Kishan Lal v. Krishna Sales — 1996 DIGILAW 678 (RAJ)

Judgment N.L. Tibrewal, J.-In both the cases, the order issuing process is being challenged with a common prayer to quash criminal proceedings pending against the petitioners. The petitions raise the following identical and important questions of law: (i) Whether a second complaint under Section 138 of the Negotiable Instruments Act, 1881 (for short “the Act”), based on a second cause of action on a subsequent presentation of the cheque for encashment is maintainable? (ii) Whether service of the notice issued under Clause (b) of Section 138 on the drawer of the cheque is essential to give a cause of action for filing a complaint for the offence under Section 138 of the Act? 2. In order to appreciate the controversy raised in these petitions, the necessary facts may be stated which are as under the complainant/non-petitioner, herein, filed two separate complaints on May 3, 1993, in the Court of the Additional Munsif and Judicial Magistrate No, 8, Jaipur City, Jaipur, alleging therein that both the parties were engaged in the business of purchase and sale of papers and from February 20, 1991, to February 4, 1992, the petitioners purchased papers from his firm to the tune of Rs. 2,45,726 through various bills and payments were made partly in cash and partly through cheques, the details of which have ‘been given in the complaint. As per the complaint the following six cheques were issued by the petitioners in favour of the complainant towards the liability outstanding against them: Cheque Date Amount(in No. Rs.) 3891713,000 17-10-92 389172 3,200 17-10-92 3891733,300 19-10-92 389174 2,500 19-10-92 432000 15,000 23-10-92 424309 15,000 23-10-92 3. The above cheques were presented in the bank for collection, but the same were bounced with the endorsement “exceeds arrangement”. The details about the presentation of the cheques and the dates of their dishonour have been given in paras. 3, 4 and 5 of the complaint. Thereafter, the complainant gave notice to the petitioners on November 7, 1992, through his advocate, Shri Chandra Prakash Joshi, informing about dishonour of the cheques and asking them to make payment within two weeks from the date of receipt of notice. On receipt of notice, the same was replied to by the petitioners on November 23, 1992, through their advocate, Shri Ram Kishore Hemani. In reply they pleaded for deduction of certain amount for having returned 25 bundles of papers. On receipt of notice, the same was replied to by the petitioners on November 23, 1992, through their advocate, Shri Ram Kishore Hemani. In reply they pleaded for deduction of certain amount for having returned 25 bundles of papers. Some other pleas were also taken, but they are not relevant to mention here. Then, a complaint was filed on January 23, 1993, in the Court of the Additional Munsif and Judicial Magistrate No. 8, Jaipur City, Jaipur, alleging therein that an offence under Section 138 of the Act was committed by the petitioners. However, the said complaint was dismissed on February 25, 1993, on the ground of limitation. 4. After dismissal of the complaint, the aforesaid cheques were re-presented in the bank for collection but they were again dishonoured with the remark “refer tp drawer”. A fresh notice was again given to the petitioners on April 13, 1993, through Shri Bhagwan Sahai, advocate, but the same was returned unserved with the endorsement “receiver has left the shop”. The complainant, thereafter, filed two fresh complaints as stated earlier in respect of three cheques each. Criminal Case No. 421 of 1993 relates to cheques N.os. 389174, 432000 and 424309 and Criminal Case No. 422 of 1993, relates to cheques Nos. 389171, 389172 and 389173 on the file of the Magistrate. The learned Magistrate after taking cognizance of the offence and recording the sworn statements of the complainant and the witness Arun Misra, issued process against the petitioners in both the cases. These petitions arise out of these criminal cases. 5. ShriM. M. Ranjan, learned Counsel appearing for the petitioners in both the cases, submitted two grounds for quashing the criminal proceedings against the petitioners. The first ground is that the offence under Section 138 of the Act was committed once and for all on failure of the drawer to make payment after notice under Clause (b) of the proviso to Section 138 within the stipulated time as per Clause (c). Learned Counsel contended that the cause of action for filing a complaint arose on failure of the drawer to make payment within 15 days of receipt of the said notice. Learned Counsel contended that the cause of action for filing a complaint arose on failure of the drawer to make payment within 15 days of receipt of the said notice. He further contended that once a cause of action has arisen, the limitation for filing the complaint will begin to run and it could not be stopped by presenting the cheques again so as to have a fresh cause of action on limitation for filing a second complaint. The next ground is that before filing the second complaint, notice was not served upon the petitioners and in the absence of service of the notice, the commission of the offence was not complete. 