R. Lakshminarasimha vs Gouthamchand

A.N. Venugopal Gowda, J.—The petitioner is facing trial in a complaint filed by the respondent, under Section 138 of the Negotiable Instruments Act, 1881 (for short, ''the Act''). According to the petitioner, the criminal complaint is not maintainable and no such proceeding could be launched against him. This petition was filed under S. 482 of Cr.P.C., seeking quashing of the entire proceeding in C.C. No. 9562/2012 pending on the file of the XV ACMM, Bengaluru.

Background facts, sans unnecessary details are as under:

"In the complaint, the respondent herein has alleged that the petitioner borrowed from him on 05.08.2011 Rs. 45 lakhs and on 05.09.2011 Rs. 40 lakhs and issued post dated cheques towards repayment, apart from execution of a Demand Promissory Note. Cheque bearing No. 857466 dated 25.11.2011 for Rs. 25 lakhs and cheque bearing No. 857467 dated 30.11.2011 for Rs. 20 lakhs, when presented for encashment on 12.12.2011, were returned by Bangalore City Co-Operative Bank Limited, the banker of the petitioner, on 13.12.2011, with a shara "payment stopped by the drawer". Having caused a legal notice with regard to the dishonour of the said cheques, a complaint was filed on 29.03.2012, under S. 200 of Cr.P.C., before the XV ACMM Bengaluru. Learned Magistrate having taken cognizance and issued summons against the petitioner, this petition was filed."

Sri G.S. Venkat Subbarao, learned advocate, contended that the respondent having issued a legal notice on 26.12.2011 demanding payment for the impugned cheques and having not lodged a complaint and having caused another notice on 29.02.2012 demanding payment of the impugned cheque/s amount, is debarred from filing the complaint based on the notice dated 29.02.2012. He submitted that the complaint having not been filed pursuant to the notice dated 26.12.2011, it is not open to initiate prosecution for an offence under S. 138 of the Act, for dishonour of cheques for the second time. He drew attention of the Court to the decisions in Sadanandan Bhadran Vs. Madhavan Sunil Kumar, (1998) 6 AD 357 : AIR 1998 SC 3043 : (1998) 94 CompCas 812 : (1998) 4 CompLJ 228 : (1998) CriLJ 4066 : (1998) 3 Crimes 217 : (1998) 2 CTC 462 : (1998) 6 JT 48 : (1998) 120 PLR 318 : (1998) 4 SCALE 708 : (1998) 6 SCC 514 : (1998) 1 SCR 178 Supp : (1998) AIRSCW 2902 : (1998) 7 Supreme 20 and Prem Chand Vijay Kumar Vs. Yashpal Singh and Another, (2005) 3 BC 198 : (2005) 125 CompCas 338 : (2006) 4 CompLJ 413 : (2005) 2 CTC 823 : (2005) 5 JT 318 : (2005) 141 PLR 713 : (2005) 4 SCC 417 : (2005) 3 SCR 1029 : (2005) 2 UJ 876 .

The learned advocate for the respondent, on the other hand, submitted that the two decisions of the Apex Court on which petitioner relied upon, being not good law, on account of the authoritative pronouncement by the Apex Court in MSR Leathers Vs. S. Palaniappan and Another, (2013) 2 ABR 800 : (2012) 4 BC 272 : (2012) 110 CLA 370 : (2012) 175 CompCas 228 : (2013) CriLJ 1112 : (2012) 6 CTC 101 : (2012) 4 JCC 289 : (2012) 9 JT 403 : (2012) 168 PLR 617 : (2012) 4 RCR(Civil) 485 : (2012) 9 SCALE 455 : (2013) 1 SCC 177 : (2012) 116 SCL 132 , this petition is liable to be dismissed.

The cheques in question having been dishonoured on 12.12.2011, notice dated 26.12.2011 demanding payment was caused. The complainant having re-presented the said two cheques on 14.02.2012 and the same having been dishonoured on 15.02.2012, caused notice dated 29.02.2012 and filed the complaint alleging commission of an offence under S. 138 of the Act.

