2010 (1) TMI 1103 - SC - Companies Law

Whether after the notice issued under clause (b) of Section 138 of the Negotiable Instruments Act 1881 is received by the drawer of the cheque the payee or holder of the cheque who does not take any action on the basis of such notice within the period prescribed under Section 138 of the Act is entitled to send a fresh notice in respect of the same cheque and thereafter proceed to file a complaint under Section 138 of the Act? Held that - In the instant case it is clear that the first notices were received by the Appellant on 14th June 2006 whereas the complaints were filed on 10th July 2006. It must therefore be held that the complaints were filed beyond the period of limitation and the learned Magistrate erred in taking cognizance on the complaints filed on the basis of the second notices issued on 7th June 2006. Similarly the High Court was also wrong in affirming the order of the learned Magistrate. Appeal allowed.

Summary

Issues:
Delay in re-filing Special Leave Petitions, Interpretation of Section 138 of Negotiable Instruments Act, 1881, Bar on sending fresh notice for the same cheque, Validity of complaints filed after the first notice, Cognizance by the Magistrate, High Court's decision affirmation.

Analysis:
The Supreme Court addressed the issue of delay in re-filing Special Leave Petitions, condoning the delay of 31 and 39 days and granting leave for the case. The core issue revolved around the interpretation of Section 138 of the Negotiable Instruments Act, 1881, specifically whether a payee can send a fresh notice for the same dishonored cheque after the expiry of the prescribed period. The case involved complaints filed by the Respondent for dishonored cheques and subsequent legal actions taken. The Respondent sent a second notice after the first notice expired, leading to complaints being filed. The Appellant contended that the complaints were time-barred as the cause of action arose from the first notice. The Appellant relied on legal precedents to support the argument that a fresh cause of action does not arise from repeated dishonors. The Respondent argued that the delay in filing the complaints was condoned due to assurances made by the Appellant.

The Court considered previous judgments and legal provisions, emphasizing that the cause of action for a complaint under Section 138 arises once, upon the issuance of notice after the cheque's dishonor. The Court distinguished cases where multiple notices were involved and clarified that a fresh cause of action does not arise from repeated dishonors. Section 138 mandates specific timelines for presenting the cheque to the bank, issuing notices, and filing complaints. In this case, the complaints were filed after the expiry of the prescribed period, rendering them time-barred. The Court held that the Magistrate erred in taking cognizance based on the second notices and that the High Court's decision affirming the Magistrate's order was incorrect.

In conclusion, the Supreme Court allowed the Appeals, setting aside the orders of the Magistrate and the High Court. The judgment clarified the interpretation of Section 138 of the Act, emphasizing the importance of timelines and the singular cause of action upon notice issuance after dishonor. The decision provided clarity on the legal principles governing complaints under the Negotiable Instruments Act, ensuring adherence to statutory provisions and legal precedents.