MSR LEATHERS Vs S. PALANIAPPAN
Bench: R.M. LODHA,T.S. THAKUR,ANIL R. DAVE
Case number: Crl.A. No.-000261-000264 / 2002
Diary number: 4771 / 2001
Advocates: ARPUTHAM ARUNA AND CO Vs
K. K. MANI
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REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NOS.261-264 OF 2002
MSR Leathers …Appellant
Versus
S. Palaniappan & Anr. …Respondents
J U D G M E N T
T.S. THAKUR, J.
1. In Sadanandan Bhadran v. Madhavan Sunil
Kumar (1998) 6 SCC 514, this Court was dealing with a
case under Section 138 of the Negotiable Instrument Act,
1881 (hereinafter referred to as ‘the Act’) in which the
complainant had, after dishonour of a cheque issued in his
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favour, taken steps to serve upon the accused-drawer of
the cheque a notice under clause (b) of proviso to Section
138 of the Act. No complaint was, however, filed by the
complainant despite failure of the accused to arrange the
payment of the amount covered by the cheque. Instead,
the complainant-payee of the cheque had presented the
cheque for collection once again, which was dishonoured a
second time for want of sufficient funds. Another notice was
served on the drawer of the cheque to arrange payment
within fifteen days of receipt of said notice. Only after
failure of drawer to do so did the payee file a complaint
against the former under Section 138 of the Act.
2. After entering appearance, the drawer filed an
application seeking discharge on the ground that the payee
could not create more than one cause of action in respect
of a single cheque and the complaint in question having
been filed on the basis of the second presentation and
resultant second cause of action was not maintainable. The
Magistrate accepted that contention relying upon a Division
Bench decision of Kerala High Court in Kumaresan v.
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Ameerappa (1991) 1 Ker L.T. 893 and dismissed the
complaint. The order passed by the Magistrate was then
questioned before the High Court of Kerala who relying
upon Kumaresan’s case (supra) upheld the order passed
by the Magistrate. The matter was eventually brought up
to this Court by special leave. This Court formulated the
following question for determination:
“Whether payee or holder of cheque can initiate proceeding of prosecution under Section 138 of Negotiable Instrument Act, 1881 for the second time if he has not initiated any action on earlier cause of action?”
3. Answering the question in the negative this Court held
that a combined reading of Sections 138 and 142 of the Act
left no room for doubt that cause of action under Section
142(b) can arise only once. The conclusion observed by the
court is supported not only by Sections 138 and 142 but
also by the fact that the dishonour of cheque gives rise to
the commission of offence only on the failure to pay money
when a notice is served upon the drawer in accordance with
clause (b) of the proviso to Section 138. The Court further
held that if the concept of successive causes of action were
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to be accepted the same would make the limitation under
Section 142(b) otiose. The Court observed:
“7. Besides the language of Sections 138 and 142 which clearly postulates only one cause of action, there are other formidable impediments which negate the concept of successive causes of action. One of them is that for dishonour of one cheque, there can be only one offence and such offence is committed by the drawer immediately on his failure to make the payment within fifteen days of the receipt of the notice served in accordance with clause (b) of the proviso to Section 138. That necessarily means that for similar failure after service of fresh notice on subsequent dishonour, the drawer cannot be liable for any offence nor can the first offence be treated as non est so as to give the payee a right to file a complaint treating the second offence as the first one. At that stage, it will not be a question of waiver of the right of the payee to prosecute the drawer but of absolution of the drawer of an offence, which stands already committed by him and which cannot be committed by him again.
8. The other impediment to the acceptance of the concept of successive causes of action is that it will make the period of limitation under clause (c) of Section 142 otiose, for, a payee who failed to file his complaint within one month and thereby forfeited his right to prosecute the drawer, can circumvent the above limitative clause by filing a complaint on the basis of a fresh presentation of the cheque and its dishonour. Since in the interpretation of statutes, the court always presumes that the legislature inserted every part thereof for a purpose and the legislative intention is that every part should have effect, the above conclusion cannot be drawn for that will make the provision for limiting the period of making the complaint nugatory.”