In Sadanandan Bhadran (supra), the complainant, had, after dishonour of a cheque issued in his favour, taken steps to serve upon the accused, the drawer of the cheque, a notice under clause (b) of proviso to S. 138 of the Act. No complaint, however, was filed by the complainant, upon failure of the accused to arrange the payment of the amount covered by the cheque. Instead, the complainant, payee of the cheque, had presented the cheque for collection once again, which was dishonoured for the second time, for want of sufficient funds. Another notice was served on the drawer of the cheque to arrange payment within 15 days of the receipt of the notice. After failure of the drawer to do so, payee filed complaint against the drawer under S. 138 of the Act. The accused filed an application seeking discharge on the ground that the complainant cannot create more than one cause of action in respect of a single cheque and the complaint in question having been filed on the basis of the second presentation and resultant second cause of action, was not maintainable. Accepting the contention, the complaint having been dismissed, was questioned in the High Court and the impugned order having been upheld, the matter, when eventually was taken up before the Apex Court, the point formulated for determination was whether the payee or holder of a cheque can initiate prosecution for offence under S. 138 of the NI Act, 1881, for its dishonour for the second time, even if he had not initiated any action on the earlier cause of action? The question was answered in the negative and the appeal was dismissed.

The decision in Sadanandan Bhadran (supra) having been followed in several subsequent decisions, by the Apex Court, including in Prem Chand Vijay Kumar (Supra) and in MSR Leathers (supra), the Division Bench referred the matter to a Larger Bench. In the said case, four cheques issued in favour of the appellant, were presented for collection. The cheques were dishonoured for insufficiency of funds. A notice demanding payment of the amount covered by the cheques was issued. Despite receipt of notice, the drawer did not arrange the payment. The cheques were presented for the second time on the assurance that the funds necessary for encashment of the cheques shall be made available. The cheques presented for the second time were dishonoured on the ground of insufficiency of funds. Notice under Clause (b) of proviso to S. 138 of the Act was given demanding payment by the drawer within 15 days. Despite service of notice, payment having not been made, complaint was filed for the offence punishable under S. 138 of the Act. The Magistrate took cognizance and issued summons. The accused having entered appearance, sought discharge, primarily on the ground that the complaint has not been filed within 30 days of expiry of notice, based on the first dishonour of the cheque/s. The application having been dismissed and the High Court having been approached, revision petition was allowed, by relying upon the decision in Sadanandan Bhadran''s case. The Apex Court, having been approached for relief by the complainant and the Division Bench having expressed its reservation about the correctness of the view taken in Sadanandan Bhadran''s case(supra), referred the matter to a Larger Bench. Considering the rival contentions and the fact that the decision in Sadanandan bhadran''s case had been followed in several subsequent decisions, without disturbing or making any addition to the rationale behind the decision in Sadanandan bhadran''s case, the reference was answered as follows:

"33. Applying the above rule of interpretation and the provisions of Section 138, we have no hesitation in holding that 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 in our opinion 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 controversy, in our opinion, can be seen from another angle also. If the decision in Sadanandan Bhadran''s case is correct, there is no option for the holder to defer institution of judicial proceedings even when he may like to do so for so simple and innocuous a reason as to extend certain accommodation to the drawer to arrange the payment of the amount. Apart from the fact that an interpretation which curtails the right of the parties to negotiate a possible settlement without prejudice to the right of holder to institute proceedings within the outer period of limitation stipulated by law should be avoided we see no reason why 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 overburdened 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''s case 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 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 Bhadran''s case, it is difficult to say that the law declared in that decision has not added to court congestion.

In the result, we overrule the decision in Sadanandan case and hold that the prosecution based upon second or successive dishonour of the cheque is also permissible so long as the same satisfies the requirements stipulated in the proviso to Section 138 of the Negotiable Instruments Act. The reference is answered accordingly. The appeals shall now be listed before the regular Bench for hearing and disposal in the light of the observations made above."

Since the decision in Sadanandan Bhadran''s cases has been overruled in MSR Leathers (supra) and as it has been held that, prosecution based on the second or successive dishonour of cheque is permissible, so long as cheque is valid, as specified in S. 138 of the Act, I do not find any merit in the contention urged by the learned advocate for the petitioner.

In the result, petition is dismissed. Learned Magistrate shall decide the case with expedition and in accordance with law.

All other contentions of both the parties are left open.