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CASE NO.: Appeal (crl.)  651 of 2005

PETITIONER: Prem Chand Vijay Kumar

RESPONDENT: Yashpal Singh and Anr

DATE OF JUDGMENT: 02/05/2005

BENCH: ARIJIT PASAYAT & S.H. KAPADIA

JUDGMENT: J U D G M E N T (Arising out of SLP(Crl.) No. 1507 of 2004)

ARIJIT PASAYAT, J.

Leave granted.

Challenge in this appeal is to the legality of the  judgment rendered by a learned Single Judge of the Punjab  and Haryana High Court holding that the proceedings  initiated on the basis of a complaint alleging infraction of  Section 138 of the Negotiable Instrument Act, 1881 (in short  the ’Act’) was not maintainable. Therefore, the proceedings  were quashed, allowing the petition filed under Section 482  of the Code of Criminal Procedure, 1973 (in short ’the  Code’).  

Background facts filtering out unnecessary details are  as under:

The complaint was filed by the appellant alleging that  in the year 1995 respondent no.1 had issued a cheque for a  sum of Rs.5,15,053.72 representing balance amount payable to  the appellant for supply of goods to a partnership firm of  which respondents are partners. It was indicated that the  total amount payable was Rs.49,21,482.72 as against which  the accused persons had paid Rs.44,06,429/-, leaving balance  of Rs.5,15,053.72. A cheque [drawn on Oriental Bank of  Commerce, Ladwa branch (Account no.954)]was issued for the  same amount on 27.1.1995.  The cheque was signed by  respondent no.1 Yashpal Singh, for the firm and respondent  no.2 Nirpal Singh, was a partner of the partnership firm,  namely, M/s Sat Guru Rice Traders, New Delhi. The cheque was  dishonoured due to inadequacy of funds in the account.   Intimation was given on 6.2.1995.  Notice was issued by the  appellant demanding payment by lawyer’s notice dated  17.2.1995.  The amount was not paid. The respondents  requested the appellant for some time to make the payment.  On the request of the respondents, the cheque was again  presented on 6.7.1995 and it was again dishonoured due to  inadequacy of funds. Intimation in this regard was sent to  the appellant on 10.7.1995.  Again, lawyer’s notice was sent  on 24.7.1995. Reply was sent by the respondents on 16.8.1995  refuting the allegations contained in the legal notice. The

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complaint was lodged on 28.8.1995. Charges were framed.   

Respondent filed an application for discharge which was  dismissed by the trial court by order dated 29.1.2002.  The  order was challenged before the High Court which by the  impugned judgment held that the requirements of Section 142  of the Act were not met.

In support of the appeal, learned counsel for the  appellant submitted that the High Court was not right in  entertaining the petition under Section 482 of the Code.   The High Court lost sight of the fact that the application  was filed by the respondents long after the charges were  framed. High Court has erroneously placed reliance on this  Court’s decision in Sadanandan Bhadran v. Madhavan Sunil  Kumar (1998 (6) SCC 514). On the contrary, the decision in  Dalmia Cement (Bharat) Ltd. v. Galaxy Traders & Agencies  Ltd. and Ors.  (2001 (6) SCC 463) is applicable.  The period  of limitation has to be reckoned from 10.8.1995 i.e. the  date on which the respondents-accused persons replied to the  legal notice dated 24.7.1995.  As the complaint was filed on  28.8.1995 the same was well within time. It was submitted  that the respondent-accused persons categorically stated in  their reply dated 10.8.1995 that the first notice had not  been served on them.     

Learned counsel for the respondent-accused persons on  the other hand, submitted that the High Court had rightly  taken the view that the requirements of Section 142 were not  met.  It was pointed out that the effect of the first notice  was lost in view of the fact that the second notice was  given. The High Court has rightly applied the ratio in  Sadanandan Bhadran’s case (supra). It is not in dispute that  there was issuance and receipt of the lawyer’s notices on  both the occasions. In fact, the acknowledgement of service  of first notice has been filed by the complainant-appellant  himself and at all stages the case proceeded on the footing  that the first notice had been issued and served.  The High  Court has categorically noted that the first notice had been  served on the respondent. With reference to the complaint it  was submitted that the appellant himself accepted that the  first notice had been served. Therefore, he cannot be  permitted to take the different stand that the notice was  not served and in any event the second notice did not  provide the cause of action.  