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4. The Court then tried to reconcile the apparently
conflicting provisions of the Act - one enabling the payee to
present the cheque and the other giving him opportunity to
file a complaint within one month and observed:
“…..Having given our anxious consideration to this question, we are of the opinion that the above two provisions can be harmonised, with the interpretation that on each presentation of the cheque and its dishonour, a fresh right — and not cause of action — accrues in his favour. He may, therefore, without taking pre-emptory action in exercise of his such right under clause (b) of Section 138, go on presenting the cheque so as to enable him to exercise such right at any point of time during the validity of the cheque. But once he gives a notice under clause (b) of Section 138, he forfeits such right for in case of failure of the drawer to pay the money within the stipulated time, he would be liable for offence and the cause of action for filing the complaint will arise. Needless to say, the period of one month for filing the complaint will be reckoned from the day immediately following the day on which the period of fifteen days from the date of the receipt of the notice by the drawer expires.”
5. The Court accordingly dismissed the appeal while
affirming the decision of the Kerala High Court in
Kumaresan’s case (supra), no matter the same had been
in the meantime overruled by a decision of the Full Bench
of that Court in S.K.D. Lakshmanan Fireworks
Industries v. K.V. Sivarama Krishnan (1995) Cri L J
1384 (Ker).
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6. When the present appeal first came up for hearing
before a bench comprising Markandey Katju and B.
Sudershan Reddy, JJ., reliance on behalf of respondents
was placed upon the decision of this Court in Sadanandan
Bhadran’s case (supra) to argue that the complaint in the
instant case had also been filed on the basis of the second
dishonour of a cheque after the payee of the cheque had
issued a notice to the drawer under clause (b) of the
proviso to Section 138 of the Act based on an earlier
dishonour. On the ratio of Sadanandan Bhadran’s case
(supra) such a complaint was not maintainable, argued the
respondents. The Court, however, expressed its reservation
about the correctness of the view taken in Sadanandan
Bhadran’s case (supra) especially in para 9 thereof and
accordingly referred the matter to a larger Bench. That is
precisely how the present appeal has come up for hearing
before us. It is, therefore, evident that this Court has
repeatedly followed the view taken in Sadanandan
Bhadran’s case (supra). But a careful reading of these
decisions reveals that in these subsequent decisions there
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had been no addition to the ratio underlying the conclusion
in Sadanandan Bhadran’s case (supra).
7. Before adverting to the submissions that were urged
at the Bar we may briefly summarise the facts in the
backdrop of which the issue arises for our determination.
Four cheques for a total sum of rupees ten lakhs were
issued by the respondent-company on 14th August, 1996 in
favour of the appellant which were presented to the bank
for collection on 21st November, 1996. The cheques were
dishonoured in terms of memo dated 22nd November, 1996
for insufficiency of funds. A notice under clause (b) of
proviso to Section 138 was then issued by the appellant to
the respondent on 8th January, 1997 demanding payment of
the amount covered by the cheques. Despite receipt of the
notice by the respondent the payment was not arranged.
The appellant’s case is that the respondent assured the
appellant that the funds necessary for the encashment of
the cheques shall be made available by the respondent, for
which purpose the cheques could be presented again to the
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bank concerned. The cheques were accordingly presented
for the second time to the bank on 21st January, 1997 and
were dishonoured for a second time in terms of a memo
dated 22nd January, 1997 once again on the ground of
insufficiency of funds. A statutory notice issued by the
appellant under clause (b) of proviso to Section 138 of the
Act on 28th January, 1997 called upon the respondent-
drawer of the cheques to arrange payment of the amount
within 15 days. Despite receipt of the said notice on 3rd
February, 1997, no payment was arranged which led to the
filing of Complaint Case No.1556-1557/1997 by the
appellant before the II Metropolitan Magistrate, Madras for
the offence punishable under Section 138 read with Section
142 of the Act. The Magistrate took cognizance and issued
summons to the respondents in response whereto the
respondents entered appearance and sought discharge
primarily on the ground that the complaint had not been
filed within 30 days of the expiry of the notice based on the
first dishonour of the cheque. It was also alleged that the
statutory notice which formed the basis of the complaint
had not been served upon the accused persons. The
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Magistrate upon consideration dismissed the applications
for discharge which order was then assailed by the
respondents before the High Court of Madras in Criminal
Appeal Nos. 618, 624, 664, 665/2000.
8. The High Court has, by the order impugned in this
appeal, allowed the revision and quashed the orders passed
by the Magistrate relying upon the decision of this Court in
Sadanandan Bhadran’s case (supra) according to which a
complaint based on a second or successive dishonour of the
cheque was not maintainable if no complaint based on an
earlier dishonour, followed by the statutory notice issued on
the basis thereof, had been filed.
9. Section 138 of the Negotiable Instruments Act, 1881,
constituting Chapter XVII of the Act which was introduced
by Act 66 of 1988, inter alia, provides:
“138. Dishonour of cheque for insufficiency, etc., of funds in the account. Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money
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standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice. to any other provision of this Act, be punished with imprisonment for a term which may extend to two year, or with fine which may extend to twice the amount of the cheque, or with both”
10. Proviso to Section 138, however, is all important and
stipulates three distinct conditions precedent, which must
be satisfied before the dishonour of a cheque can constitute
an offence and become punishable. The first condition is
that the cheque ought to have been presented to the bank
within a period of six months from the date on which it is
drawn or within the period of its validity, whichever is
earlier. The second condition is that the payee or the holder
in due course of the cheque, as the case may be, ought to
make a demand for the payment of the said amount of
money by giving a notice in writing, to the drawer of the
cheque, within thirty days of the receipt of information by
him from the bank regarding the return of the cheque as
unpaid. The third condition is that the drawer of such a
cheque should have failed to make payment of the said
amount of money to the payee or as the case may be, to
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the holder in due course of the cheque within fifteen days of
the receipt of the said notice. It is only upon the satisfaction
of all the three conditions mentioned above and
enumerated under the proviso to Section 138 as clauses
(a), (b) and (c) thereof that an offence under Section 138
can be said to have been committed by the person issuing
the cheque.
11. Section 142 of the Negotiable Instruments Act governs
taking of cognizance of the offence and starts with a non-
obstante clause. It provides that no court shall take
cognizance of any offence punishable under Section 138
except upon a complaint, in writing, made by the payee or,
as the case may be, by the holder in due course and such
complaint is made within one month of the date on which
the cause of action arises under clause (c) of the proviso to
Section 138. In terms of sub-section (c) to Section 142, no
court inferior to that of a Metropolitan Magistrate or a
Judicial Magistrate of the first class is competent to try any
offence punishable under Section 138.
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12. A careful reading of the above provisions makes it
manifest that a complaint under Section 138 can be filed
only after cause of action to do so has accrued in terms of
clause (c) of proviso to Section 138 which, as noticed
earlier, happens no sooner than when the drawer of the
cheque fails to make the payment of the cheque amount to
the payee or the holder of the cheque within 15 days of the
receipt of the notice required to be sent in terms of clause
(b) of proviso to Section 138 of the Act.
13. What is important is that neither Section 138 nor
Section 142 or any other provision contained in the Act
forbids the holder or payee of the cheque from presenting
the cheque for encashment on any number of occasions
within a period of six months of its issue or within the
period of its validity, whichever is earlier. That such
presentation will be perfectly legal and justified was not
disputed before us even at the Bar by learned counsel
appearing for the parties and rightly so in light of the
judicial pronouncements on that question which are all
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unanimous. Even Sadanandan Bhadran’s case (supra)
the correctness whereof we are examining, recognized that
the holder or the payee of the cheque has the right to
present the same any number of times for encashment
during the period of six months or during the period of its
validity, whichever is earlier.
14. Presentation of the cheque and dishonour thereof
within the period of its validity or a period of six months is
just one of the three requirements that constitutes ‘cause
of action’ within the meaning of Sections 138 and 142(b) of
the Act, an expression that is more commonly used in civil
law than in penal statutes. For a dishonour to culminate
into the commission of an offence of which a court may
take cognizance, there are two other requirements,
namely, (a) service of a notice upon the drawer of the
cheque to make payment of the amount covered by the
cheque and (b) failure of the drawer to make any such
payment within the stipulated period of 15 days of the
receipt of such a notice. It is only when the said two
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conditions are superadded to the dishonour of the cheque
that the holder/payee of the cheque acquires the right to
institute proceedings for prosecution under Section 138 of
the Act, which right remains legally enforceable for a period
of 30 days counted from the date on which the cause of
action accrued to him. There is, however, nothing in the
proviso to Section 138 or Section 142 for that matter, to
oblige the holder/payee of a dishonoured cheque to
necessarily file a complaint even when he has acquired an
indefeasible right to do so. The fact that an offence is
complete need not necessarily lead to launch of prosecution
especially when the offence is not a cognizable one. It
follows that the complainant may, even when he has the
immediate right to institute criminal proceedings against
the drawer of the cheque, either at the request of the
holder/payee of the cheque or on his own volition, refrain
from instituting the proceedings based on the cause of
action that has accrued to him. Such a decision to defer
prosecution may be impelled by several considerations but
more importantly it may be induced by an assurance which
the drawer extends to the holder of the cheque that given
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some time the payment covered by the cheques would be
arranged, in the process rendering a time consuming and
generally expensive legal recourse unnecessary. It may
also be induced by a belief that a fresh presentation of the
cheque may result in encashment for a variety of reasons
including the vicissitudes of trade and business dealings
where financial accommodation given by the parties to each
other is not an unknown phenomenon. Suffice it to say
that there is nothing in the provisions of the Act that
forbids the holder/payee of the cheque to demand by
service of a fresh notice under clause (b) of proviso to
Section 138 of the Act, the amount covered by the cheque,
should there be a second or a successive dishonour of the
cheque on its presentation.
15. Sadanandan Bhadran’s case (supra) holds that
while a second or successive presentation of the cheque is
legally permissible so long as such presentation is within
the period of six months or the validity of the cheque
whichever is earlier, the second or subsequent dishonour of
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the cheque would not entitle the holder/payee to issue a
statutory notice to the drawer nor would it entitle him to
institute legal proceedings against the drawer in the event
he fails to arrange the payment. The decision gives three
distinct reasons why that should be so. The first and the
foremost of these reasons is the use of the expression
“cause of action” in Section 142(b) of the Act which
according to the Court has been used in a restrictive sense
and must therefore be understood to mean that cause of
action under Section 142(b) can arise but once. The
second reason cited for the view taken in the Sadanandan
Bhadran’s case (supra) is that dishonour of a cheque will
lead to commission of only one offence and that the offence
is complete no sooner the drawer fails to make the
payment of the cheque amount within a period of 15 days
of the receipt of the notice served upon him. The Court has
not pressed into service the doctrine of “waiver of the right
to prosecute” but held that the failure of the holder to
institute proceedings would tantamount to “absolution” of
the drawer of the offence committed by him. The third and
the only other reason is that successive causes of action
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will militate against the provisions of Section 142(b) and
make the said provision otiose. The Court in Sadanandan
Bhadran’s case (supra) held that the failure of the
drawer/payee to file a complaint within one month resulted
in forfeiture of the complainant’s right to prosecute the
drawer/payee which forfeiture cannot be circumvented by
him by presenting the cheque afresh and inviting a
dishonour to be followed by a fresh notice and a delayed
complaint on the basis thereof.
16. With utmost respect to the Judges who decided
Sadanandan Bhadran’s case (supra) we regret our
inability to fall in line with the above line of reasoning to
hold that while a cheque is presented afresh the right to
prosecute the drawer, if the cheque is dishonoured, is
forfeited only because the previous dishonour had not
resulted in immediate prosecution of the offender even
when a notice under clause (b) of proviso to Section 138
had been served upon the drawer. We are conscious of the
fact that Sadanandan Bhadran’s case (supra) has been
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followed in several subsequent decisions of this Court such
as in Sil Import, USA v. Exim Aides Silk Exporters,
Bangalore, (1999) 4 SCC 567, Uniplas India Ltd. and
Ors. v. State (Govt. of NCT Delhi) and Anr., (2001) 6
SCC 8, Dalmia Cement (Bharat) Ltd. v. Galaxy
Traders & Agencies Ltd. and Anr., (2001) 6 SCC 463,
Prem Chand Vijay Kumar v. Yashpal Singh and Anr.,
(2005) 4 SCC 417, S.L. Constructions and Anr. v.
Alapati Srinivasa Rao and Anr., (2009) 1 SCC 500,
Tameshwar Vaishnav v. Ramvishal Gupta, (2010) 2
SCC 329.
17. All these decisions have without disturbing or making
any addition to the rationale behind the decision in
Sadanandan Bhadran’s case (supra) followed the
conclusion drawn in the same. We, therefore, propose to
deal with the three dimensions that have been highlighted
in that case while holding that successive causes of action
are not within the comprehension of Sections 138 and 142
of the Act.
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18. The expression ‘cause of action’ is more commonly
and easily understood in the realm of civil laws. The
expression is not defined anywhere in the Code of Civil
Procedure to which it generally bears relevance but has
been universally understood to mean the bundle of facts
which the plaintiff must prove in order to entitle him to
succeed in the suit. (See State of Madras v. C.P.
Agencies AIR 1960 SC 1309; Rajasthan High Court
Advocates Association v. U.O.I. & Ors. AIR 2001 SC
416 and Mohamed Khaleel Khan v. Mahaboob Ali Mia
AIR 1949 PC 78).
19. Section 142 of the Negotiable Instruments Act is
perhaps the only penal provision in a statute which uses
the expression ‘cause of action’ in relation to the
commission of an offence or the institution of a complaint
for the prosecution of the offender. A careful reading of
Sections 138 and 142, as noticed above, makes it
abundantly clear that the cause of action to institute a
complaint comprises the three different factual
prerequisites for the institution of a complaint to which we
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have already referred in the earlier part of this order.
None of these prerequisites is in itself sufficient to
constitute a complete cause of action for an offence under
Section 138. For instance if a cheque is not presented
within a period of six months from the date on which it is
drawn or within the period of its validity, whichever is
earlier, no cause of action would accrue to the holder of the
cheque even when the remaining two requirements, namely
service of a notice and failure of the drawer to make the
payment of the cheque amount are established on facts. So
also presentation of the cheque within the stipulated period
without service of a notice in terms of Section 138 proviso
(b) would give no cause of action to the holder to prosecute
the drawer just as the failure of the drawer to make the
payment demanded on the basis of a notice that does not
satisfy the requirements of clause (b) of proviso to Section
138 would not constitute a complete cause of action.
20. The expression ‘cause of action’ appearing in Section
142 (b) of the Act cannot therefore be understood to be
limited to any given requirement out of the three
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requirements that are mandatory for launching a
prosecution on the basis of a dishonoured cheque. Having
said that, every time a cheque is presented in the manner
and within the time stipulated under the proviso to Section
138 followed by a notice within the meaning of clause (b) of
proviso to Section 138 and the drawer fails to make the
payment of the amount within the stipulated period of
fifteen days after the date of receipt of such notice, a cause
of action accrues to the holder of the cheque to institute
proceedings for prosecution of the drawer.
21. There is, in our view, nothing either in Section 138 or
Section 142 to curtail the said right of the payee, leave
alone a forfeiture of the said right for no better reason than
the failure of the holder of the cheque to institute
prosecution against the drawer when the cause of action to
do so had first arisen. Simply because the prosecution for
an offence under Section 138 must on the language of
Section 142 be instituted within one month from the date of
the failure of the drawer to make the payment does not in
our view militate against the accrual of multiple causes of
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action to the holder of the cheque upon failure of the
drawer to make the payment of the cheque amount. In the
absence of any juristic principle on which such failure to
prosecute on the basis of the first default in payment
should result in forfeiture, we find it difficult to hold that
the payee would lose his right to institute such proceedings
on a subsequent default that satisfies all the three
requirements of Section 138.
