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MSR LEATHERS – Appellant
Versus
S. PALANIAPPAN – Respondent
What is the maintainability of a prosecution based on a second or successive dishonour of a cheque if no complaint was filed based on an earlier dishonour? How to interpret the concept of "cause of action" under Section 142(b) of the Negotiable Instruments Act regarding successive defaults? What are the rights of a holder to institute proceedings against a drawer for subsequent defaults in payment of cheque amounts?
Key Points: - A prosecution based on a second or successive default in payment of the cheque amount is permissible even if no prosecution was launched based on the first default, provided statutory notice and failure to pay conditions are met (!) (!) . - The decision in Sadanandan Bhadrans case is overruled, holding that a holder has the discretion to choose which default to prosecute without forfeiting rights for earlier defaults (!) (!) . - The cause of action for filing a complaint under Section 138 accrues separately for each dishonour followed by a notice and failure to pay, rather than arising only once (!) (!) . - Failure to institute prosecution after the first default does not grant immunity to the drawer as long as the cheque remains valid and is dishonoured upon subsequent presentation (!) (!) . - The object of Section 138 is to promote faith in the banking system and penalize unscrupulous drawers, which supports an interpretation allowing successive prosecutions (!) (!) . - The concept of "absolution" from a previous offence is rejected as the statute does not provide for it, especially in light of the 2002 amendment allowing courts to condone delay (!) (!) . - There is no real or qualitative difference between launching prosecution immediately after the first default and deferring it until a second dishonour occurs (!) . - The holder's right to prosecute remains valid and exercisable for every dishonour within the validity period of the cheque, subject to the proviso requirements of Section 138 (!) (!) .
JUDGMENT
T.S. Thakur, J.-
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 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
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