IMPORTANT POINT
If any notice of demand is issued under Section 434 of the Companies Act, 1956 within 15 days of the information from the Bank regarding return of the cheque drawn by a Company as unpaid (for insufficient funds etc.), such a notice would as well be good enough under clause (b) of the proviso to Section 138 of Negotiable Instruments Act, 1881. But in this case Notice was issued only after the expiry of 15 days from receipt of the intimation of dishonour so it cannot be treated a notice under Section 138(b) of NIA. So no cause of action under Section 138 r/w 142 NIA had arisen on such notice. Cheque could be presented again during permitted period and when bounced 2nd notice of demand can give rise to cause of action under NIA.

Headnote:Negotiable Instruments Act, 1881-Section 138-Dishonour of cheque when an offence-Companies Act, 1956-Sections 433 and 434-Cases in which a company may be wound up by Court-Cheques dishonoured-Notice given more than 15 days after receipt of intimation of dishonour under Section 434 Companies Act-Whether can be treated as notice under Section 138 NIA? (No)-Effect-No cause of action arises-Result-Cheque can be presented within the permitted period-If bounced again-Prosecution can be launched on 2nd notice within 15 days-Case law discussed-Appeal dismissed.
       Held : If any notice is issued under Section 434 of the Companies Act within 15 days of the information from the Bank regarding return of the cheque drawn by a company as unpaid, such a notice would as well be good enough under clause (b) of the proviso to Section 138 of the NI Act. (Para 9)
       One of the indispensable factors to form the cause of action envisaged in Section 138 of the NI Act is contained in clause (b) of the proviso to that section. It involves the making of a demand by giving a notice in writing to the drawer of the cheque "within fifteen days of receipt of information by him from the bank regarding the return of the cheque as unpaid." If no such notice is given within the said period of 15 days no cause of action could have been created at all. Thus, it is well neigh settled that 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 question in this case is, did the payee issue notice within 15 days after the first dishonour of the cheque. The question can as well be put in another form. Was the notice dated 1.12.1995 within 15 days of the date of intimation from the bank regarding dishonour, or was it sent after that period of 15 days? In fact, that is the crux of the issue involved in this case. (Paras 11 and 12)
       To a query by us learned counsel for the appellants candidly admitted that the notice of 1.12.1995 was issued only after the expiry of 15 days from receipt of the intimation from Bank regarding the dishonour. If so the said dishonour remained without any further escalation and need not snowball into a cause of action. Its corollary is that the payee was not prevented from presenting the cheque once again within the permitted period and to make use of such presentation and the subsequent dishonour for a cause of action to be founded for launching a complaint as in the present case. We therefore dismiss this appeal. (Para 13)

JUDGMENT

Thomas, J.-Leave granted.

2. The drawer of a cheque clutches on a straw for wriggling out of the clinch of a criminal prosecution he is caught in, but the straw is too fragile to be of any help to him. He thought that a previous notice sent by the payee of the cheque, after it was once bounced, was enough to knock off the prosecution based on a second presentation and second bouncing of the cheque. But neither the trial Court nor the High Court favoured the accused in his endeavour to secure a discharge from the case on the said ground. Thus he has come up with this appeal.

3. Respondent company filed a complaint before the court of a Chief Metropolitan Magistrate against three appellants for the offence under Section 138 of the Negotiable Instrument Act (for short the NI Act) on the following inter alia, allegations :

The third appellant is the Managing Director of the first appellant company of which the second appellant is Vice President. A cheque in a sum of Rs. 50 lacs and another cheque for above Rs. 3 lacs have been drawn by the first appellant in favour of the respondent complainant. The said cheques were presented before the Oriental Bank of Commerce but they were dishonoured by the Bank as per memo dated 23.2.1996. Notice was sent to the appellants on 2.3.1996 calling upon them to pay the amount. As the appellants did not pay the amount within the statutory period a complaint was filed on 11.4.1996.

4. The stand of the appellants is this : the cheque was earlier presented by the payee and then it was dishonoured by the Bank and thereafter a notice was issued to the drawer on 1.12.1995, but the payee did not file a complaint within one month of the expiry of 15 days after the said notice and hence he cannot create one more cause of action by presenting the cheque once again. At any rate the complaint filed on 11.4.1996 is beyond the time prescribed by law and consequently the court is debarred from taking cognizance of the offence upon the said complaint, contended the appellants. In support of the said contention appellants cited the decisions of this Court in Sadanandan Bhadran v. Madhavan Sunil Kumar1.

5. The trial Court repelled the said contention on the premise that the notice issued on 1.12.1995 was under Section 434 of the Companies Act which cannot be treated as a notice under 138 of the NI Act. This position of the trial Court was upheld by the learned Single Judge of the High Court on the strength of the following reasons :

"A notice under Sections 433 and 434 of the Companies Act cannot be treated as a notice under Section 138 of the Act. Therefore, the contention of learned counsel for the petitioners that notice dated 1.12.1995 should be taken as notice under Section 138 of the Act, is unsustainable. In the case on hand, notice under Section 138 of the Act was dated 12.3.1996. It is this notice which is in accordance with the provisions of Section 138 that proceedings can be set into motion by giving fifteen days time to comply with the demand and thereafter within one month file a complaint. The period, if calculated from the issue of notice dated 12.3.1996, brings the complaint well within the period of limitation. Therefore, from the facts of the case alleged in the complaint, the position is clear that no exception can be taken against the order of the Magistrate taking cognizance of the offence under Section 138 of the Act against the petitioners."

6. Learned counsel for the appellants contended that the High Court went wrong in saying that a notice under Section 433 and 434 of the Companies Act cannot be treated as a notice under Section 138 of the NI Act. Any notice containing a demand for payment of the amount covered by the dishonoured cheque can as well be a notice under Section 138 of the NI Act, according to him.

7. Section 433 and 434 of the Companies Act are provisions dealing with cases in which a company may be wound up by the court. Section 434 has to be read in association with Sectio

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2001 Supreme(SC) 937

Cases Referred (2)