V.K. Gupta vs Dimension And Designers (P) Ltd. ...
2006 Latest Caselaw 1206 Del

JUDGMENT

Badar Durrez Ahmed, J.

1. This revision petition is filed by the petitioner being aggrieved by the revisional order dated 01.08.2001 by the learned Additional Sessions Judge whereby the learned Additional Sessions Judge allowed the revision petition filed on behalf of the respondents herein and came to the conclusion that there was no cause of action available to the complainant to file the four complaints in question.

2. The learned Counsel for the petitioner pointed out that the impugned order was liable to be set aside because the learned Additional Sessions Judge fell into error when he came to the conclusion that the notice of demand under Section 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as 'the said Act') was not sent within the 15 days period stipulated therein. He also submitted that the learned Additional Sessions Judge fell into error in holding that the demand draft of Rs. 3 lakhs paid on 19.02.1998 represented the payment by the respondent in lieu of the four cheques in question which had been dishonoured on 18.02.1998. He submitted that the cheques were presented twice by the petitioner. The first presentation was prior to 18.02.1998 and the same were dishonoured on 18.02.1998. The said cheques were subsequently presented sometime towards the end of March, 1998 and they were again dishonoured on 04.04.1998. The notice of demand under Section 138 of the said Act was issued on 15.04.1998 and the complaint was filed on 22.05.1998. Therefore, according to the learned Counsel for the petitioner, the notice of demand was well within time and so was the complaint and the finding of the learned Additional Sessions Judge was, therefore, erroneous.

3. The brief facts of the case are that the respondent issued four cheques, two cheques each of Rs. 1 lakh and two cheques each of Rs. 50,000/- on 14.02.1998 in favor of the petitioner. According to the petitioner, these cheques were issued in part discharge of the respondents' liability of a sum of Rs. 7.62 lakhs. It is contended on behalf of the respondents that the respondents did not have a liability of Rs. 7.62 lakhs and the same was only to the extent of Rs. 4.06 lakhs. The learned Counsel for the respondents also contended that apart from these four cheques, two other cheques were issued each of Rs. 50,000/- on 18.02.1998 and, therefore, the total sum of the 6 cheques was in discharge of their total liability of Rs. 4.06 lakhs. So, there is a dispute with regard to the extent of liability of the respondents. On the one hand, the petitioner contends that the liability was Rs. 7.62 lakhs and, on the other hand, the respondents contend that the liability was limited to Rs. 4.06 lakhs. This dispute is relevant because on 19.02.1998, a sum of Rs. 3 lakhs was paid by one demand draft issued at the instance of the respondents in favor of the petitioner. The said sum of Rs. 3 lakhs, though not initially mentioned in the complaint or in the demand notice, has been acknowledged by the petitioner as having been received by him on 19.02.1998. This fact was also mentioned in the reply issued by the respondents to the demand notice on 04.05.1998. It is the contention of the petitioner that the said draft for Rs. 3 lakhs was in addition to the 6 cheques amounting to Rs. 4 lakhs in order to cover the liability of Rs. 7.62 lakhs. On the other hand, it is the contention of the respondents that the said draft of Rs. 3 lakhs was issued in lieu of the four cheques in issue in the present case which had been dishonoured on 18.02.1998. The respondents contend that immediately on dishonour of these four cheques on 18.02.1998, the respondents were informed by the petitioner and the respondents, keeping in mind the urgent need of the funds of the petitioner, agreed to replace the same by the draft for Rs. 3 lakhs. The learned Counsel for the petitioner controverter this argument by submitting that had it been a payment in lieu of the four cheques, then the cheques would have been returned to the respondents which was not the case. The cheques were retained by the petitioner and, this, according to the learned Counsel for the petitioner, clearly indicated that the four cheques were independent of the draft of Rs. 3 lakhs which was paid by the respondents to the petitioner on 19.02.1998.

4. The learned Counsel for the respondents, in answer to the arguments advanced on behalf of the petitioners, submitted that the conduct of the petitioner should also be noted. The conduct being that the receipt of the amount of Rs. 3 lakhs as well as the reply issued by the respondents were not placed before the learned Metropolitan Magistrate at the pre-summoning stage. He submitted that, therefore, the learned Metropolitan Magistrate did not have all the facts before him for the purposes of summoning the respondents. It is his case that had these materials been placed before the learned Metropolitan Magistrate, then he would not have passed the summoning order. These materials have only come to light after the passing of the summoning order and perhaps even at the stage of revision before the learned Additional Sessions Judge. So, according to the learned Counsel for the respondents, the conduct of the petitioner should not be to the detriment of the respondents. He, therefore, supported the order passed by the learned Additional Sessions Judge wherein he has given a fair measure of importance to this conduct on behalf of the petitioner. However, I am of the view that these are issues which require greater examination and cannot be dealt with in a summary or cursory manner.