6. On behalf of the, complainant/non-petitioners it was contended by learned Counsel that under the Act there is no bar for presentation of a cheque for encashment any number of times within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier, and every fresh presentation of cheque for collection gives a fresh cause of action to file the complaint. It was also contended that under Clause (c) of the proviso to Section 138 service of notice on the drawer of the cheque is not essential and the requirement of Clause (c) stands fulfilled by giving notice itself 7. Chapter XVII, containing sections 138 to 142, was inserted in the Act by the Amendment Act No. 66 of 1988, to provide penalties in case of dishonour of certain cheques for insufficiency of funds in the account. Section 138 creates a new offence based on a cheque returned unpaid due to insufficiency of funds in the account of the drawer or it exceeds the amount arranged to be paid from that account by agreement with the bank. The offender, as per the section, is the drawer of the cheque. Section 139 casts a presumption that the holder of the cheque has received the sum towards the discharge of his liability. Section 140 precludes the drawer of the cheque from pleading that he had no reason to believe that the cheque would be dishonoured. A complaint can be filed only by a payee or a holder of the cheque in due course, as the case may be. Section 140 precludes the drawer of the cheque from pleading that he had no reason to believe that the cheque would be dishonoured. A complaint can be filed only by a payee or a holder of the cheque in due course, as the case may be. Section 142 imposes a further restriction that no complaint can be filed after one month of the date on which the cause of action arose under Clause (c). 8. For our decision, interpretation of sections 138 and 142 shall be required, as such, they are reproduced as under:-“138. 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 the 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 provision 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 this 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 the 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.” “142. Cognizance of offence.--Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974),-- .(a) noCourt, shall take cognizance of any offence punishable under Section 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 an offence punishable under Section 138.” 9. A perusal of Section 138 makes it clear that the offence under the section is committed by the drawer of a cheque, issued for the discharge of any debt or other liability and the same is returned by the bank unpaid on either of the two conditions, viz., (i) insufficiency of the amount of money standing to the credit of the drawer or (ii) it exceeds the amount arranged to be paid from that account by an agreement made with the bank. 10. The proviso to Section 138 stipulates certain conditions to be fulfilled before the main clause is attracted or in other words, the offence can be said to have been committed by the drawer of the cheque or cheques. These conditions are .(i) The cheque is 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; .(ii) the notice is given by the payee or the holder in due course of the cheque, as the case may be to the drawer of the cheque giving intimation of dishonour of the cheque and making a demand of the amount within 15 days of the receipt of information by him; and (iii) the drawer of the cheque fails to pay the amount of cheque within 15 days of service of the notice. 11. Thus, the offence under Section 138 is complete only after failure of the drawer of the cheque to make payment of the amount of the cheque as contemplated in Clause (c) of the proviso to Section 138 of the Act. Before this stage comes, the offence is not committed and no cause of action for filing a complaint arises on dishonour of the cheque. Before this stage comes, the offence is not committed and no cause of action for filing a complaint arises on dishonour of the cheque. Once the offence is complete, as stated above, the cause of action for filing the complaint on dishonour of the cheque arises and the period of limitation as provided in Section 142(b) will start to run for filing a complaint. 