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November 20, 2020

Should complainant wait for 15 days to file a complaint for dishonour of cheque, once the intention of the party is clear that he does not wish to make payment?

by CA Shivam Jaiswal in RBI

Should complainant wait for 15 days to file a complaint for dishonour of cheque, once the intention of the party is clear that he does not wish to make payment?

The Negotiable Instruments Act, 1882 came into force to fulfil the following objectives:

  • Facilitate the settlement of payments in business as they pass freely from holder to holder due to easy transferability of value of instrument.
  • Provide legal protection to different mercantile instruments.
  • Present orderly and authoritative statement of leading rules of law relating to negotiable instrument.
  • Provide for the special procedure in case the obligations which have to discharge under the instruments.
  • Regulate the different types of negotiable instruments which include Promissory notes, Bills of Exchange and Cheques.
  • Explain the capacity and liabilities of the parties to the instrument.
  • Provide the understanding of different topics under the Act that are negotiation, assignment, endorsement etc.
  • Inculcate faith in the efficacy of banking operations and credibility in transacting business on the negotiable instruments.

Section 138 of the Negotiable Instruments Act pertains to Dishonour of cheque for insufficiency, etc., of funds in the account. According to the said section, 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 provisions of this Act

Such person shall be punished with imprisonment which may be extended to two years, or with fine which may extend to twice the amount of the cheque, or with both.

However, nothing contained in this section shall apply unless:

  • 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;
  • 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 30 days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and
  • 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

Section 142 pertains to Cognizance of offences. According to the said Section:

  • 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
  • such complaint is made within one month of the date on which the cause of action arises under of the proviso to section 138(c)
  • no court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the first class shall try any offence punishable under section 138.

Let us refer to the case of Ravi Dixit Vs State of U.P. and Another (Allahabad High Court) where the issue under consideration was whether the complainant of a dishonored cheque, should wait for a period of 15 days or not?

Facts of the Case:

  • A cheque of Rs.5,00,000 issued on 1.3.2019 and one another cheque of Rs.5,98,000 issued on 2.3.2019 were dishonoured on 28.5.2019.
  • The complainant sent a notice on 11.6.2019.
  • He did not receive any money and, therefore, on 29.6.2019 he filed compliant under Section 138 of Negotiable Instrument Act, 1881.
  • The Judge after discussing the dates was satisfied that prima facie case was made out for issuance of notice and likewise on 3.9.2019 passed the summoning order.

Submissions by the Petitioner

  • The petitioner was put to a question as to how the summoning order passed by the Court was bad.
  • Petitioner stated that as per the provisions of Section 138 of the Negotiable Instrument Act, 1881, he could not be asked to answer the summons as he had already filed reply and the complaint could be filed only after 15 days of his reply and it was filed before the said date.
  • The petitioner also submitted that the summoning order was without compliance of provisions of Section 138.
  • The application was falsely implicated due to enmity and financial dispute with the complainant and that cheques were dishonoured as he had directed stop of payment.
  • It is submitted that respondent sent notice to the applicant on 11.6.2019 but no date of service of notice was mentioned in the complaint.
  • The petitioner has submitted that on 25.6.2019 he had replied.
  • The complainant, according to the petitioner, should have waited for a period of 15 days and should not have filed the complaint on 29.6.2019.
  • The petitioner was not in know-how of the summon issued and the complaint was a premature complaint.
  • If the notice was sent on 11.6.2019 and no date of service was mentioned, as per general clause Act, 30 days’ time would have been presumed for service of notice and 15 days thereafter for waiting period of payment and, then only the complaint should have been filed.

Observations of the High Court (HC)

  • The provision of Section 138 of the Act, 1881 could not be interpreted to mean that even if the accused refused to make payment, the complainant could not file a complaint.
  • Proviso (c) of the said Act was to see the authenticity of the drawer of the cheque and was with a view to grant him a chance to make the payment.
  • In this case, the cheque was drawn by the accused on an account maintained by him with the bank.
  • The period of 15 days was for making payment. In this case the accused did not make the payment and did not even appear before the Court below for a year.
  • He approached the Court in the month of August, 2020.
  • Proviso to Section 138 did not constitute ingredients of offence punishable under Section 138.
  • Proviso to Section 138 simply postponed the actual prosecution of the offender till such time he failed to pay the amount, then the statutory period prescribed began for lodgement of complaint.
  • The Parliament had granted just and proper time to give to the drawer the opportunity to pay the amount before he could be prosecuted.
  • The offence was completed the moment the cheque is dishonoured.

Reference to earlier cases

  • The judgment in Shakti Travel and Tours Vs. State of Bihar, (2002) would not apply to the facts of this case as it was averred in the complaint that the notice was served which was replied by the accused and, therefore, it could not be said that the issuance of summons was bad in the eye of law.
  • In the case in hand, the petitioner replied to the notice which goes to show that the intention of the drawer is clear that he did not wish to make the payment. Once this was clarified, should the complainant wait for the minimum period of 15 days, the answer would be ‘no’.
  • In this case, judgment in Parameswaram Unni Vs. G. Kannan, (2017) could be relied upon as in this case it appears that notice was deemed to have been served to the petitioner and he was under an obligation to discharge his liability which he has not done.
  • The only object of proviso (c) to Section 138 was to avoid unnecessary hardship if the drawer wants to make payment.
  • Hence, the HC did not find any reason to interfere with the well-reasoned summoning order passed by the Magistrate.
  • Reason given by the Magistrate was very clear.
  • It was well-reasoned order which was passed on 30.11.2019. For a period of one year, the petitioner had chosen not to appear before the Magistrate and had moved this Court now.

Conclusion by the High Court (HC)

In view of the above, this petition was dismissed with cost of Rs.15,000 to be deposited before the Court. The petitioner was aware that summons was already issued against him and, therefore, he could choose to appear before the Court below on or before 15.10.2020 failing which the Court shall be free to take steps as provided by law.

In simple words, once the intention of the party is clear that he does not wish to make payment, the complainant need not wait for 15 days to make a complaint.

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