5. The legal issues that have been raised by the learned Counsel for the petitioner need to be examined. The first issue is that the learned Additional Sessions Judge has gone completely wrong in noting that the demand notice was beyond time and that the complaint was also not filed within the stipulated time. He had come to this erroneous conclusion because he had reckoned 18.02.1998 as the relevant date from which the 15 days period was said to have started. In point of fact, the court below ought to have taken the date as 04.04.1998, the date of the second dishonour of the four cheques. The learned Counsel for the petitioner placed reliance on the decision of the Supreme Court in the case of Uniplas India Ltd. and Ors. v. State (Govt of NCT of Delhi) and Anr. to indicate that insofar as the offence under Section 138 of the said Act is concerned, the demand notice forms an integral part of the cause of action.

6. If the cheques are dishonoured and no demand notice is issued, then the cause of action does not accrue under Section 138 of the said Act. Section 138 of the said Act as applicable at the relevant time reads 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 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 provision of this Act, be punished with imprisonment for a term which may be extended 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.

Clearly, Section 138 of the said Act requires that, on receipt of information from the bank regarding the return of a cheque as unpaid, 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 by giving a notice in writing to the drawer of the cheque within fifteen (15) days of receipt of such information. Another essential requirement of Section 138 is that the drawer of such cheque must fail to make the payment to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen (15) days of receipt of the said notice. The cause of action for initiating proceedings under Section 138, therefore, arises only when, after receipt of information of dishonour of a cheque, (i) a written notice is given within 15 days to the drawer and; (ii) the drawer fails to make the payment within 15 days of receipt of the said notice. Mere dishonour of a cheque without the issuance of a notice does not result in a cause of action.

7. As regards the filing of the written complaint, Section 142 of the said Act places a bar on the courts from taking cognizance of any offence under Section 138 unless the written 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. In SIL Import, USA v. Exim Aides Silk Exporters, Bangalore , the Supreme Court, with reference to Section 142 of the said Act, observed:

7. The language used in the above section 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 cause of action. In other words cause of action would arise soon after completion of the offence, and the period of limitation for filing the complaint would simultaneously start running.

Receipt of the written notice puts the ball, as it were, on the court of the drawer of the cheque. The clock starts ticking against him. If fifteen (15) days pass by and he does not pay, the offence is completed and the cause of action arises. And, now, the clock starts running against the payee. He has one month from this date to make the written complaint. If no complaint is filed within this period, the payee would stand forbidden from launching a prosecution thereafter, due to the clear interdict contained in Section 142 of the Act [See: SIL Import (supra), para 24].

8. In the present case, I find that the cheques were presented twice. On the first presentation, they were dishonoured on 18.02.1998, but no demand notice was issued. So, no cause of action for a prosecution under Section 138 of the said Act accrued at that stage. Subsequently, during the validity period of the cheques, they were re-presented towards the end of March, 1998 and they were again dishonoured on 04.04.1998. It is consequent upon this, on 15.04.1998, that the notice of demand contemplated under Section 138 of the said Act was issued. Since no payment was received even after the issuance of the notice, the cause of action accrued to the petitioner to initiate prosecution by filing a complaint. Though, according to the learned Counsel for the respondents, their reply provided a complete explanation of the conduct on the part of the respondents in not paying pursuant to the demand notice inasmuch it was the respondents' case that they had already paid by virtue of the draft of Rs. 3 lakhs, that is a defense involving questions of fact which can only be established in a trial. At this stage, this much is clear on the basis of allegations that the cause of action arose when the respondents failed to pay within fifteen days of receipt of the notice dated 15.04.1998. The complaint was filed on 22.05.1998. Obviously, it was within the stipulated period of one month from the date the offence was completed and the cause of action arose. The complaint was, therefore, not hit by the interdict of Section 142 of the said Act.

9. In the impugned order, the learned Additional Sessions Judge observed that if no complaint is filed on the "first" cause of action, the payee is disentitled to create "another" cause of action to file the complaint for the purpose of launching a prosecution on it by presenting the cheques again. This observation is entirely misplaced. Perhaps it is based on the decision of the Supreme Court in the case of Sadanandan Bhadran v. Madhavan Sunil Kumar , where the facts were entirely different. In that case, upon the dishonour of a cheque, the payee sent a notice under Section 138 of the said Act, but did not follow it up with the filing of a complaint within the stipulated period. Instead, the payee presented the cheque once again and upon its dishonour issued a second notice under Section 138. When payment was not made within 15 days of receipt of the notice, the complaint was filed. The question which arose for consideration was whether in a case where notice in writing was sent after the first dishonour of the cheque, the payee can once again present the cheque and get it dishonoured for the purpose of filing the complaint. The Supreme Court held:

7. Besides the language of Sections 138 and 142 which clearly postulates only one cause of action, there are other formidable impediments which negate the concept of successive causes of action. One of them is that for dishonour of one cheque, there can be only one offence and such offence is committed by the drawer immediately on his failure to make the payment within fifteen days of the receipt of the notice served in accordance with Clause (b) of the proviso to Section 138. That necessarily means that for similar failure after service of fresh notice on subsequent dishonour, the drawer cannot be liable for any offence nor can the first offence be treated as non est so as to give the payee a right to file a complaint treating the second offence as the first one. At that stage, it will not be a question of waiver of the right of the payee to prosecute the drawer but of absolution of the drawer of an offence, which stands already committed by him and which cannot be committed by him again.