For resolution of the controversy Sections 138 and 142  of the Act are relevant. They read as follows:

"Section 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 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

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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.  Explanation  - For the purposes of this  section, "debt or other liability" means a  legally enforceable debt or other liability.   Section 142: Cognizance of offences - Notwithstanding  anything contained in the Code of Criminal  Procedure, 1973 (2 of 1974), -  (a) no court 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;          (Provided that the cognizance of a  complaint may be taken by the Court after the  prescribed period, if the complainant  satisfies the Court that he had sufficient  cause for not making a complaint within such  period.) (c) no court inferior to that of a  Metropolitan Magistrate or a Judicial  Magistrate of the first class shall try any  offence punishable under Section 138."  

Clause (a) of the proviso to Section 138 does not put  any embargo upon the payee to successively present a  dishonoured cheque during the period of its validity. This  apart, in the course of business transactions it is not  uncommon for a cheque being returned due to insufficient  funds or similar such reasons and being presented again by  the payee after sometime, on his own volition or at the  request of the drawer, in expectation that it would be  encashed. The primary interest of the payee is to get his  money and not prosecution of the drawer, recourse to which,  normally, is taken out of compulsion and not choice.  On  each presentation of the cheque and its dishonour, a fresh  right-and not a cause of action - accrues in his favour.  He

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may, therefore, without taking pre-emptory action in  exercise of his such right under clause (b) of Section 138,  go on presenting the cheque so as to enable him to exercise  such right at any point of time during the validity of the  cheque.   

But once he gives a notice under clause (b) of Section  138, he forfeits such right in case of failure of the drawer  to pay the money within the stipulated time, he would be  liable for offence and the cause of action for filing the  complaint will arise. In a generic and wide sense (as in Section 20 of the  Civil Procedure Code, 1908 (in short ’CPC’) "cause of  action" means every fact which it is necessary to establish  to support a right or obtain a judgment. Viewed in that  context, the following facts are required to be proved to  successfully prosecute the drawer for an offence under  Section 138 of the Act:  (a) that the cheque was drawn for payment of an  amount of money for discharge of a debt/liability  and the cheque was dishonoured;  (b) that the cheque was presented within the  prescribed period;  (c) that the payee made a demand for payment of  the money by giving a notice in writing to the  drawer within the stipulated period; and  (d) that the drawer failed to make the payment  within 15 days of the receipt of the notice.  Proceeding on the basis of the generic meaning of the term  "cause of action", certainly each of the above facts would  constitute a part of the cause of action but clause (b) of  Section 142 gives it a restrictive meaning, in that, it  refers to only one fact which will give rise to the cause of  action and that is the failure to make the payment within 15  days from the date of the receipt of the notice.  A combined  reading of Sections 138 and 142 makes it clear that cause of  action is to be reckoned accordingly. The combined reading  of the above two sections of the Act leaves no room for  doubt that cause of action within the meaning of Section  142(c) arises - and can arise - only once.   The period of one month for filing the complaint will  be reckoned from the day immediately following the day on  which the period of fifteen days from the date of the  receipt of the notice by the drawer expires.

As noted in Sadanandan Bhadran’s case (supra) once a  notice under clause (b) of Section 138 of the Act is  "received" by the drawer of the cheque, the payee or  holder of the cheque forfeits his right to again present the  cheque as cause of action has accrued when there was failure  to pay the amount within the prescribed period and the  period of limitation starts to run which cannot be stopped  on any account. One of the indispensable factors to form the cause of  action envisaged in Section 138 of the  Act is contained in  clause (b) of the proviso to that section. It involves the  making of a demand 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". If no such notice is given within the  said period of 15 days, no cause of action could have been  created at all.  Thus, it is well settled that if dishonour of a cheque  has once snowballed into a cause of action it is not  permissible for a payee to create another cause of action

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with the same cheque. In Sil Import, USA v. Exim Aides Silk Exporters,  Bangalore (1999 (4) SCC 567), it was held that the language  used in Section 142 admits of no doubt that the magistrate  is forbidden from taking cognizance of the offence  if the  complaint was not filed within one month of the date on  which the cause of action arose.  Completion of the offence  is the immediate forerunner of rising of the cause of  action. In other words, cause of action would arise  soonafter completion of the offence and period of limitation  for filing of the application starts simultaneously running.   

It is to be noted that though a somewhat confusing  statement was made by the respondents regarding the receipt  of the first lawyer’s notice.  Therefore, what was kept  alive was a fresh right and not cause of action.  Therefore,  Sadanandan Bhadran’s case (supra) was rightly applied.  The  impugned judgment does not suffer from any infirmity to  warrant interference.                 

The appeal is dismissed.