22. That brings us to the question whether an offence
punishable under Section 138 can be committed only once
as held by this Court in Sadanandan Bhadran’s case
(supra). The holder of a cheque as seen earlier can present
it before a bank any number of times within the period of
six months or during the period of its validity, whichever is
earlier. This right of the holder to present the cheque for
encashment carries with it a corresponding obligation on
the part of the drawer to ensure that the cheque drawn by
him is honoured by the bank who stands in the capacity of
an agent of the drawer vis-à-vis the holder of the cheque.
If the holder of the cheque has a right, as indeed is in the
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unanimous opinion expressed in the decisions on the
subject, there is no reason why the corresponding
obligation of the drawer should also not continue every
time the cheque is presented for encashment if it satisfies
the requirements stipulated in that clause (a) to the proviso
to Section 138. There is nothing in that proviso to even
remotely suggest that clause (a) would have no application
to a cheque presented for the second time if the same has
already been dishonoured once. Indeed if the legislative
intent was to restrict prosecution only to cases arising out
of the first dishonour of a cheque nothing prevented it from
stipulating so in clause (a) itself. In the absence of any
such provision a dishonour whether based on a second or
any successive presentation of a cheque for encashment
would be a dishonour within the meaning of Section 138
and clause (a) to proviso thereof. We have, therefore, no
manner of doubt that so long as the cheque remains unpaid
it is the continuing obligation of the drawer to make good
the same by either arranging the funds in the account on
which the cheque is drawn or liquidating the liability
otherwise. It is true that a dishonour of the cheque can be
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made a basis for prosecution of the offender but once, but
that is far from saying that the holder of the cheque does
not have the discretion to choose out of several such
defaults, one default, on which to launch such a
prosecution. The omission or the failure of the holder to
institute prosecution does not, therefore, give any
immunity to the drawer so long as the cheque is
dishonoured within its validity period and the conditions
precedent for prosecution in terms of the proviso to Section
138 are satisfied.
23. Coming then to the question whether there is anything
in Section 142(b) to suggest that prosecution based on
subsequent or successive dishonour is impermissible, we
need only mention that the limitation which Sadanandan
Bhadran’s case (supra) reads into that provision does not
appear to us to arise. We say so because while a complaint
based on a default and notice to pay must be filed within a
period of one month from the date the cause of action
accrues, which implies the date on which the period of 15
days granted to the drawer to arrange the payment
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expires, there is nothing in Section 142 to suggest that
expiry of any such limitation would absolve him of his
criminal liability should the cheque continue to get
dishonoured by the bank on subsequent presentations. So
long as the cheque is valid and so long as it is dishonoured
upon presentation to the bank, the holder’s right to
prosecute the drawer for the default committed by him
remains valid and exercisable. The argument that the
holder takes advantage by not filing a prosecution against
the drawer has not impressed us. By reason of a fresh
presentation of a cheque followed by a fresh notice in terms
of Section 138, proviso (b), the drawer gets an extended
period to make the payment and thereby benefits in terms
of further opportunity to pay to avoid prosecution. Such
fresh opportunity cannot help the defaulter on any juristic
principle, to get a complete absolution from prosecution.
24. Absolution is, at any rate, a theological concept which
implies an act of forgiving the sinner of his sins upon
confession. The expression has no doubt been used in some
judicial pronouncements, but the same stop short of
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recognizing absolution as a juristic concept. It has always
been used or understood in common parlance to convey
“setting free from guilt” or “release from a penalty”. The
use of the expression “absolution” in Sadanandan
Bhadran’s case (supra) at any rate came at a time when
proviso to Section 142(b) had not found a place on the
statute book. That proviso was added by the Negotiable
Instruments (Amendment and Miscellaneous Provisions)
Act, 2002 which read as under:
“Provided that the cognizance of a complaint may be taken by the Court after the prescribed period, if the complainant satisfies the Court that he had sufficient cause for not making a complaint within such period.”