12. From the scheme of the provisions in Chapter XVII of the Act, dishonour of a cheque by itself does not give rise to a cause of action, because, payment can be made by the drawer of the cheque on receipt of the notice of demand as contemplated in Clause (b). Further, no offence under Section 138 read with Section 142 of the Act or any attempt to commit such offence can be said to have been committed by the drawer unless he fails to pay the amount within 15 days of the receipt of notice as per Clause (c). Thus, the cause of action for filing the complaint arises on failure to pay the amount within 15 days of the receipt of notice under Clause (c) of the proviso to Section 138. Section 142(b) further makes it clear that the period for filing the complaint starts from the date on which the cause of action arises under Clause (c) and the payee or the holder of the cheque, as the case may be, can file a complaint within one month from that date. The scheme contained in the Chapter does not contemplate more than one cause of action on the same cheque for filing a complaint. Once a cause of action has arisen, the limitation will begin to run and it could not be stopped by presenting the cheque again so as to have a fresh cause of action on limitation. Hence, if one fails to institute a complaint on the first cause of action or the complaint is dismissed for any reason including of it being filed after expiry of the period of limitation as provided under Sub-section (b) of Section 142, a second complaint in respect of the same cheque based on a fresh cause of action on re-presentation of the cheque for collection is not maintainable. In other words, the provisions do not contemplate a second cause of action on the ground that the cheque was presented again for collection and on its being dishonoured, the drawer again failed to make payment to the payee after a second notice in terms of Clauses (b) and (c). In view of this, the first contention urged by Mr. Ranjan deserves to be accepted and it is held that the subsequent complaints filed in the present case are not maintainable in law. 13. A Division Bench of the Kerala High Court has taken a similar view in N. C. Kumaresan vs. Ameerappa [1992] 74 Comp Cas 848 ; [1992] 1 Crimes 23, and it would be useful to reproduce the following observations made in Para. 8 of the decision (page 851): “From the scheme of the provisions in Chapter XVII of the Act, two features loom large. The first is that more than one cause of action on the same cheque is not contemplated or envisaged, The second is that institution of prosecution cannot be made after one month of the cause of action. If more than one cause of action on the same cheque can be created, the consequence would be that the same drawer of the cheque can be prosecuted and even convicted again and again on the strength of the same cheque. The Legislature cannot be imputed with the intention to subject a drawer of cheque to repeated prosecutions and convictions on the strength of one cheque,” 14. The same view has been reiterated by a learned single judge of the Kerala High Court (K. T. Thomas) in Chellakkannu Nadar (K.) vs. CkenkalM. R. Simon [1994] 1 Crimes 382;[1995] 85 Comp Cas 439. Following the decision of N. C. Kumaresan vs. Ameerappa [1992] 74 Comp Cas 848; [1992] 1 Crimes 23, the learned single judge further observed that a cheque can be presented any number of times during the period of validity but once the offence was complete with the failure to pay the amount within the prescribed period after making demand in writing, a subsequent presentation of the cheque for encashment is of no use so far as the offence under Section 138 of the Act is concerned. I am in full agreement with the view expressed by the learned single judge. 15. I am in full agreement with the view expressed by the learned single judge. 15. ThePunjab and Haryana High Court has also taken the consistent view that the cause of action to make the drawer of the cheque criminally liable under Section 138 of the Act arises on the expiry of the period of notice under Clause (c) of the proviso to Section 138 ; that once a cause of action has arisen, the limitation will begin to run and it could not be stopped by presenting the cheque again so as to have a fresh cause of action on limitation, (see K. D. Sales Corporation vs. Morinda Cooperative Sugar Mills Ltd. [1994] 1 Crimes 499 ; Chahal Engineering and Construction Ltd. vs. Verma Plywood Co. [1994] 1 Crimes 845 and Gulshan Rai vs. Darshan Lal [1995] 84 Comp Cas 445 (P & H); [1995] 1 Crimes 644. 16. In Syed Rasool and Sons v, Aildas and Company [1993] 78 Comp Cas 738 (AP); [1993] 2 Crimes 550, 559, the facts of the case were that after the cheque was returned unpaid the complainant contacted the accused on the telephone whereupon he was advised to re-present the said cheque on or after February 25, 1991. Accordingly, the cheque was re-presented on February 28, 1991. but, once again, the same was bounced with the endorsement “refer to drawer” and the same was accordingly intimated to the complainant on March 11, 1991. Thereupon, the complainant issued a notice on March 14, 1991, calling upon the accused to pay the amount covered by the cheque in question. Since there was no reply from the accused, the complainant filed a criminal case under Section 138 of the Act and under Section 420 of the Indian Penal Code, 1860. Dealing with the provision contained in sections 138 and 142 of the Act, a Division Bench of the Andhra Pradesh High Court observed as under (page 751 of 78 Comp Cas) “From the scheme of the provisions, sections 138 and 142 of the Act, it is seen that a cheque can be 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. Clause (a) of the proviso to Section 138 does not lay down as to the number of times a cheque can be presented to the bank. Clause (a) of the proviso to Section 138 does not lay down as to the number of times a cheque can be presented to the bank. Thus, from the scheme of the provisions in Chapter XVII of the Act two features loom large. The first is that more than one cause of action on the same cheque is not contemplated or envisaged. The second is, institution of prosecution cannot be made after one month of the cause of action. If more than one cause of action on the same cheque can be created, its consequence would be that the same drawer of the cheque can be prosecuted and even convicted again and again on the strength of the same cheque. The Legislature cannot be imputed with the intention to subject a drawer of a cheque to repeated prosecutions and convictions on the strength of one cheque.” 17. Then (at page 754 of 78 Comp Cas) it was further observed as under: “From the scheme of sections 138 and 142, it is thus seen that a cheque can be 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. So, when a cheque, which has been presented to the bank, is returned, the payee or the holder in due course of the cheque has to give a notice, in writing, to the drawer within fifteen days of the receipt of information from the bank and the drawer of such cheque must make the payment of the amount to the payee or the holder of the cheque within fifteen days of the receipt of the said notice. The person who 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 request for postponement of time. The 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. During the validity period the cheque can be presented any number of times but the action by filing a complaint under Section 138 read with Section 142 can be taken only once.” 18. During the validity period the cheque can be presented any number of times but the action by filing a complaint under Section 138 read with Section 142 can be taken only once.” 18. In Rakesh Nemkumar Porwal vs. Narayan Dhondu Joglekar [1993] 78 Comp Cas 822 (Bom); [1993] Cr1. U 680, the facts of the case were that the complainant had made certain supplies to the accused and 12 cheques, each one in the sum of Rs. 15,000 were issued to him towards payment against the goods in question. All the 12 cheques were presented in the bank for collection but they were returned unpaid with the endorsement “refer to drawer”. After receipt of communication from the bank about the dishonour of the cheques, the complainant gave separate notices to the drawer in respect of each cheque on July 18, 1991. As per the complainant, the notices were delivered by the postal department to the accused on July 29, 1991. Thereafter, the complainant filed 12 separate complaints on August 9, 1991, i.e., before expiry of 15 days from the date of receipt of notice. The learned magistrate took cognizance and issued process in all cases which were challenged before the High Court in a criminal writ petition. The petition was allowed. Dealing with the question as to when an offence is said to have been committed under Section 138 of the Act, it was observed by a Bench of the Bombay High Court (page 832 of 78 Comp Cas): “For this purpose, one needs to go back to the specific provisions of Section 142 of the Negotiable Instruments Act. This provision in terms debars the Court from taking cognizance of any offence punishable under Section 138 of the Act except in certain specified situations. Section 138 defines as to when and under what circumstances an offence can be said to have been committed. In order to remove any possible ambiguity, Section 142(b) of the Negotiable Instruments Act reiterates the position that the point pf time when the cause of action has arisen is to commence when the notice period of 15 days as prescribed in the proviso to Section 13 8(c) has elapsed. In order to remove any possible ambiguity, Section 142(b) of the Negotiable Instruments Act reiterates the position that the point pf time when the cause of action has arisen is to commence when the notice period of 15 days as prescribed in the proviso to Section 13 8(c) has elapsed. Reading these provisos together, we have no hesitation in holding that no offence can be said to have been committed unless and until the period of 15 days as prescribed under sub-Clause (c) of section, 138 has in fact elapsed. A Court