Supreme Court Upholds Complaint Under Section 138 of Negotiable Instruments Act: Birendra Prasad Sah vs. State of Bihar (2019)

Date of the Judgment: May 8, 2019

Citation: 2019 INSC 428

Judges: Dr Dhananjaya Y Chandrachud, J and Hemant Gupta, J

Can a complaint under Section 138 of the Negotiable Instruments Act, 1881 be dismissed if the complainant issued a second legal notice after the first one was allegedly not served? The Supreme Court of India recently addressed this issue, focusing on the validity of a complaint filed after a delay, where the delay was sought to be condoned. This case examines the circumstances under which a complaint for cheque dishonor can be maintained, especially when there is a question of proper notice and delay in filing the complaint. The judgment was delivered by a two-judge bench comprising Dr. Dhananjaya Y Chandrachud, J and Hemant Gupta, J, with the opinion authored by Dr. Dhananjaya Y Chandrachud, J.

Case Background

The case revolves around two cheques issued by the second respondent to the appellant. These cheques, for Rs 36,00,000 and Rs 13,00,000, were drawn on the State Bank of India. The cheques were returned unpaid, with a memo issued by UCO Bank, Begusarai, on 20 November 2015. The appellant received this memo on 4 December 2015. Following this, the appellant issued a legal notice on 31 December 2015, informing the second respondent of the dishonor of the cheques. The appellant claimed that despite inquiries with the postal department between 14 February 2016 and 23 February 2016, no proof of service was provided. Consequently, a second legal notice was issued on 26 February 2016. The second respondent replied to this notice on 2 March 2016. Eventually, the appellant filed a complaint under Section 138 of the Negotiable Instruments Act, 1881 on 11 May 2016.

Timeline

Course of Proceedings

The Chief Judicial Magistrate (CJM), Begusarai, condoned the delay in filing the complaint on 14 July 2016 and issued summons to the second respondent. The second respondent then filed a revision petition before the Sessions Judge, which was rejected on 8 March 2017. Subsequently, the second respondent approached the High Court of Judicature at Patna under Section 482 of the Code of Criminal Procedure. The High Court, on 10 May 2018, quashed the proceedings, holding that the complaint was not filed within the statutory period of thirty days as prescribed under Section 138 of the Negotiable Instruments Act, 1881.

Legal Framework

The core of this case revolves around Section 138 of the Negotiable Instruments Act, 1881, which deals with the dishonor of cheques. Specifically, the court considered the following:

• Section 138 of the Negotiable Instruments Act, 1881: This section defines the offense of dishonoring a cheque due to insufficient funds. It states that if a cheque is returned unpaid, the drawer is deemed to have committed an offense, punishable with imprisonment or fine, or both. The section includes the following provisos:
  • (a) the cheque has 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;
  • (b) the payee or the holder in due course of the cheque makes 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; and
  • (c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.
• Section 142(1) of the Negotiable Instruments Act, 1881: This section specifies the procedure for taking cognizance of an offense under Section 138. It states that:
  • (a) 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, the holder in due course of the cheque;
  • (b) 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:
    • 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;
  • (c) no court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the first class shall try any offence punishable under section 138.

Arguments

Appellant’s Arguments:

• The appellant argued that the High Court erred in quashing the proceedings.
• He contended that the issuance of successive notices is permissible under Section 138 of the Negotiable Instruments Act, 1881, as established in the case of MSR Leathers v. S Palaniappan [2013] 1 SCC 177.
• The appellant emphasized that the Chief Judicial Magistrate (CJM) had condoned the delay in filing the complaint under Section 142 of the Negotiable Instruments Act, 1881.
• The appellant submitted that the first legal notice dated 31 December 2015 was the basis of the complaint and the second notice was issued due to non-receipt of acknowledgment of the first notice.
• The appellant argued that sufficient reasons were provided in the complaint for the delay in filing the complaint, which the CJM duly considered.

Respondent’s Arguments:

• The second respondent argued that the second legal notice dated 26 February 2016 was sent beyond the thirty-day period from the receipt of the dishonor memo on 4 December 2015, making it invalid.
• He contended that if a complaint was to be filed, it should have been based on the first legal notice dated 31 December 2015, which was within thirty days of the dishonor memo.
• The respondent submitted that the complaint filed on 11 May 2016 was beyond the stipulated period from the date of the first notice.
• He argued that the CJM had condoned the delay only for the period after 6 April 2016, following the second notice, not from the first notice.
• The respondent distinguished the case of MSR Leathers (supra), stating that it involved a re-presentation of the cheque, which was not the case here.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in a separate section. However, the core issues addressed by the court can be summarized as follows:

1. Whether the complaint under Section 138 of the Negotiable Instruments Act, 1881, could be maintained based on the first legal notice dated 31 December 2015.
2. Whether the delay in filing the complaint could be condoned by the Chief Judicial Magistrate under Section 142 of the Negotiable Instruments Act, 1881.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The Supreme Court considered the following authorities:

Judgment

How each authority was viewed by the Court?