10. The facts of the present case are immediately distinguishable from the facts of Sadanandan Bhadran (supra). Whereas in the latter case the first dishonour was immediately followed by a notice under Section 138, in the present case, no notice was issued upon the first dishonour. Thus, while in Sadanandan Bhadran (supra) the offence was completed and the cause of action arose qua the first dishonour, in the present case, as no notice was issued consequent upon the first dishonour, no cause of action arose under Section 138 qua the first dishonour. Therefore the learned Additional Sessions Judge was clearly wrong in law in suggesting that a "cause of action" had arisen qua the first dishonour of the cheques on 18.02.1998. At this juncture, a reference to the Supreme Court decision in Uniplas India Ltd (supra) would be appropriate. A cheque was presented by the payee. It was dishonoured. A notice was issued, though under Section 434 of the Companies Act, 1956, on 01.12.1995, beyond 15 days of the receipt of information of the dishonour. The cheque was presented again and was dishonoured again as per the Bank Memo of 23.02.1996. This time round, a notice under Section 138 of the said Act was sent by the payee to the drawer on 02.03.1996. As the drawer did not pay within the statutory period, a complaint was filed on 11.04.1996. The Supreme Court firstly held that if a notice is issued under Section 434 of the Companies Act, 1956 within 15 days of receipt of information of dishonour, "such a notice would as well be good enough under Clause (b) of the proviso to Section 138 of the NI Act." It then held that an indispensable factor constituting the cause of action involves the making of the demand by giving a written notice to the drawer "within fifteen days" of the receipt of information of dishonour by the bank. The first notice of 01.12.1995 was issued beyond this fifteen day period and, therefore, the first dishonour, using the words of the Supreme Court, "did not snowball into a cause of action." The corollary of this, according to the Supreme Court, was "that the payee was not prevented from presenting the cheque once again within the permitted period and to make use of such presentation and the subsequent dishonour for a cause of action to be founded for launching a complaint...." Clearly, in the present case, there being no notice (valid or invalid) consequent upon the first dishonour of cheques on 18.02.1998, there was no impediment to the petitioner presenting them again as long as they were valid. The notice dated 15.04.1998 consequent upon the second dishonour was within time and so, too, the complaint.

11. The second aspect of the matter is the question of payment of Rs. 3 lakhs by the respondents to the petitioner. It was contended, as noticed above, on behalf of the respondents that this payment was in lieu of the four dishonoured cheques. The contrary submission of the petitioner is that payment was in addition to the cheques and was in discharge of other liabilities. The reliance placed by the petitioner on the decision of the Supreme Court in the case of State Farm Corporation of India Ltd. v. Nijjer Agro Foods Ltd. and Ors. (2005) 12 SCC 502 is, in my view, apposite. The Supreme Court was of the view that such issues with regard to discharge of liabilities was best left to be finalised in the course of the trial and could not be taken up at the stage of summoning. The Supreme Court observed:

2. Two complaints under Section 138 of the Negotiable Instruments Act were filed by the appellant against the respondents. In those complaints, the Metropolitan Magistrate, New Delhi issued summons to the respondents. An application filed by them for dropping the proceedings was dismissed in terms of the order of the learned Magistrate, dated 26-4-1999, holding that "whether the cheques were issued for discharge of debt/liability can be decided only after recording evidence. At the stage of summoning the respondents the court has just to see whether prima facie case is made out against the accused or not under Section 138 of the NI Act". Further, it was held, whether the respondents have made payment by way of bank drafts in lieu of the cheques which are subject-matter of complaints can also be decided at the trial and not at the stage of summoning and by way of an application seeking to drop the criminal complaint proceedings. Quite strangely, the High Court, by the impugned judgment dated 14-10-2003, while exercising revisional jurisdiction, examined the defense on merits and allowed the criminal revision petition filed by the respondents and reversed the decision of the Magistrate declining to drop the proceedings by holding that by making payment of Rs. 40 lakhs, the respondents had discharged their liability. It was no stage to examine the defense of the respondents.

3. Though, at this stage, we are not going into the merits, but we may only note that the subject-matter of the two complaints are four cheques in all amounting to Rs76,55,917.47p. According to the respondents, they made payment of Rs 40 lakhs by six bank drafts after the issue of some of the cheques. Whether the said payment has been made or it is towards some of the amounts covered by the cheques are all the questions which can be decided only at the trial of the complaint cases under Section 138 of the Negotiable Instruments Act and could not have been made the basis of allowing the revision petition. The approach of the High Court is clearly erroneous."

Therefore, on this ground also, I find that the learned Additional Sessions Judge fell into error in examining the defense of the respondents.

12. For the foregoing reasons, the impugned order is set aside. The complaint stands restored before the learned Metropolitan Magistrate. It shall be open to the parties to take up all the issues in the trial. The matter be now placed before the learned ACMM, Patiala House, New Delhi on 22.08.2006 for assignment to the appropriate court for further proceedings.

13. The revision petition stands allowed accordingly.