25. The Statement of Objects and Reasons appended to
the Amendment Bill, 2002 suggests that the introduction of
this proviso was recommended by the Standing Committee
on Finance and other representatives so as to provide
discretion to the Court to waive the period of one month,
which has been prescribed for taking cognizance of a case
under the Act. This was so recognised judicially also by this
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Court in Subodh S. Salaskar v. Jayprakash M. Shah &
Anr. (2008) 13 SCC 689 where this Court observed:
“11. The [Negotiable Instruments] Act was amended in the year 2002 whereby additional powers have been conferred upon the court to take cognizance even after expiry of the period of limitation by conferring on it a discretion to waive the period of one month.
xx xx xx xx
24...The provisions of the Act being special in nature, in terms thereof the jurisdiction of the court to take cognizance of an offence under Section 138 of the Act was limited to the period of thirty days in terms of the proviso appended thereto. The Parliament only with a view to obviate the aforementioned difficulties on the part of the complainant inserted proviso to Clause (b) of Section 142 of the Act in 2002. It confers a jurisdiction upon the court to condone the delay...”
26. The proviso referred to above now permits the payee
to institute prosecution proceedings against a defaulting
drawer even after the expiry of the period of one month. If
a failure of the payee to file a complaint within a period of
one month from the date of expiry of the period of 15 days
allowed for this purpose was to result in ‘absolution’, the
proviso would not have been added to negate that
consequence. The statute as it exists today, therefore,
does not provide for ‘absolution’ simply because the period
of 30 days has expired or the payee has for some other
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reasons deferred the filing of the complaint against the
defaulter.
27. It is trite that the object underlying Section 138 of the
Act is to promote and inculcate faith in the efficacy of
banking system and its operations, giving credibility to
Negotiable Instruments in business transactions and to
create an atmosphere of faith and reliance by discouraging
people from dishonouring their commitments which are
implicit when they pay their dues through cheques. The
provision was intended to punish those unscrupulous
persons who issued cheques for discharging their liabilities
without really intending to honour the promise that goes
with the drawing up of such a negotiable instrument. It
was intended to enhance the acceptability of cheques in
settlement of liabilities by making the drawer liable for
penalties in case the cheque was dishonoured and to
safeguard and prevent harassment of honest drawers.
(See Mosaraf Hossain Khan v. Bhagheeratha Engg.
Ltd. (2006) 3 SCC 658, C.C. Alavi Haji v. Palapetty
Muhammed & Anr. (2007) 6 SCC 555 and Damodar S.
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29
Prabhu v. Sayed Babulal H. (2010) 5 SCC 663).
Having said that, we must add that one of the salutary
principles of interpretation of statutes is to adopt an
interpretation which promotes and advances the object
sought to be achieved by the legislation, in preference to an
interpretation which defeats such object. This Court has in
a long line of decisions recognized purposive interpretation
as a sound principle for the Courts to adopt while
interpreting statutory provisions. We may only refer to the
decisions of this Court in New India Sugar Mills Ltd. v.
Commissioner of Sales Tax, Bihar (AIR 1963 SC
1207), where this Court observed:
“It is a recognised rule of interpretation of statutes that expressions used therein should ordinarily be understood in a sense in which they best harmonise with the object of the statute, and which effectuate the object of the Legislature. If an expression is susceptible of a narrow or technical meaning, as well as a popular meaning, the Court would be justified in assuming that the Legislature used the expression in the sense which would carry out its object and reject that which renders the exercise of its power invalid.”
28. Reference may also be made to the decision of this
Court in Deputy Custodian, Evacuee Property v.
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Official Receiver (AIR 1965 SC 951), where this Court
observed:
“The rules of grammar may suggest that when the section says that the property is evacuee property, it prima facie indicates that the property should bear that character at the time when the opinion is formed. But Mr. Ganapathy Iyer for the appellants has strenuously contended that the construction of s. 7(1) should not be based solely or primarily on the mechanical application of the rules of grammar. He urges that the construction for which Mr. Pathak contents and which, in substance, has been accepted by the High Court, would lead to very anomalous results; and his arguments is that it is open to the Court to take into account the obvious aim and object of the statutory provision when attempting the task of construing its words. If it appears that the obvious aim and object of the statutory provisions would be frustrated by accepting the literal construction suggested by the respondent, then it may be open to the Court to enquire whether an alternative construction which would serve the purpose of achieving the aim and object of the Act, is reasonably possible.”