• MSR Leathers v. S Palaniappan [2013] 1 SCC 177*: The Supreme Court cited this case to support the permissibility of successive notices under Section 138 of the Negotiable Instruments Act, 1881. However, the court clarified that the cause of action for the complaint was the first notice.
• Section 138 of the Negotiable Instruments Act, 1881: The Court used this provision to determine the conditions for a valid complaint, particularly the requirement of issuing a notice within thirty days of receiving the memo of dishonor.
• Section 142 of the Negotiable Instruments Act, 1881: The Court relied on this section to uphold the condonation of delay by the CJM, noting that the appellant had provided sufficient cause for the delay in filing the complaint.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors:

• The court recognized that the first legal notice dated 31 December 2015 was issued within the stipulated thirty-day period from the receipt of the memo of dishonor, thus fulfilling the requirement under Section 138(b) of the Negotiable Instruments Act, 1881.
• The court acknowledged the appellant’s explanation for issuing the second notice, which was due to the non-receipt of acknowledgment of the first notice.
• The court accepted the reasons provided by the appellant in the complaint for the delay in filing the complaint and upheld the CJM’s decision to condone the delay under Section 142 of the Negotiable Instruments Act, 1881.
• The court emphasized that the cause of action was based on the first notice, and the complaint was valid despite the delay, which was sufficiently explained and condoned.

Fact:Law Ratio

Logical Reasoning:

The court’s reasoning was based on the following points:

• The court emphasized that the first legal notice dated 31 December 2015 was the basis of the complaint, and it was issued within the stipulated time as per Section 138(b) of the Negotiable Instruments Act, 1881.
• The court acknowledged that the second notice was issued due to the non-receipt of acknowledgment of the first notice, but the cause of action was still the first notice.
• The court found that the appellant had provided sufficient cause for the delay in filing the complaint, which was condoned by the CJM under Section 142 of the Negotiable Instruments Act, 1881.
• The court clarified that the High Court erred in quashing the proceedings, as the delay was adequately explained and condoned.

The Supreme Court did not consider any alternative interpretations. The decision was reached by analyzing the facts and applying the relevant provisions of the Negotiable Instruments Act, 1881.

The court’s decision was clear: the complaint was valid, and the High Court’s decision was overturned. The court stated:

• “…we have proceeded on the basis that it is the first notice dated 31 December 2015 which constitutes the cause of action for the complaint under Section 138.”
• “The CJM condoned the delay on the cause which was shown by the appellant for the period commencing from 6 April 2018. However, if paragraphs 7 and 8 of the complaint are read together, it is evident that the appellant had indicated sufficient cause for seeking condonation of the delay in the institution of the complaint.”
• “In the view which we have taken, we have come to the conclusion that the impugned judgment of the High Court is unsustainable.”

There was no minority opinion in this case. The bench consisted of two judges, and the opinion was authored by Dr. Dhananjaya Y Chandrachud, J.

Key Takeaways

• A complaint under Section 138 of the Negotiable Instruments Act, 1881, can be maintained based on the first legal notice issued within thirty days of the receipt of the memo of dishonor.
• The issuance of a second legal notice does not invalidate the complaint if the first notice was validly issued. The second notice can be seen as a precautionary measure to ensure service, but the cause of action remains the first notice.
• The court can condone the delay in filing a complaint under Section 142 of the Negotiable Instruments Act, 1881, if the complainant provides sufficient cause for the delay.
• The reasons for the delay must be clearly stated in the complaint itself.
• The Supreme Court has emphasized that the procedural aspects of filing a complaint should not be used to defeat the substantive rights of the complainant, especially when the delay is adequately explained and condoned.

Directions

The Supreme Court allowed the appeal, set aside the order passed by the High Court, and restored the complaint to the file of the trial court.

Development of Law

The ratio decidendi of this case is that a complaint under Section 138 of the Negotiable Instruments Act, 1881, can be maintained based on the first legal notice issued within the stipulated time, and the delay in filing the complaint can be condoned if sufficient cause is shown. This case does not change the previous position of law but reinforces the importance of adhering to the procedural requirements while ensuring that substantive justice is not defeated by technicalities.

Conclusion

In conclusion, the Supreme Court’s judgment in Birendra Prasad Sah vs. The State of Bihar & Anr. clarifies the procedure for maintaining a complaint under Section 138 of the Negotiable Instruments Act, 1881. The court upheld the validity of the complaint, emphasizing that the first legal notice issued within the stipulated time is the basis for the complaint and that the delay in filing the complaint can be condoned if sufficient reasons are provided. This judgment reinforces the importance of procedural compliance while ensuring that substantive justice is not compromised.