within the period of limitation and the final cause of action arises on account of dishonour alone.

The provisions of Section 138 understood in their correct perspective and in consonance with the scheme of the Act clearly indicates as to when an offence u/s 138 of the Act is complete. Mere dishonouring of cheques simpliciter in absence of subsequent steps having been taken, does not constitute an offence punishable u/s 138 of the Act. In other words a cheque must be dishonoured on presentation, payee should serve a notice upon the drawer and the drawer must have failed to make the payment within the stipulated period after such notice was received/served upon him, and all acts having been done within the prescribed period of limitation u/s 138 of the Act, that completes an offence of which a complaint can be filed by the payee and cognizance taken by a Court of competent jurisdiction u/s 142 of the Act. Fulfilment of the aforestated ingredients is the sine qua non for institution of a complaint and cognizance to be taken by the Court of competent jurisdiction.

The plain reading of the relevant provisions of the statute conveys that legislature did not intend to put an embargo upon presentation of cheque within the prescribed period of limitation under the provisions of Section 138. Once the legislature has opted not to impose any such restriction either by using plain language or implicitly providing the same on the principles of necessary implication we find it totally unnecessary to read such restriction in these provisions. There is nothing in the provisions u/s 138 of the Act that justifies inference of such intention on the part of the legislature which prevents presentation of the cheque within the prescribed period and keeping in mind the other limitation''s provided of the statute. Thus, it cannot be said that a payee of holder of the cheque in due course must file a complaint when the cheque is dishonoured Dishonouring of cheque alone does not constitute an offence as contemplated by the provisions of Section 138 of the Act.

The payee or holder of a cheque has to elect his remedy at that stage but certainly within (he four corners of the various periods of limitation which have been stated in the Section. If the payee elects to present his cheque without serving a notice, the cause of action for payee is not concluded. It is only after the cause of action is completed by adherence to the afore-stated provisions of Section 138, that has the effect of depriving the complainant/payee of afresh cause of action on presentation of the cheque. If the payee does not serve the notice as postulated under the provisions of Section 138 of the Act upon dishonouring of the cheque, his right to represent the cheque is protected. But if he serves the notice, he loses control over his remedy and service of notice must proceed to its logical end, leaving the payee with no right to represent the cheque. Once the notice is served upon the drawer, then it is compliance and/or non-compliance on the part of the drawer that constitutes the offence and no more act is required to be done by the payee except filing a complaint in the event of default of the provisions by the drawer. Thus it is ''animus et factum of the payee which keeping in mind the facts and circumstances of the case would determine whether payee has divested himself of the right of presenting the cheque and he cannot raise a new cause of action by such further act on his part.

The scheme of the Act and the provisions of Section 138 do not intend or indicate restriction on the number of times when such cheques could be presented and represented for encashment, but certainly within the prescribed period of six months or the validity period of the cheque, whichever is earlier. The period of 15 days provided for service of notice under Clause (b) of proviso to Section 138 would commence from such last dishonouring of the cheque. This of course no way would have the effect of extending the prescribed period of limitation of six months or the validity period of the cheque, as the case may be. In other words cumulative effect of contemplated actions under the provisions of Section 138 must result, in a complete cause of action within the meaning of these provisions. The object of these newly added provisions in the Act is to prevent the mischief arising from dishonouring of the cheque which has been issued by the drawer and to provide due safeguard in commercial deals. The purpose of these provisions would be defeated if a dishonest drawer is permitted to take advantage on the principle that a dishonoured cheque cannot be represented within its period of validity or the prescribed period of six months, whichever is earlier. The rights of a payee are certainly not the same when he serves the notice and travels into the realm of incidental actions arising from the dishonouring of the cheque. Apparently for the reason that if the notice is served by the payee on the drawer of the cheque, then nothing more is contemplated on the part of the payee except to wait for the period specified and to approach the Court of competent jurisdiction for appropriate orders. The distinction is a fine one but we feel the same is very subtle and clear.

Therefore, in view of our discussion aforestated we are of the considered view that a cheque can be presented by the payee or its holder in due course on different occasions but within the prescribed period of six months or the period of validity of the cheque whichever is earlier, further a clear stipulation that upon the dishonouring of the cheque for the first time, the payee has not taken any action as postulated in terms of provisions (b) and (c) of proviso to Section 138 of the Act. Consequently, we are unable to find ourselves in agreement with the view expressed in the case of K.P. V. Textiles v. Malook Chand Naresh Chanel 1992 (2) RCR 425 (supra) and in the case of Kumaresan v. Ameerappa 1991 (3) RCR 172, and other judgments expressing the same view. It appears to us, this view is not a correct view in law.

Even otherwise, the judgments referred to in the above paras are liable to be overruled as they are based upon the judgment in Kumaresan v. Ameerappa''s case 1991 (3) RCR 172 (supra), which has already been overruled by a Full Bench of the same Court in S.K.D. Lakshmanan Fireworks Industries and Another Vs. K.V. Sivarama Krishnan and Another,

It may further be noted that we respectfully agree with the law laid down by the Full Bench of the Kerala High Court in S.K.D. Lakshmanan Fireworks Industries and Another Vs. K.V. Sivarama Krishnan and Another, and a Division Bench of Andhra Pradesh High Court in Syed Rasool and Sons and Others Vs. Aildas and Company and Another,

The other points raised by the learned Counsel in this case relate to the factual position which is required to be determined by the Magistrate after appreciating the evidence on the file. We cannot go into the factual position by invoking our inherent powers u/s 482 of the Cr.P.C.

In view of our discussion made above, this Criminal Misc. Petition stands dismissed.