2009 (3) TMI 1112 - HC - Indian Laws

Summary

The core legal questions considered by the Court in this matter include:

1. Whether the communication dated 26.03.2007 sent by the complainant to the accused constitutes a valid notice of demand within the meaning of Clause (c) of the proviso to Section 138 of the Negotiable Instruments Act, 1881.

2. Whether the criminal complaint filed under Section 138 of the Negotiable Instruments Act was maintainable or barred by limitation, considering the timing of the demand notice and the filing of the complaint.

3. Whether the proviso to Section 142(b) of the Negotiable Instruments Act, allowing the court to take cognizance beyond the prescribed period if sufficient cause is shown, applies in the instant case.

4. Whether the facts alleged by the petitioner regarding misuse of the cheque and fraudulent filling of amount by the respondent affect the maintainability of the complaint at the stage of quashing.

5. The scope and principles governing the quashing of criminal complaints under Section 482 of the Code of Criminal Procedure, 1973.

Issue-wise Detailed Analysis

1. Validity of the communication dated 26.03.2007 as a notice of demand under Section 138

The Court examined whether the letter dated 26.03.2007 qualifies as a notice of demand as required by Clause (c) of the proviso to Section 138 of the Negotiable Instruments Act. The relevant legal framework mandates that after a cheque is dishonoured, the payee must send a written demand notice to the drawer within 30 days of receiving information from the bank about the dishonour. The drawer then has 15 days to make payment. Failure to pay within this period gives rise to a cause of action for prosecution.

The Court relied on authoritative precedent which held that a notice must clearly demand payment and warn of legal action in case of non-payment. The communication in question explicitly stated the cheque details, the dishonour reason ("Funds insufficient"), requested payment by demand draft including penalty and bank charges, and reserved the right to initiate legal action if payment was not received within five days. This satisfied all the ingredients of a valid notice of demand.

The Court rejected the respondent's contention that the earlier communication dated 26.03.2007 was not a notice of demand, emphasizing that the letter clearly conveyed an unequivocal demand for payment and warning of legal consequences. Thus, the Court held that the communication dated 26.03.2007 constituted a valid notice of demand under Section 138.

2. Limitation for filing complaint under Section 138 and applicability of Section 142(b) proviso

Section 142(b) of the Negotiable Instruments Act requires that a complaint under Section 138 must be filed within one month of the date on which the cause of action arises, i.e., after the expiry of 15 days from receipt of the demand notice. The Court noted that the cause of action arose after the 15-day period following receipt of the 26.03.2007 notice.

The respondent filed the complaint based on a second notice dated 04.06.2007, after presenting the cheque again and its subsequent dishonour. The Court referred to binding precedent that a payee cannot create multiple causes of action on the same cheque by issuing successive notices and presenting the cheque multiple times. Once a cause of action arises and the limitation period begins, the payee must file the complaint within the prescribed period; otherwise, the complaint is barred by limitation.

The Court found that the respondent did not file the complaint within one month of the first cause of action arising from the 26.03.2007 notice. Furthermore, the respondent neither invoked the proviso to Section 142(b) to seek condonation of delay nor filed any application before the court to justify the delay. The Court emphasized that the proviso allowing cognizance beyond the prescribed period is discretionary and requires sufficient cause to be shown, which was absent in this case.

The Court also highlighted the contradictory stance of the respondent, who on one hand denied the first communication as a notice of demand and on the other sought to rely on the proviso to extend limitation. The Court rejected this inconsistency.

Accordingly, the Court concluded that the complaint was filed beyond the period of limitation and was not saved by any condonation of delay.

3. Allegations of misuse of cheque and fraudulent filling of amount by respondent

The petitioner alleged that the respondent fraudulently filled the blank cheque for a higher amount than authorized, including goods not ordered by the petitioner, and delayed presentation of the cheque to cause dishonour. The petitioner also claimed a counter-claim against the respondent and asserted that no amount was due beyond Rs. 34,880/-.

The Court observed that such factual disputes concerning the genuineness of the transaction, the amount due, and the conduct of the parties cannot be adjudicated at the stage of quashing the complaint. The Court reiterated that quashing is appropriate only where the complaint on its face does not disclose an offence or is barred by law. Questions of fact must be left to trial.

Therefore, these contentions did not warrant quashing of the complaint on merits.

4. Principles governing quashing of criminal complaints under Section 482 Cr.P.C.

The Court reiterated the settled legal position that the High Court's jurisdiction under Section 482 is sparingly exercised to prevent abuse of process or manifest injustice. A complaint can be quashed if it does not disclose any offence or is barred by limitation or suffers from other legal infirmities.

In the present case, the Court found that the complaint was barred by limitation, which is a valid ground for quashing. However, the Court declined to quash the complaint on other grounds such as disputed facts or alleged fraudulent conduct, which require evidence and trial.

Significant Holdings

"A reading of the communication dated 26.03.2007 would show that all the ingredients of a notice of demand are made out."

"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."

"The proviso to Section 142(b) enables the court to take cognizance of the offence beyond the prescribed period if the complainant satisfies the court that he had sufficient cause for not making the complaint within such period. However, there is nothing on record to show that any application was made for condonation of delay or any attempt was made to satisfy the court that there was sufficient cause for not making the complaint within the stipulated time period."

"The criminal complaint... has been filed beyond the period of limitation. The same is accordingly quashed."

The Court established the core principle that the limitation period for filing a complaint under Section 138 of the Negotiable Instruments Act begins from the date of receipt of a valid demand notice and that multiple notices or presentations of the same cheque cannot create successive causes of action. The Court emphasized strict adherence to limitation and procedural safeguards, including the requirement to seek condonation of delay where applicable.

On the facts, the Court held that the complaint was barred by limitation and quashed it accordingly, while leaving factual disputes for trial and rejecting attempts to quash on those grounds.