would, therefore, be barred in law from taking cognizance of a complaint in respect of such an offence, at any point of time prior to this.” 19. I would like to make it clear that under the Negotiable Instruments Act there is no bar for presentation of a cheque for encashment any number of times during the period of validity of the cheque. In the course of trade and commerce it is a common feature to re-present the same cheque for collection in the bank after its dishonour earlier, on request or promise of the drawer to arrange for the funds in the meantime. A payee who may not be keen on entering into a litigation, may present the cheque again, though it was returned unpaid on one or more occasions for want of sufficient funds, to give an opportunity to the drawer to make good the deficiency. By mere dishonour of a cheque the offence under Section 138 of the Act is not complete and the cause of action to file a complaint does not arise unless the payee or the holder of the cheque initiates further necessary steps for prosecuting the drawer by issuing a notice under Clause (b) and the drawer of the cheque fails to make payment of the amount of the cheque. It is left to the payee to decide whether he would make use of the cause which arises when the cheque is returned with endorsement of insufficiency of funds, and initiate steps which may ultimately result in prosecution or to wait for some time to enable the drawer to arrange sufficient funds and represent the cheque again if the period of validity of the cheque is not over. However, after dishonour of the cheque on the grounds narrated in Section 138(1), if the payee or the holder of the cheque proceeds to issue a notice under Clause (b) and the drawer of the cheque fails to make the payment within 15 days of receipt of the said notice, the offence under Section 138 of the Act stands committed once for all, and a cause of action for filing the complaint arises. In that situation, the complaint has to be filed within a month from the date on which the cause of action arose under Clause (c) of the proviso to Section 138 of the Act, as required by Sub-section (b) of Section 142 of the Act. 20. To make it more clear, if the payee or holder of the cheque does not issue a notice as contemplated in Clause (b) on dishonour of the cheque, he is not precluded to give notice on the cheque being dishonoured again on its re-presentation for collection. In view of that situation, the cause of action for filing the complaint would arise on failure of the drawer to make payment within 15 days of receipt of the notice. 21. I am also of the view that the Judgment of the Andhra Pradesn High Court does not run counter to the view taken by me as in that case no notice was given as contemplated in Clause (b) when the cheque was dishonoured first time, and the complaint was filed after re-presentation of the cheque within the valid period and after giving notice under Clause (b) and failure of the drawer to make payment within 15 days of the receipt of the notice. As stated earlier, dishonour of a cheque does not give rise to the cause of action as payment can be made even after notice under Clause (b) of Section 138 of the Act. The cause of action arises only on failure to pay the amount within 15 days of receipt of the aforesaid notice. It cannot be said, therefore, that there were two causes of action in the case before the Andhra Pradesh High Court. 22. Thesecond submission made by Mr. Ranjan has also merit as it is in consonance with Clauses (b) and (c) of the proviso to Section 138 of the Act. It cannot be said, therefore, that there were two causes of action in the case before the Andhra Pradesh High Court. 22. Thesecond submission made by Mr. Ranjan has also merit as it is in consonance with Clauses (b) and (c) of the proviso to Section 138 of the Act. Clause (b) has an object behind it and the object is to provide an opportunity, by giving a notice, to the drawer of the cheque, drawing his attention towards the dishonour of the cheque by the bank, to make payment within 15 days of receipt of the notice. If notice is not received by the drawer of the cheque the object contemplated in the aforesaid proviso is not fulfilled and it cannot be said that he, was given an opportunity to make the payment. Looking to the language employed in Clauses (b) and (c) and the object behind the provisions. I am of the considered view that service of the notice, by any of the modes which may be by refusal, also, is essential to constitute an offence under Section 138 of the Act. The second contention raised by Mr. Ranjan is, therefore, accepted. 23. Judged from any angle, the subsequent complaints filed by the non-petitioner were not maintainable and it is a fit case to quash the proceedings in exercise of power under Section 482 of the Criminal Procedure Code, 1973. 24. Consequently, both the petitions are allowed as indicated above.