2022 (2) TMI 1381 - HC - Indian Laws

Dishonour of Cheque - successive presentation of the cheque within the period permitted, when the cheque was earlier returned for the reason account closed is legally permissible? - HELD THAT - While dealing with the cheque returned on the ground that the account closed , it was observed NEPC MICON LTD. VERSUS MAGMA LEASING LTD. 1999 (4) TMI 659 - SUPREME COURT that account is closed would mean that the cheque is returned as unpaid on the ground that the amount of money standing to the credit of that account is insufficient to honour the cheque . It is observed in M/S LAXMI DYECHEM VERSUS STATE OF GUJARAT ORS. 2012 (12) TMI 106 - SUPREME COURT that the reasons for dishonour of cheque as account closed , payment stopped , referred to drawer are only species of the genus that the amount of money available in the account is insufficient. Therefore, these grounds for return would constitute a dishonour within the meaning of Section 138 of the Act. It is no doubt, a cheque may be presented second time. Validity of second presentation depends on facts and circumstances of the case. The judgment in MSR Leathers V.S. Palaniappan and another 2012 (10) TMI 232 - SUPREME COURT deals with the case where the cheque was returned for the reason not arranged funds for . We have the case where the cheque was returned for the reason account closed . The aforesaid judgments relied by the counsel appearing for the respondent do not deal with the situation where a cheque was presented again, when the earlier presentation was dishonoured on the ground account closed . In the case before hand, the first presentation of cheque and return on the ground of account closed was not even mentioned in the statutory notice and the complaint and it was not informed to the petitioner and petitioner had never asked the respondent to represent the cheque again. In the case before hand the cheque was returned for the reason that account closed on 03.02.2016 when it was presented for the first time on 02.02.2016. Suppressing this return, cheque was presented again on 28.03.2016 and it was again returned for the same reason account closed . It is palpably clear that second presentation was made only to bring the case within a period of limitation. There is no logic or reason for representing the cheque again, when the cheque was returned for the reason account closed . Once account is closed, there is no question of re-opening the account to facilitate payment in the same account. It is quite obvious that the respondent having failed to issue a statutory notice within stipulated period after the first return, again presented the cheque to save the limitation. This Court finds that this case is barred by limitation and cannot be maintained. Petition allowed.

Summary

Issues Involved:
1. Legality of successive presentations of a cheque when the account is closed.
2. Validity of the complaint under Section 138 of the Negotiable Instruments Act, 1881.
3. Whether the second presentation of the cheque was made to save the limitation period.

Issue-wise Detailed Analysis:

1. Legality of Successive Presentations of a Cheque When the Account is Closed:

The petitioner argued that the cheque was initially presented on 02.02.2016 and returned on 03.02.2016 with the reason "account closed." The respondent then presented the cheque again on 28.03.2016, which was dishonoured on 29.03.2016 for the same reason. The petitioner contended that the second presentation was illegal and solely aimed at saving the limitation period. The court examined the judgments cited by both parties, including NEPC MICON LTD. vs. MAGMA LEASING LTD and Laxmi Dyechem vs. State of Gujarat, which held that "account closed" implies insufficient funds, thus constituting a dishonour under Section 138 of the Negotiable Instruments Act. However, the court found that these judgments did not address the scenario where a cheque was re-presented after being dishonoured due to a closed account.

2. Validity of the Complaint under Section 138 of the Negotiable Instruments Act, 1881:

The respondent claimed that the second presentation of the cheque was permissible and that the complaint was valid. The court referred to MSR Leathers vs. S. Palaniappan, which allows for the re-presentation of a cheque. However, the court noted that the specific facts of this case involved the cheque being dishonoured due to "account closed," which was not explicitly addressed in the cited judgments. The court emphasized that the first presentation and subsequent dishonour were not mentioned in the statutory notice or the complaint, indicating a suppression of material information.

3. Whether the Second Presentation of the Cheque was Made to Save the Limitation Period:

The court found that the second presentation was indeed made to bring the case within the limitation period. It was evident that the respondent failed to issue a statutory notice within the stipulated period after the first dishonour. The court stated, "It is palpably clear that second presentation was made only to bring the case within a period of limitation." The court reasoned that once an account is closed, there is no logic in re-presenting the cheque, as the account cannot be reopened to facilitate payment.

Conclusion:

The court concluded that the case was barred by limitation and could not be maintained. The Criminal Original Petition was allowed, and the case in S.T.C. No. 422 of 2016 on the file of the Judicial Magistrate No. II, Salem, was quashed. Consequently, connected Criminal Miscellaneous Petitions were also closed.