Supreme Court of India
SADANANDAN BHADRANversusMADHAVAN SUNIL KUMAR
- Citation
- 1998 INSC 326
- Decided
- 28 August 1998
- Disposal
- Dismissed
- Bench
- M K MUKHERJEE
Holding
A cause of action under Section 142(b) arises only once for a cheque; subsequent dishonours create only a fresh right to present, not a new cause of action.
Summary
The appellant, Sadanandan Badran, received a Rs 30,000 cheque from the respondent, Madhavan Sunil Kumar, to settle a loan. The cheque was presented twice (January and May 1991) and was dishonoured both times for insufficient funds. After each dishonour the appellant issued a legal notice demanding payment; the respondent failed to pay, and the appellant filed a complaint under Section 138 of the Negotiable Instruments Act. The trial magistrate, relying on a Kerala High Court decision, acquitted the respondent on the ground that only one cause of action arises per cheque, a view upheld by the High Court. The Supreme Court held that while each presentation creates a fresh right to present the cheque, the "cause of action" under Section 142(b) arises only once—when the drawer fails to pay within 15 days of the notice—so a later complaint is not maintainable. Consequently, the appeal was dismissed.
Issues considered
- Whether each dishonour of the same cheque gives rise to a fresh cause of action under Section 142(b) of the Negotiable Instruments Act, permitting multiple prosecutions under Section 138.
- What is the correct interpretation of "cause of action" in the context of Sections 138 and 142 of the Negotiable Instruments Act.
Legislation cited
Subjects
Negotiable Instruments ActSection 138Section 142cause of actioncheque dishonourmultiple presentationscriminal complaintlimitation period
Judgment
A SADANANDANBHADRAN
v.
MADHAVAN SUNIL KUMAR
AUGUST 28, 1998
B [M.K. MUKHERJEE AND D.P. WADHWA, JJ.]
Oiminal Law :
Negotiable bzstn1111e11ts Act, 1881 : Sections 138 and 142.
c Clzeque--Dislwnour of-Non-payment-Filing of complaint-Cause of
action-Arising of-Held : Cause of action arises only once-A fresh cause
of action would not arise 011 each presentation of cheque and its
dishonow~A cheque can be presented any number of times dwing its period
of validity--But once notice is issued and pay111e11t not received withi11 15 days
D of the receipt of the notice, payee has to avail that ve1y cause of actio11 and
file co111plaint-Complia11t has to be filed 1111der S. 142(b) within one month
i111111ediately foil owing the day 011 which the period of 15 days from the date
of receipt of the first 11otice by the drawer e;.pires.
Words a11d Phrases :
E
"Came of action''-Memzing of-!11 the conte;.·t of S. 142(b) of the
Negotiable !11stnune11ts Act, 1881.
The Respondent handed over a cheque to the appellant in liquidation
F of the appellant's loan. The cheque was dishonoured for want of sufficient
funds. The appellant then sent a lawyer's notice to the respondent calling
upon him to pay the amount. The respondent requested more time to pay
the amount. Therefore, the appellants did not proceed further. As the
respondent did not keep up his promise the appellant presented the che11ue
once again. This time also the cheque was dishonoured for want of suffi-
G cient funds. The appellant sent another notice to the respondent demand-
ing the payment, but the respondent failed to make the payment. The
appellant then filed a complaint against the respondent under Section 138
of the Negotiable Instruments Act, 1881. After entering appearance at the
trial the respondent contended that the complaint was not maintainable,
H as there could not be more than one cause of action in respect of a single
178
S.BHADRAN v. M.S. KUMAR 179
cheque. The Magistrate accepted this contention and the respondent was A
acquitted. The High Court upheld the order of the Magistrate. Hence this
appeal. ..
Dismissing the appeal, the Court
HELD : 1. Clause (a) of the proviso to Section 138 of the Negotiable B
Instruments Act, 1881 does not put any embargo upon the payee to
successively present a dishonoured cheque during the period of its validity.
This apart, in course of business transaction it is not uncommon for a
cheque being returned due to insufficient funds or similar such reasons
and being presented again by the payee after sometime, on his own volition C
or at the request of the drawer, in expectation that it would be encashed.
The primary interest of the payee is to get his money and not prosecution
of the drawer, recourse to which, normally, is taken out of compulsion and
not choice. For the above reasons it must be held that a cheque can be
presented any number of times during the period of its validity. On each
presentation of the cheque and its dishonour a fresh right - and not cause D
of action - accrues in his favour. He may, therefore, without taking pre-
emptory action in exercise of his such right under Section 138(h) of the
Act, go on presenting the cheque so as to enable him to exercise such right
at any point of time during the validity of the cheque. But, once he gives a
notice under Section 138(b) he forfeits such right for in case of failure of E
the drawer to pay the money within tbe stipulated time he would be liable
for the offence and the cause of action for filing the complaint will arise.
The period of one month for filing the complaint will be reckoned from the
day immediately following the day on which the period of fifteen days from
the date of receipt of the notice by the drawer expires.
F
[183-G-H; 184-A; 186-E-G]
2.1. In a generic and wide sense (as in Section 20 of the Code of Civil
Procedure, 1908) 'cause of action' means every facts which it is necessary
to establish to support a right or obtain a judgment. Viewed in that context
the following facts are rec1uired to be proved to successfully prosecute the G
drawer for an offence under Section 138 of the Act :
(a) that the cheque was drawn for payment of an amount of money
for discharge of a debt/liability and the cheque was dishonoured;
(b) that the cheque was presented within the prescribed period; H
180 SUPREME COURT REPORTS [1998) SUPP. 1 S.C.R.
A . (c) that the payee made a demand for payment of the money by giving
a notice in writing to the drawer within the stipulated period; and
(d) that the drawer failed to make the payment within 15 days of the
receipt of the notice. [184-H; 185-A-C]
B 2.2. Proceeding on the basis of the generic meaning of the term 'cause
of action' certainly each of the above facts would constitute a part of the
cause of action but then it is significant to note that Section 142 (b) gives
it a restrictive meaning, in that, it refers to only one fact which will give
rise to the cause of action and that is the failure to make the payment
C within 15 days from the date of the receipt of the notice. The combined
reading of the above two Sections of the Act leaves no room for doubt that
cause of action within the meaning of Section 142(c) arises - and can arise
- only once. [185-D-E]
SKDL Fireworks flldustries v. K. V. Sivarama Krisl111a11, (1995) Cr.LJ.
D 1384 (Ker) (FB), approved.
Kw11aresa11 v.Ameerappa, (1991) 1KLT893 (Ker), overruled.
CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No.
589of1992.
E
From the Judgment and Order dated 6.2.92 of the Kerala High Court
in Cr!. M.C. No. 1373 of 1991.
C.N. Sreekumar for G. Prakash for the appellant.
F ·T.S. Arunachalam and Shiv Kumar Suri (A.C.) for the Respondent.
The Judgment of the Court was delivered by
M.K. MUKHERJEE, J. This appeal is directed against the judgment
and order dated February 26, 1992 rendered by a learned Single Judge of
G the Kerala High Court in Criminal Misc. Case No. 1373 of 1991. Facts
relevant for disposal of this appeal are as under.
. On January 4, 1991, the respondent handed over a cheque for Rs.
30,000 to the appellant in liquidation of the loan he obtained from the
latter. The cheque was presented in the bank for encashment on January
I
H 5, 1991 but was returned for want of sufficient funds in the account of the
S.BHADRAN v. M.S. KUMAR [M.K. MUKHERJEE, J.] 181
respondent. The appellant then sent a lawyer's notice to the respondent on A
January 15, 1991 calling upon him to pay the aforesaid amount. On receipt
of the notice the respondent approached the appellant and requested for
some time to pay the amount. In view of the assurance so given the
appellant did not initiate any further proceeding but as the respondent did
not keep his promise he presented the cheque in the bank once again on
May 4, 1991. This time also the cheque was dishonoured for want of
B
sufficient funds. Another notice dated May 9, 1991 was then served upon
the respondent demanding payment of the amount but he failed to make
the payment. The appellant then filed a complaint against the respondent
on June 30, 1991 under Section 138 of the Negotiable Instruments Act, 1881
('Act' for short). On that complaint cognizance was taken and the respon- c
dent was summoned to face the trial. After entering appearance the
respondent filed an application stating that in view of the Division Bench
judgment of the Kerala High Court in Kumaresan v. Ameerappa (1991) 1
K.L.T. 893, (since over-ruled by a Full Bench of that Court in Mis S.K.D.L.
Fireworks !11dust1ies v. K.V. Sivarama Krishnan, (1995) Crl.L.J. 1384) D
wherein it was held that there could not be more than one cause of action
in respect of a single cheque, the complaint was not maintainable. The
trying magistrate accepted the contention of the respondent and acquitted
him. Against the order of acquittal the appellant moved the High Court
· but relying upon the judgment in Kumaresan's case (supra), it upheld the
order of the Magistrate. E
In the context of the above facts the question that requires to be
answered in this appeal is whether the payee or holder (hereinafter
referred to as 'payee' for the sake of brevity) of a cheque can initiate
prosecution for an offence under Section 138 of the Act for its dishonour
F
for the second time, if he had not initiated such prosecution on the earlier
cause of action. The above question came up for consideration before
different High Courts in several cases, besides those of Kumaresan and
Fireworks Industries (supra); and culling the judgments rendered therein
we find that the following three different propositions have been laid down
by one or the other High Court: G
(i) a cheque can be presented for encashment on any number of
occasions within the period of its validity and it dishonour on
every oc2asion will give rise to a fresh cause of action' within
the meaning of clause (b) of Section 142 of the Act so as to H
182 SUPREME COURT REPORTS {1998) SUPP. 1 S.C.R.
A entitle the payee to institute prosecution under section 138
on the basis of the last cause of action;
(ii) a cheque can be presented for encashment on any number of
occasions within the period of its validity but there can be
only one cause of action under Section 142(b) arising from
B its last dishonour; and
(iii) only for the first dishonour - and not subsequent dishonours
- can a prosecution under section 138 be instituted as Section
138 read with Section 142(b) envisages only one cause of
C action in respect of one and the same cheque.
To ascertain which, if any, of the above propositions dovetails into
the Scheme of the Act it will be necessary at this stage to refer to its
relevant provisions.
D Chapter XVII of the Act containing the fascicule of Sections 13_8 to
142 was brought into the statute book with effect from April 1, 1989 by
Section 4 of the Banking Public Financial Institutions and Negotiable
Instruments laws (Amendment) Act, 1988. The 'objects and reasons' clause
of the Bill which introduced the Amending Act indicates that the new
chapter was incorporated to enhance the acceptability of cheques in set-
E tlement of liabilities by making the drawer liable for penalties in case of
bouncing of cheques due to insufficiency of funds in the accounts or for
the reason that it exceeds the arrangements made by the drawer with
adequate safeguards to prevent harassment of honest drawers. Section 138
of the Act reads as under:
F
"Where any cheque drawn by a person on an account main-
tained 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
G 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
I
H this Act, be punished with imprisonment for a term which
S.BHADRAN v. M.S. KUMAR (M.K. MUKHERJEE, J.] 183
may extend to one year, or with fine which may extend to A
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 B
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 C
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 D
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."
On a careful analysis of the above Section it is seen that its main part
E
creates an offence when a cheque is returned by the bank unpaid for any
of the reasons mentioned therein. The significant fact, however, is that the
proviso lays down three conditions precedent to the applicability of the
above Section and, for that matter, creation of such offence and the
conditions are: (i) the cheque should have been presented to the bank
within six months of its issue or within the period of its validity whichever F
is earlier; (ii) payee should have made a demand for payment by registered
notice after the cheque is returned unpaid; and (iii) that the drawer should
have failed to pay the amount within 15 days of the receipt of notice. It is
only when all the above three conditions are satisfied that a prosecution
can be launched for the offence under section 138. So far as the first
condition is concerned clause (a) of the proviso to Section 138 does not
G
put any embargo upon the payee to successively present a dishonoured
cheque during the period of its validity. This apart, in course of business
transactions it is not uncommon for a cheque being returned due to
insufficient funds or similar such reasons and being presented again by the
payee after sometime, on his own volition or at the request of the drawer, H
184 SUPREME COURT REPORTS (1998] SUPP. 1 S.C.R.
A in expectation that it would be encashed. Needless to say, the primary
interest of the payee is to get his money and not prosecution of the drawer,
recourse to which normally, is taken out of compulsion and not choice. 'For
the above reasons it must be held that a cheque can be presented any
number of times during the period of its validity. Indeed that is also the
consistent view of all the High Courts except that of the Division Bench of
B the Kerala High Court in Kumaresan (supra) which struck a discordant
note with the observation that for the first dishonour of the cheque only a
prosecution can be launched for there cannot be more than one cause of
action for prosecution.
C The next question that falls for our determination is whether
dishonour of the cheque on each occasion of its presentation gives rise to
a fresh cause of action within the meaning of Section 142(b) of the Act.
Section 142 reads as under:
"Notwithstanding anything contained in the Code of Criminal Pro-
D cedure, 1973
(a) no court shall take congnizance 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;
E
(b) such complaint is made within one month of the date on which
the cause of a_ction arise~ under clause (c) of the proviso to
Section 138;
(c) no court inferior to that of a Metropolitan Magistrate or a
F Judicial Magistrate of the first class shall try any offence punishable
under Section 138."
From a plain reading of the above Section it is manifest that a competent.
Court can take cognizance of a written complaint of an offence under
G section 138 if it is made within one month of the date on which the cause
of action arises under clause (c) of the proviso to Section 138. (emphasis
supplied)
In a generic and wide sense (as in Section 20 of the Civil Procedure
Code, 1908) 'cause of action' means every fact which it is necessary to
H establish to support a right or obtain a judgment. View$!d in that context,
S.BHADRAN v. M.S. KUMAR [M.K. MUKHERJEE, J.] 185
tbe
I
following facts are required to be proved to successfully prosecute the A
drawer for an offence under Section 138 of the Act:
(a) that the cheque was drawn for payment of an amount of money
for discharge of a debt/liability and the cheque was dishonoured;
(b) that the cheque was presented within the prescribed period; B
(c) that the payee made a demand for payment of the money by
giving a notice in writing to the drawer within the stipulated period; and
(d) that the drawer failed to make the payment within 15 days of the
receipt of the notice. C
If we were to proceed on the basis of the generic meaning of the term
'cause of action' certainly each of the above facts would constitute a part
of the cause of action but then it is significant to note that clause (b) of
Section 142 gives it a restrictive meaning, in that, it refers to only one fact D
which \vill give rise to the cause of action and that is the failure to make
the payment within 15 days from the date of the receipt of the notice. The
reason behind giving such a restrictive meaning is not far to seek. Conse-
quent upon the failure of the drawer to pay the money within the period
- of 15 days as envisaged under clause (c) of the proviso to Section 138, the
liability of the drawer for being prosecuted for the offence he has com-
milted arises, and the period of one month for filing the complaint under
section 142 is to be reckoned accordingly. The combined reading of the
E
above two sections of the Act leaves no room for doubt that cause pf action
within the meaning of Section 142(c) arises - and can arise - only once.
Besides the language of Sections 138 and 142 which clearly postulates F
only one cause of action there are other formidable impediments which
negates 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 G
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 11011 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 H
186 SUPREME COURT REPORTS [1998] SUPP.1 S.C.R.
A 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.
The other impediment to the acceptance of the concept of successive
causes of action is that it will- make the period of limitation under clause
B (c) of Section 142 otiose, for, a payee who failed to file his complaint within
one month and thereby forfeited his right to prosecute the drawer, can
circumvent the above !imitative clause by filing a complaint on the basis of
a fresh presentation of the cheque and its dishonour. Since in the inter-
pretation of statutes the Court always presumes that the legislature inserted
C every part thereof for a purpose and the legislative intention is that the
every part should have effect the above conclusion cannot be drawn for,
· that will make the provision for limiting the period of making the complaint
nugatory.
D Now, the question is how the apparently conflicting provisions of the
Act, one enabling the payee to repeatedly present the cheque and the other
giving him only one opportunity to file a complaint for its dishonour, and
that too within one month from the date the cause of action arises, can be
reconciled. Having given our anxious consideration to this question, we are
of the opinion that the above two provisions can be harmonised, with the
E interpretation that on each presentation of the cheque and its dishonour a
fresh right - and not cause of action - accrues in his favour. He may,
therefore, without taking pre-emptory action in exercise of his such right
under clause (b) of Section 138, go on presenting the cheque so as to
enable him to exercise such right at any point of time during the validity
F of the cheque. But, once he gives a notice under clause (b) of Section 138
he forfeits such right for in case of failure of the drawer to pay the money
within the stipulated time he would be liable for the offence and the cause
of action for filing the complaint will arise. Needless to say, the period of
one month for filing the complaint will be reckoned from the day immedi-
G ately following the day on which the period of fifteen days from the date
of the receipt of the notice by the drawer, expires.
For the foregoing discussion this appeal stands dismissed as the
appellant had earlier taken recourse to clause (b) of Section 138 of the Act
but did not avail of the cause of action that arose in his favour under
H Section 142(b) of the Act.
S.BHADRAN v. M.S. KUMAR [M.K. MUKHERJEE,J.] 187
Before parting with this judgment we must place on record our deep A
appreciation for the invaluable assistance rendered by Mr. T.S.
Arunachalam, senior counsel and Mr. Shiv Kumar Suri, who appeared as
amicus curiae, (the respondent did not appear in spite of service of notice)
in deciding the short but interesting question raised in this appeal.
v.s.s. Appeal dismissed. B
-
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