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2001 (1) TMI 896 - SC - Companies LawComplaint filed under section 138 of the Negotiable Instruments Act, 1881 quashed by the High Court holding that the same was barred by time Held that - Appeal allowed. The High Court fell in error by not referring to the letter of the respondents dated 20-6-1998 and quashing the proceedings merely by reading a line from para 6 of the complaint. The appellant in para 7 of their complaint had specifically stated that Even though the complainant is not admitting the said allegation, on abundant caution the complainant presented the cheque again on 1-7-1998 to the drawee bank through the complainant s bankers, Punjab National Bank. The cheque was again dishonoured by the drawee bank on 2-7-1993 a registered lawyer notice was issued to the 1st accused firm as well as to the 2nd accused intimating the dishonour of the cheque and demanding payment. The accused have received the notice on 27-7-1998. The accused did not make any payment so far . The receipt of the second notice has concededly not been denied by the respondents.
Issues Involved:
1. Whether the complaint under Section 138 of the Negotiable Instruments Act was barred by limitation. 2. Whether the receipt of notice by the accused is necessary to constitute an offence under Section 138. 3. The interpretation and application of Section 138 and related provisions of the Negotiable Instruments Act, 1881. Detailed Analysis: 1. Whether the complaint under Section 138 of the Negotiable Instruments Act was barred by limitation: The High Court quashed the complaint, holding it was barred by time as the complainant allegedly failed to file it within the statutory period from the date of the cause of action. The appellant-company issued a cheque on 26-5-1998, which was dishonoured due to insufficient funds. The bank informed the complainant on 2-6-1998. A statutory notice was issued on 13-6-1998, and the postal acknowledgment was received on 15-6-1998. The respondents claimed they received empty envelopes, prompting the appellant to present the cheque again on 1-7-1998, which was dishonoured again on 2-7-1998. A fresh notice was issued, and the complaint was filed within the statutory period from the second notice. The High Court quashed the complaint, considering the limitation period from the first notice. 2. Whether the receipt of notice by the accused is necessary to constitute an offence under Section 138: The Supreme Court emphasized that to constitute an offence under Section 138, the complainant must prove the receipt of notice by the accused. It is not the 'giving' but the 'receipt' of the notice that gives the cause of action to file the complaint. If the notice is returned as unclaimed, Section 27 of the General Clauses Act presumes service unless rebutted. The appellant chose to accept the respondents' claim of receiving empty envelopes and issued a fresh notice after re-presenting the cheque. The complaint was filed within the limitation period from the second notice. 3. The interpretation and application of Section 138 and related provisions of the Negotiable Instruments Act, 1881: Section 138 of the Act makes a civil transaction an offence by fiction of law if a cheque is dishonoured due to insufficient funds. The aggrieved party must present the cheque within six months and issue a notice within 15 days of receiving information about the dishonour. The drawer must fail to pay within 15 days of receiving the notice. Sections 139, 140, 141, and 142 outline presumptions, restrictions on defence, offences by companies, and conditions for court cognizance, respectively. The Supreme Court, referencing K. Bhaskaran v. Sankaran Vaidhyan Balan, clarified that 'giving' notice is different from 'receipt' and that the latter triggers the cause of action. In Sadanandan Bhadran v. Madhavan Sunil Kumar, it was held that successive presentations of the cheque are allowed, but once notice is 'received,' the limitation period starts. Conclusion: The appeal was allowed, and the High Court's order quashing the complaint was set aside. The trial Magistrate was directed to proceed against the respondents according to the law and dispose of the complaint expeditiously. The Supreme Court highlighted the importance of interpreting the law to prevent misuse and ensure the smooth functioning of commercial activities.
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