2020 (2) TMI 177 - HC - Indian Laws

Dishonor of Cheque - section 138 of NI Act - non-presentation of the cheque - HELD THAT - Admittedly, the cheque was presented to the drawee bank after the period of expiry of its validity of three months, which is to be calculated from the date mentioned on the cheque. The Clause (a) of Proviso to Section 138 of N.I. Act stipulates that Section 138 shall not be applicable unless the cheque is presented to the bank within a period of six months (the period has been reduced from 6 months to 3 months vide the aforementioned RBI notification dated 04.11.2011) from the date on which it is drawn or within the period of its validity, whichever is earlier. Petition allowed.

Summary

Issues:
Quashing of Complaint Case and summoning order under Section 138 N.I. Act for dishonour of a cheque.

Analysis:
1. The petitioner sought to quash Complaint Case No.8777/2017 and the summoning order dated 12.07.2017 for an offence under Section 138 N.I. Act.
2. The case involved a dishonoured cheque bearing No.436505 dated 02.01.2017 for ?1,25,00,000 drawn on State Bank of India, Saket, New Delhi.
3. The petitioner argued that the cheque was presented for encashment after its validity period, referring to an RBI notification restricting payments on post-dated cheques beyond three months.
4. Additionally, the petitioner claimed the cheque was stolen, filing a missing report on 10.10.2016 for the lost cheque and other leaflets.
5. The respondent contended that objections should be raised during the framing of notice at the Trial Court, citing relevant case laws.
6. The Court emphasized that summoning an accused is a serious matter, requiring the Magistrate to apply judicial discretion and examine evidence before issuing the order.
7. The cheque was presented after its validity period, absolving the issuer of criminal liability under Section 138 N.I. Act as per legal precedents.
8. The cause of action in cheque dishonour cases includes specific prerequisites, such as timely presentation of the cheque, failure of payment, and notice served to the drawer.
9. The Court noted that the validity of the cheque is fundamental to initiating proceedings under the Negotiable Instruments Act, emphasizing that no cause of action exists if the cheque is not valid.
10. Considering the legal position and admitted facts, the Court quashed the summoning order and the Complaint Case, as the cheque's invalidity prevented the initiation of proceedings under Section 138 N.I. Act.
11. The Court clarified that the validity of the cheque is crucial, and if the cheque presented is not valid, there is no cause of action for proceedings under the Negotiable Instruments Act.
12. Consequently, the petition was allowed, and Complaint Case No. 8777/2017 was quashed, with directions to communicate the judgment to the Trial Court for further action.