2005 (5) TMI 614 - SC - Companies Law

Whether the proceedings initiated on the basis of a complaint alleging infraction of Section 138 of the Negotiable Instrument Act, 1881 was not maintainable? Held that - One of the indispensable factors to form the cause of action envisaged in Section 138 of the Act is contained in clause (b) of the proviso to that section. It involves the making of a demand 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 . If no such notice is given within the said period of 15 days, no cause of action could have been created at all. Thus, it is well settled that if dishonour of a cheque has once snowballed into a cause of action it is not permissible for a payee to create another cause of action with the same cheque. Thus the impugned judgment does not suffer from any infirmity to warrant interference.Appeal dismissed.

Summary

Issues:
Legality of judgment quashing proceedings under Section 138 of the Negotiable Instrument Act, 1881 based on a complaint. Interpretation of Sections 138 and 142 of the Act in relation to the cause of action and time limits for filing complaints.

Detailed Analysis:

1. Legality of Judgment:
The appeal challenged the legality of a judgment by a Single Judge of the Punjab and Haryana High Court, which quashed proceedings initiated under Section 138 of the Negotiable Instrument Act, 1881. The complaint alleged that a cheque issued by the respondent was dishonored, leading to legal notices and subsequent legal actions. The High Court held that the requirements of Section 142 of the Act were not met, leading to the quashing of the proceedings.

2. Interpretation of Sections 138 and 142:
Sections 138 and 142 of the Act were crucial in determining the cause of action and time limits for filing complaints related to dishonored cheques. Section 138 outlines the offense of dishonoring a cheque due to insufficient funds and the consequences thereof. On the other hand, Section 142 specifies the procedure for taking cognizance of offenses under Section 138, including the time limit for filing complaints.

3. Cause of Action and Time Limits:
The interpretation of cause of action under Section 138 was a key point of contention. The Court emphasized that the cause of action arises only once, and the period for filing a complaint is to be reckoned accordingly. The failure to make payment within the stipulated time after receiving a notice triggers the cause of action for filing a complaint under Section 138.

4. Application of Legal Precedents:
The Court referred to previous judgments, such as Sadanandan Bhadran's case, to clarify the forfeiture of rights upon the receipt of a notice under Section 138. The importance of giving notice within fifteen days of the cheque being dishonored was highlighted as a crucial element in creating a cause of action.

5. Final Decision:
The Court dismissed the appeal, upholding the High Court's judgment that correctly applied the legal provisions of Sections 138 and 142 of the Act. The appeal was rejected, affirming the decision to quash the proceedings based on the failure to meet the statutory requirements outlined in the Act.

In conclusion, the Supreme Court's judgment provided a detailed analysis of the legal provisions governing dishonored cheques under the Negotiable Instrument Act, emphasizing the importance of meeting the statutory requirements for initiating legal proceedings. The decision clarified the interpretation of cause of action and time limits for filing complaints, reinforcing the significance of adherence to procedural norms in such cases.