Limitation u/s 138 of NI Act starts after expiry of 15 days period to make payment from the date of receipt of notice- Allahabad High Court
ABCAUS Case Law Citation:
ABCAUS 3891 (2024) (03) HC
Important Case Laws relied upon by parties:
Kusum Ingots & Alloys Limited Vs. Pennar Peterson Securities Ltd.
MSR Leathers vs. S. Palaniappan And Another
Yogendra Pratap Singh Vs. Savitri Pandey
In the instant case of cheque dishonour, the Petitioner had challenged the order passed in Complaint Case under Section 138 of the Negotiable Instruments Act, 1881 (the Act) in terms of which the petitioner had been summoned, and also the subsequent order passed in Criminal Revision. The challenge was confined to the order only on the question of limitation.
A cheque drawn by the petitioner, upon being presented by the respondent was returned unpaid by the bank, along with a return memo with a remark “Amount Insufficient”.
Upon receipt of the aforesaid return memo, the respondent gave a show cause notice to the petitioner regarding return of the cheque, and the said notice. On failure of the petitioner to pay the sums even thereafter, the said criminal case was filed by the respondent.
However, on the basis of the date of receipt of the notice, the petitioner contended that the limitation would run from the date when the legal notice was received by him, and the complaint having been filed beyond 30 days from the said date was liable to be rejected.
The A.G.A. submitted that the complaint having been filed within one month from the date when the cause of action arose, the same was within the prescribed period of limitation, and, therefore, the orders passed by the courts below cannot be faulted on the question of limitation.
The Hon’ble High Court observed that The proviso to Section 138 stipulates three distinct conditions, which must be satisfied, before the dishonour of a cheque, may be held to constitute an offence and become punishable: i.e.
(i) cheque is 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;
(ii) 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 thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid;
(iii) 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
It is only upon a cumulative satisfaction of the aforesaid three conditions, as enumerated under the proviso to Section 138, as clauses (a), (b) and (c), thereof that an offence under Section 138, can be said to have been committed by the person issuing the cheque.
The High Court further observed that the provisions relating to cognizance of offences is contained under Section 142 of the N.I. Act. The section starts with a non obstante clause, and in terms thereof, 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, and such complaint is to be made within one month of the date on which the cause of action arises under clause (c) of the proviso to Section 138.
Further, The proviso to clause (b) of subsection (1) of Section 142 prescribes 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.
The Hon’ble High Court stated that a conjoint reading of the aforesaid provisions would indicate that a complaint under Section 138 can be filed within one month of the date on which the cause of action arises under clause (c) of the proviso to Section 138, which happens as soon as the drawer of the cheque fails to make payment of the cheque amount to the payee or to the holder in due course of the cheque, within fifteen days of the receipt of the notice required to be sent in terms of clause (b) of the proviso to Section 138 of the N.I. Act.
The cause of action having once arisen, under clause (c) of the proviso to Section 138, the payee or the holder of the cheque acquires the right to institute proceedings for prosecution under Section 138 of the N.I. Act, and the said right remains legally enforceable for a period of one month from the date on which the cause of action has arisen.
The Court explained the sequence of events starting from the dishonour of cheque for insufficiency etc. of funds in the account to the stage at which cognizance of the offence may be taken with the help of the following flow chart
The Hon’ble High Court noted that the ingredients of Section 138 of the N.I. Act were analyzed by the Supreme Court in the decision and it was observed that the following ingredients would be required to be satisfied for making out a case under Section 138 of the N.I. Act:
(i) a person must have drawn a cheque on an account maintained by him in a bank for payment of a certain amount of money to another person from out of that account for the discharge of any debt or other liability;
(ii) that 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;
(iii) that cheque is returned by the bank unpaid, either because the amount of money standing to the credit of the 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 the bank;
(iv) the payee or the holder in due course of the cheque 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 15 days of the receipt of information by him from the bank regarding the return of the cheque as unpaid;
(v) the drawer of such cheque fails to make payment of the said amount of money to the payee or the holder in due course of the cheque within 15 days of the receipt of the said notice.
The Hon’ble High Court further observed that the conditions precedent to constitute an offence, as prescribed under the proviso to Section 138, were subject matter of consideration in another case before Hon’ble Apex Court, wherein it was held that only upon satisfaction of all three conditions enumerated under clauses (a), (b) and (c) of the proviso to Section 138, can an offence be said to have been committed by the person issuing the cheque.
The Hon’ble High Court further noted that Section 142 of the N.I. Act has been considered in a decision of Hon’ble Supreme Court and it has been held that the said section prescribes the mode and also the time within which a complaint for an offence under Section 138 of the N.I. Act can be filed.
The Hon’ble High Court noted that in the instant case, the respondent duly gave notice of the dishonour of the cheque to the petitioner. The cause of action for filing the complaint, arose to the respondent after expiry of 15 days’ period to make the payment from the date of receipt of notice as per clause (c) of the proviso of Section 138. The complaint having been filed within the prescribed period of one month as per clause (b) of sub-Section (1) of Section 138, from the date on which the cause of action arose and accordingly the court concerned would be within its right to take cognizance of the offence, as provided under Section 142.
The Hon’ble High Court held that the summoning order and the order passed in the revision, therefore, cannot be faulted on the ground of limitation.
The petition was dismissed accordingly.
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