29. The decision of this Court in Nathi Devi v. Radha
Devi (2005) 2 SCC 271, reiterates the rule of purposive
construction in the following words:
“Even if there exists some ambiguity in the language or the same is capable of two interpretations, it is trite the interpretation which serves the object and purport of the Act must be given effect to. In such a case the doctrine of purposive construction should be adopted.”
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30. To the same effect is the decision of this Court in S.P.
Jain v. Krishan Mohan Gupta (1987) 1 SCC 191, where
this Court observed:
“We are of the opinion that law should take a pragmatic view of the matter and respond to the purpose for which it was made and also take cognizance of the current capabilities of technology and life-style of the community. It is well settled that the purpose of law provides a good guide to the interpretation of the meaning of the Act. We agree with the views of Justice Krishna Iyer in Busching Schmitz Private Ltd’s case (supra) that legislative futility is to be ruled out so long as interpretative possibility permits.”
31. Applying the above rule of interpretation and the
provisions of Section 138, we have no hesitation in holding
that a prosecution based on a second or successive default
in payment of the cheque amount should not be
impermissible simply because no prosecution based on the
first default which was followed by a statutory notice and a
failure to pay had not been launched. If the entire purpose
underlying Section 138 of the Negotiable Instruments Act is
to compel the drawers to honour their commitments made
in the course of their business or other affairs, there is no
reason why a person who has issued a cheque which is
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dishonoured and who fails to make payment despite
statutory notice served upon him should be immune to
prosecution simply because the holder of the cheque has
not rushed to the court with a complaint based on such
default or simply because the drawer has made the holder
defer prosecution promising to make arrangements for
funds or for any other similar reason. There is in our
opinion no real or qualitative difference between a case
where default is committed and prosecution immediately
launched and another where the prosecution is deferred till
the cheque presented again gets dishonoured for the
second or successive time.
32. The controversy, in our opinion, can be seen from
another angle also. If the decision in Sadanandan
Bhadran’s case (supra) is correct, there is no option for
the holder to defer institution of judicial proceedings even
when he may like to do so for so simple and innocuous a
reason as to extend certain accommodation to the drawer
to arrange the payment of the amount. Apart from the fact
that an interpretation which curtails the right of the parties
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to negotiate a possible settlement without prejudice to the
right of holder to institute proceedings within the outer
period of limitation stipulated by law should be avoided we
see no reason why parties should, by a process of
interpretation, be forced to launch complaints where they
can or may like to defer such action for good and valid
reasons. After all, neither the courts nor the parties stand
to gain by institution of proceedings which may become
unnecessary if cheque amount is paid by the drawer. The
magistracy in this country is over-burdened by an
avalanche of cases under Section 138 of Negotiable
Instruments Act. If the first default itself must in terms of
the decision in Sadanandan Bhadran’s case (supra)
result in filing of prosecution, avoidable litigation would
become an inevitable bane of the legislation that was
intended only to bring solemnity to cheques without forcing
parties to resort to proceedings in the courts of law. While
there is no empirical data to suggest that the problems of
overburdened magistracy and judicial system at the district
level is entirely because of the compulsions arising out of
the decisions in Sadanandan Bhadran’s case (supra), it is
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difficult to say that the law declared in that decision has not
added to court congestion.
33. In the result, we overrule the decision in
Sadanandan Bhadran’s case (supra) and hold that
prosecution based upon second or successive dishonour of
the cheque is also permissible so long as the same satisfies
the requirements stipulated in the proviso to Section 138 of
the Negotiable Instruments Act. The reference is answered
accordingly. The appeals shall now be listed before the
regular Bench for hearing and disposal in light of the
observations made above.
………….………………….…..……….J. (R.M. LODHA)
………….……………………..…….…J. (T.S. THAKUR)
………….………………….…..……….J. (ANIL R. DAVE)
New Delhi September 26, 2012