India: A 'Cheque Bounce' Complaint Filed, Based On A Second Statutory Notice Issued After Re-Presentation Of Cheques, Is Maintainable

Last Updated: 24 January 2019
Article by AMLEGALS  

M/s. Sicagen India Ltd. vs. Mahindra Vadideni & Ors.
[criminal appeal nos. 26-27 of 2019] dated: 08.01.2019


The Appeal was filed against the orders of the High Court of Judicature at Madras dated 14.11.2011 in Crl. O.P. No. 20401 of 2011 and 15.12.2014 Crl. O.P.S.R. No. 55782 of 2014.

The orders quashed the criminal complaint filed by the Appellant under Section 138 of the Negotiable Instruments Act.

In the present case, M/s. Sicagen India Ltd (hereinafter referred to as 'the Appellant') was involved in business dealings with Mahindra Vadideni (hereinafter referred to as 'the Respondent').

In the course of business dealings, the Respondent issued three cheques in favor of the Appellant. Thee cheques were presented for collection and they were dishonoured due to insufficient funds.

Hence, the Appellant issued the first statutory notice to the Respondent on 31.08.2009, demanding the refund of the cheque amounts. The cheques were presented again and dishonored again.

Hence, on 25.01.2010 the Appellant issued a statutory notice to the Respondent and filed a complaint under Section 138 of the Negotiable Instruments Act, 1881(hereinafter referred to as 'the said Act'). This complaint was based on the second statutory notice dated 25.01.2010.

The Respondent filed a petition before the High Court of Judicature at Madras under Section 482 of CrPC seeking to quash the criminal complaint on the ground that the complaint was not filed based on the first statutory notice dated 31.08.2009. Hence the complaint filed on the basis of the second statutory notice dated 25.01.2010 was not maintainable.

The Hon'ble High Court of Judicature at Madras, quashed the criminal complaint filed by the Appellant. The Hon'ble Court held that it was not maintainable since the amount had been specifically mentioned in the first statutory notice dated 31.08.2009, but the complaint was filed, instead, on the basis of the second statutory notice dated 25.01.2010 by postponing the matter.

Further, the Hon'ble Court held that since the complaint had been filed on the same cause of action as the first statutory notice, it was not maintainable.

The present appeal was heard and decided by a Supreme Court bench comprising of J. R. Bhanumati and J. Indira Banerjee.


The sole issue for consideration before the Court was:

Whether a criminal complaint based on a subsequent or successive statutory notice, filed under Section 138 of the Negotiable Instruments Act, 1881 is maintainable.2


The Hon'ble Supreme Court stated that the issue was no longer without a precedent and referred to its judgment in Sadanandan Bhadran vs Madhavan Sunil Kumar.

Therein, it was held that second and successive presentation of a cheque is legally permissible as long as such presentation is within the period of 6 months or the validity of the cheque, whichever is earlier.

This Hon'ble Court also held that the subsequent dishonour of the cheque would not entitle the payee to issue a statutory notice or initiate legal proceedings against the drawer of the said dishonoured cheque if he fails to make the payment.

Further, this Hon'ble bench observed that the correctness of the abovementioned Sadanandan judgment was doubted and was referred to the larger bench of this Hon'ble Court in Leathers vs. S. Palaniappan and Another [2013 ((1) SCC 177 MSR], wherein the Hon'ble Apex Court held that no prohibition exists against the subsequent presentation of cheque and institution of a criminal complaint based on the subsequent dishonour of the same.

The Supreme Court also noted in the Leathers judgment that:

"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 statutory notice and a failure to pay had not been launched.

... ... ....

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."

In the same Leathers' judgment, while reiterating the purport and object of the said Act, the Honorable Court also observed that:

"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."


The Supreme Court set aside the impugned orders dated 14.11.2011 in Crl. O.P. No. 20401 of 2011 and 15.12.2014 Crl. O.P.S.R. No. 55782 of 2014 of the High Court of Judicature at Madras with the observation that:

"In the present case as pointed out earlier that cheques were presented twice and notices were issued on 31.08.2009 and 25.01.2010. Applying the ratio of MSR Leathers (supra) the complaint filed based on the second statutory notice is not barred and the High Court, in our view, ought not to have quashed the criminal complaint and the impugned judgment is liable to be set aside."

The matter was remitted back to the Trial Court and all the contentions raised by the parties were left open to be raised before the Trial Court.

Hence, this Hon'ble Court conclusively held as under:

"The impugned judgment of the High Court is set aside and the appeals are allowed. The Complaint CC No. 4029 of 2010 before the Court of XVIII, Metropolitan Magistrate at Saidapet, Chennai is restored to the file of the Trial Court and the Trial Court shall proceed with the matter in accordance with law after affording sufficient opportunity to both the parties."


The Court reasoned, by reiterating the principle propounded in Leathers vs. S. Palaniappan and Another [2013 ((1) SCC 177 MSR] wherein the principle has been pounded by associating the same to the principles of interpretation of statutes that:

"29. It is trite that the object underlying Section 138 of the Act is to promote and inculcate faith in the efficacy of banking system and its operations giving creditability to negotiable instruments in business transactions and to create an atmosphere of faith and reliance by discouraging people from dishonouring their commitments which are implicit when they pay their dues through cheques. The provision was intended to punish those unscrupulous persons who issued cheques for discharging their liabilities without really intending to honour the promise that goes with the drawing up of such a negotiable instrument. It was intended to enhance the acceptability of cheques in settlement of liabilities by making the drawer liable for penalties in case the cheque was dishonoured and to safeguard and prevent harassment of honest drawers. (See Mosaraf Hossain Khan V. Bhagheeratha Engg. Ltd. Reported in (2006) 3 SCC 658; C. C. Alavi Haji v. Palapetty Muhammed reported in (2007) 6 SCC 555 and Damodar S. Prabhu v. Sayed Babalal H. reported in (2010) 5 SCC 663.) Having said that, we must add that one of the salutary principles of interpretation of statues is to adopt an interpretation which promotes and advances the object sought to be achieved by the legislation, in preference to an interpretation which defeats such object. This Court has in a long line of decisions recognized purposive interpretation as a sound principle for the courts to adopt while interpreting statutory provisions."

The Court also reasoned by reiterating the principle propounded in New India Sugar Mills Ltd. v. CST [1963(2) Suppl. SCR 459 = 1963 AIR 1207], that:

""8. ... It is a recognized rule of interpretation of statutes that the expressions used therein should ordinarily be understood in a sense in which they best harmonise with the object of the statue, and which effectuate the object of the legislature. If an expression is susceptible of narrow or technical meaning, as well as a popular meaning the court would be justified in assuming that the legislature used the expression in the sense which would carry out its object and reject that which renders the exercise of its power invalid"


The Hon'ble Supreme Court's ruling in the instant case upholds the preceding judgments relating to the same issue as exists in the present case and determines the judicial intent of the provisions of Section 138 of the said Act.

This has been done by determining the applicability of the rule of Harmonius Construction of the interpretation of statutes to the facts and circumstances of the current case.

The decisions that have been relied upon by this Hon'ble Court are a standing precedent in matters related to the procedural aspects of prosecution for dishonour of cheque.

The jurisprudence appropriated by this Hon'ble Court showcases the shared intent of the various stratum of the Indian Judiciary towards the determination of the procedure applicable in similar circumstances associated with matters of dishonour of cheque.

This balanced approach of the Court would go a long way in ensuring that the object and purport of the provisions of the said Act are protected.

This content is purely an academic analysis under "Legal intelligence series".

© Copyright AMLEGALS.

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