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  

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

FACTS

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.

ISSUE BEFORE SC

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

OBSERVATION

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."

CONCLUDING VIEW

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."

REASON OF JURISPRUDENCE

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"

AMLEGALS REMARKS

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.

Disclaimer: The information contained in this document is intended for informational purposes only and does not constitute legal opinion, advice or any advertisement. This document is not intended to address the circumstances of any particular individual or corporate body. Readers should not act on the information provided herein without appropriate professional advice after a thorough examination of the facts and circumstances of a particular situation. There can be no assurance that the judicial/quasi-judicial authorities may not take a position contrary to the views mentioned herein.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Sign Up
Gain free access to lawyers expertise from more than 250 countries.
 
Email Address
Company Name
Password
Confirm Password
Position
Industry
Mondaq Newsalert
Select Topics
Select Regions
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions