A

B

c

SADANANDANBHADRAN

v.

MADHAVAN SUNIL KUMAR

AUGUST 28, 1998

[M.K. MUKHERJEE AND D.P. WADHWA, JJ.]

Oiminal Law :

Negotiable bzstn1111e11ts Act, 1881 : Sections 138 and 142.

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.

E

Words a11d Phrases :

"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.

[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

F

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.

E

Kw11aresa11 v.Ameerappa, (1991) 1KLT893 (Ker), overruled.

CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No.

589of1992.

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 I

latter. The cheque was presented in the bank for encashment on January

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

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

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

A

B

c

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

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.

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

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:

(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

E

F

G

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

G

H

"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

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

I

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

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

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

E

F

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:

D

E

F

"Notwithstanding anything contained in the Code of Criminal Pro­

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;

(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

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 following facts are required to be proved to successfully prosecute the A

I

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- E

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

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

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

F

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