CHEQUES

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CHEQUES-DISHONOUR-DOUBTS CLEARED (PART 1)

Cause of Action

Doubt:

Whether dishonour of cheque will amount to cause of action?

Answer:

No.  Dishonour of cheque by itself does give not rise to a cause of action, because payment can be made on receipt of notice of demand contemplated in clause (b) of section 138 and in that event, there is no offence, nor any attempt to commit an offence, nor even a preparation to commit an offence.  Failure to pay amount within 15 days on receipt of notice alone is the cause of action and nothing else. j

Doubt:

When the cause of action will be complete and when the offence is deemed to have been committed?

Answer:

The cause of action will be complete when the drawer of the cheque fails to make payment within 15 days of the receipt of the notice contemplated by proviso (b) of section 138.  The offence shall be deemed to have been committed only from the date when the notice expired. k

Doubt:

Whether issuing of cheque can be considered as the starting point for the commission of the offence?

Answer:

By no stretch of imagination the Act of issuing of cheque can be considered as the starting point for the commission of the offence.  From the reading of the main body of section 138 along with the proviso as well as the provisions of section 142, leaves no doubt that the date of issuing of the cheque is immaterial for constituting an offence under section 138. l

Doubt:

Whether there can be the second cause of action?

Answer:

A cheque can be presented any number of times during the period of its validity.  But, once the offence was complete with the failure to pay amount within the prescribed period after making demand in writing, a subsequent presentation of the cheque for encashment is of no use as far as section 138 of the Act is concerned.  Thus complaint filed on a second cause of action with the same cheque would not be maintainable. m

 

The Supreme Court has also confirmed this view in SIL Import, USA vs. Exim Aides Silk Exporters (1999) 4 SCC 567 and in UIPLAS INDIA ltd., and others vs. STATE (Govt of New Delhi) (2001) 6 SCC 8 wherein it was held that notice given to the drawer after the statutory period postulated in proviso ( b) to S.138 and non payment of the amount of cheque by the drawer within 15 days of such notice, held, would not give rise to cause of action. In such a case the payee can again present the cheque within the permitted period and dishonour of the cheque at this stage would create a casue of action for filing a complaint.

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1.          S.Prithviraj Kukkillaya Vs. Manthew Koshy of the same High Court reported in 1991 Crl.L.J.1771;Management Baranagar Juit factory Vs. A.D.Showdri 1993 Crl.L.J.2165; M/s EssVee Food Representatives Vs. Kapoor brothers 1992 Crl. L.J.739.

2.          M.M.Malik Vs. Prem Kumar Goyel 1991 Crl.L.J.2594 (P&H)

3.          Anil K.Mehra Vs. Huns Raj 1992 Crl.L.J. 1044.

       4       K.Chellakannu Nadaar Vs. Sri.Chenkal M.R.Suman 1994 Crl.L.J. 3515(ker)

 

 

 

Doubt:

Whether a part payment will affect the cause of action of the payee to file complaint before the court under section 138 read with 142. 

Answer:

Clause (b) of the proviso to section 138 requires that on dishonour of the cheque by the bank the payee shall make a demand for the payment of the “ said amount of money” by giving a notice in writing to the drawer of the cheque.  Which means that the notice shall make a demand for payment of the amount mentioned in the cheque.  Clause (c) of the proviso refers clearly to the failure of the drawer of such cheque to make payment of the “ said amount of money” to the payee within 15 days on receipt of the said notice.  The expression “the said mount of money” as used in both clauses of (b) and (c) of the proviso to section 138 makes it clear that the drawer will have to make payment of the entire amount of the money pursuant to the notice given by the payee and failure to pay the entire amount as mentioned in the cheque and the notice will constitute an offence under section 138 and any part payment even if made will be of no avail to the drawer of the cheque for evading prosecution.  If part amount could protect the drawer of the cheque from prosecution under section 138, this would have been very handy and convenient device for an unscrupulous person to frustrate the very purpose of section 138.  In that case tender of any paltry and insignificance amount of say Rupees ten or five even against a demand for any huge amount mentioned in the cheque could frustrate the coercive remedy which the legislature has thought fit to make available under section 138 to a duped payee coming within the ambit of the said section.  Anything short of payment of whole of the amount within the time limit mentioned in clause (c) of the proviso to section 138 generates the cause of action for making the complaint under section 142 (b).j

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1.       M/s Ancon Engineering Company Vs. Amitava Goswami 1994 Crl.L.J.351 (cal)

Doubt:

Whether 1.giving of the notice OR 2.receipt of the notice gives cause of action?

 

Answer:

The Supreme Court in Dalmia Cement (Bharat) Ltd., vs. Galaxy Traders & Agencies Ltd, & other (2001) 6 Supreme Court 463 has held that to constitute an offence under Section 138 of the Act, the complainant is obliged to prove its ingredients, which include the receipt of notice, by the accused under clause (b). It is to be kept in mind that it is not the "giving" of the notice, which makes the offence, but it is the "receipt" of the notice by the drawer, which gives the cause of action to the complainant to file the complaint within the statutory period.

The accused persons were partners of the respondent Firm. The respondent Firm on 26‑5‑1998 issued a cheque for a certain amount to the appellant Company but the same was dishonoured on 28‑5‑1998 by the bank, which intimated the appellant on 2‑6‑1998 accordingly. On 13‑6‑1998, the appellant issued to the respondent and one of its partners the statutory notice under Section 138 of the Negotiable Instruments Act and received the postal acknowledgement of the notice on 15‑6‑1998. The respondents through letter dt. 20-6‑1998, which was received by the appellant on 30‑6‑1998 (the last day of limitation period on the basis of the said notice), intimated that they had received only an empty envelope. Moreover, the respondents requested the appellant to send the contents, if any. The appellant again presented the cheque on 1‑7‑1998 to the bank, which was again dishonoured on 2‑7‑1998. The appellant Company sent to the accused a second notice of the dishonour of the cheque and demanded payment. The accused received the notice on 27‑7‑1998 but did not make the payment. On 9‑9‑1998,the appellant filed a complaint. The case of the accused was that since the complainant on 15-6-1998 received the postal acknowledgement receipt of the first notice, the complaint filed after 15-7-1998 was barred by limitation.

 

The learned counsel appearing for the respondents has submitted that as, upon presentation and dishonour of the cheque by the bank on 28‑5‑1998, which was intimated to the complainant, a cause of action had accrued, the complaint could be filed only within 30 days from the date of the alleged receipt of the first notice by the accused. He contends that as according to the complainant on 15‑6‑1998 he received the postal acknowledgement receipt of the notice, the complaint filed by it after 15‑7‑1998 was barred by time As admittedly, the complaint was filed by the appellant on 9‑9‑1998. it is contended that the same being barred by limitation was rightly quashed by the High Court. However, the learned Counsel for the appellant Submitted that as the respondents had disclaimed to have received the notice of dishonour sent to them on 13‑6‑1998, no option was left to the appellant except to present the cheque again and when not paid, serve a fresh notice for the purpose of making out a case and offence within the meaning of Section 138 of the Act.

Overruling the objection of the respondent the Supreme Court has held that the plea of the respondents was not only contradictory and an afterthought, but apparently carved out to resist the claim of the complainant and thereby frustrate the provisions of law.

(Contd in Part 2)