2018 (8) TMI 1295 - HC - Indian Laws

Dishonor of cheque - Whether in a case where, the drawer of the cheque denies the liability and refuses to pay the cheque amount and issues a reply notice categorically making his stand clear to that effect, even then, should the payee wait for the expiry of 15 days and only thereafter file a complaint as provided in proviso (c) to Section 138 of the Negotiable Instruments Act? Held that - The scheme of giving opportunity to the drawer of the cheque is to pay the cheque amount before permitting his prosecution, no matter whether offence is complete, is unique to Section 138 of the Act. It gives chance even to the dishonest drawer to make, amend and escape prosecution - When the notice is given by the complainant demanding payment, the accused must make payment within a period of 15 days of the receipt of such notice. The words the drawer of such cheque fails to make the payment are ostensibly different from saying the drawer refuses to make payment . The legislature has thoughtfully used the word fails instead of other expressions, as failure can be due to variety of reasons including disability to pay. Therefore, the offence would be complete, when the drawer fails to make payment within the stipulated time, whatever be the cause for such failure. In view of conflicting decisions of two learned single Judges of this Court on the same issue and in view of the importance of resolving the important question of law that has arisen for consideration, this Court deems it fit to place the matter before a Division Bench in order to resolve the conflict and to come out with an authoritative pronouncement - this Court directs the Registry to place this matter before the Hon ble Administrative Judge, so as to enable the Hon ble Administrative Judge to consider constituting a Bench in order to hear the issue and to resolve the conflict and make an authoritative pronouncement on the issue.

Summary

Issues Involved:
1. Compliance with Section 138(c) of the Negotiable Instruments Act regarding the mandatory waiting period before filing a complaint.
2. The effect of denial of liability by the drawer on the cause of action for filing a complaint under Section 138 of the Negotiable Instruments Act.

Detailed Analysis:

Issue 1: Compliance with Section 138(c) of the Negotiable Instruments Act

The petitioner argued that the complaint was filed prematurely, violating the mandatory 15-day waiting period stipulated under Section 138(c) of the Negotiable Instruments Act. The statutory notice was issued on 30.04.2013, received by the petitioner on 03.05.2013, and the complaint was filed on 08.05.2013, with cognizance taken on 09.05.2013. The petitioner contended that the complaint should be quashed as it was filed before the cause of action arose, and there was no specific averment in the complaint that the petitioner failed to pay the cheque amount within 15 days of receiving the notice.

The respondent countered that the complaint was already at the stage of examining defense witnesses and should not be quashed. They argued that if the drawer denies liability and refuses to pay, the payee need not wait for the 15-day period to lapse before filing a complaint. The respondent cited the judgment in Sagaya Arokiya Raj Vs. Ganesh Kumar, which supports the view that the complaint can be filed immediately after the drawer denies liability.

The court acknowledged that the legislative intent of Section 138 is to provide a strong remedy to deter dishonor of cheques, ensuring reliability in commercial transactions. The provision mandates a 15-day period for the drawer to make payment upon receiving notice, and failure to do so constitutes the offence. The court noted that the words "fails to make the payment" imply that the drawer must be given the full 15 days to comply, regardless of any earlier denial of liability.

Issue 2: Effect of Denial of Liability by the Drawer

The court examined whether a drawer's denial of liability in their reply notice affects the cause of action for filing a complaint under Section 138. The petitioner cited several judgments where complaints filed within the 15-day period were deemed premature. However, the court distinguished these cases, noting that they did not involve a scenario where the drawer denied liability. The court referred to the judgment in V.Suresh Kumar Vs. C.sreekrishnan, which held that the cause of action arises only after the 15-day period, even if the drawer denies liability.

The court observed conflicting views in judgments regarding whether the cause of action arises immediately upon denial of liability or only after the 15-day period. The court highlighted the need to resolve this conflict and emphasized that penal statutes require strict interpretation. The court questioned what would happen if a drawer initially denies liability but later decides to make payment within the 15-day period.

Conclusion:

In light of the conflicting judgments and the importance of resolving the legal question, the court deemed it necessary to refer the matter to a Division Bench for an authoritative pronouncement. The court directed the Registry to place the matter before the Hon'ble Administrative Judge to consider constituting a Bench to hear and resolve the issue.