Holding

A cause of action under Section 142 arises only once, upon receipt of the first notice and the drawer's failure to pay within 15 days; subsequent presentations and notices do not create a new cause of action.

Summary

The appellant, a supplier, issued a cheque to the respondents for goods supplied, which was dishonoured due to insufficient funds. After the first dishonour, the appellant served a legal notice demanding payment; the cheque was presented again at the respondents' request and dishonoured a second time, followed by a second notice and a criminal complaint under Section 138 of the Negotiable Instruments Act. The trial court proceeded, but the High Court quashed the complaint, holding that the requirements of Section 142 were not satisfied because a cause of action arises only once, upon receipt of the first notice and failure to pay within 15 days. On appeal, the Supreme Court affirmed that each presentation creates a fresh right, not a new cause of action, and that once the notice is given, the limitation period for filing a complaint starts and cannot be restarted by a second notice. Consequently, the appeal was dismissed, upholding the High Court's decision to quash the proceedings.

Issues considered

The scope of 'cause of action' under Section 142 of the Negotiable Instruments Act with respect to multiple presentations of a dishonoured cheque.
Whether a second notice after a second presentation can create a fresh cause of action for a complaint under Section 138.
Whether the High Court correctly applied the limitation period prescribed in Sections 138 and 142.

Legislation cited

Code of Civil Procedure, 1908s. 20
Code of Criminal Procedure, 1973s. 482
Negotiable Instruments Act, 1881s. 138, s. 142

Subjects

Negotiable Instruments ActSection 138Section 142cheque dishonourcause of actionlimitation periodcriminal complaintSection 482 CrPCnotice

Judgment

MIS. PREM CHAND VIJA Y KUMAR A,
v.
YASH PAL SINGH AND ANR.

MAY 2, 2005

[ARIJIT PASAYAT AND S.H. KAPADIA, JJ.] B

Negotiable Instruments Act, 1881: Sections 138 and 142-Dishonour of
cheque-Cause of action to file complaint on dishonour of cheque despite
issue of notice arise only once-Once notice is received by drawer, the payee
forfeits his right to again present the cheque as cause of action had already C
arisen and period of limitation begun to run-Giving of second notice would
not then give rise to fresh cause of action.

Words and Phrases-Cause of action-Meaning of in the Context of
Section 142 of Negotiable Instruments Act, 1881.
D
Respondents issued a cheque in favour of the appellant for the value
of goods supplied. On presentation of cheque in bank, it was dishonoured
due to inadequacy of funds. Appellant sent notice to the respondents
demanding payment. On the request of the respondents, the cheque was
again presented and was dishonoured due to inadequacy of funds.
Appellant sent another notice, but respondent failed again. Appellant filed E
complaint under Section 138 of Negotiable Instruments Ad, 1881.
Respondents filed an application for discharge which was dismissed by the
trial court. On a petition filed under section 482 Cr.P.C, High Court
quashed the proceedings, holding that the requirement of Section 142 of
the Act were not met. Hence the present appeal. F
Dismissing the appeal, the Court

HELD : 1. Clause (a) of the proviso to Section 138 of Negotiable
Instruments Act, 1881 does not put any embargo upon the payee to
successively present a dishonoured cheque during the perfod of its validity. G
On each presentation Of the cheque and its dishonour, a fresh right - and
not a 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
1m9 H
1030 SUPREME COURT REPORTS (2005] 3 S.C.R.

A he gives a notice under clause (b) of Section 138, he forfeits such right in
case of failure of the drawer to pay the money within the stipulated time,
and the cause of action for filing the complaint will arise. (1034-C-FI

2.1. In a generic and wide sense (as in Section 20 CPC) "cause of
action" means every fact which it is necessary to establish to support a
B right or obtain a judgment. However clause (b) of Section 142 gives a
restrictive meaning to the term 'cause of action'. It refers to only one fact
which will give rise to the cause of action and that is the failure to make
the payment within 15 days from the date of receipt of the notic~. A
combined reading of Sections 138 and 142 makes it clear that cause of
C action within the meaning of Section 142(c) arises - and can arise - only
once. 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 receipt of the notice by the drawer expires.
f1034-G; 1035-C-E)
D 2.2. Once a notice under dause (b) of Section 138 of the Act is
"received" by the drawer of the cheque, the payee or holder of the cheque
forfeits his right to again present the cheque as c~use of action has accrued
when there was failure to pay the amount within the prescribed period
and the period of limitation starts to run which cannot be stopped on any
account. One of the indispensable factors to form the cause of action
E envisaged in Section 138 of the 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 the 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
p cause of action could have been created at all. Thus, it is well 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. (1035-E"'.'H; 1036-AJ

Sadanandan Bhadran v. Madhavan Sunil Kumar, 11998) 6 SCC 514,
G relied on.
Dalmia Cement (Bharat) ltd v. Galaxy Traders & Agencies Ltd and
Ors., (2001 ( 6 SCC 463, referred to.

CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No. 65 l
-
H of 2oos.
PREMCHANDVIJAYKUMARv. YASHPALSINGH [PASAYAT,J.] 1031

From the Judgment and Order dated 1.12.2003 of the Punjab and A
Haryana High Court in Crl.M. No. l 0748-M of 2002.

Hiren Dasan, Chanchal Kumar Ganguli and Rajnish Gupta for the
Appellant.

Amit Singh Chhadha and Pradeep Kumar Bakshi for the Respondents. B
The Judgment of the Court was delivered by

ARIJIT PASAYAT, J. Leave granted.

Challenge in this appeal is to the legality of the judgment rendered by C
a learned Single Judge of the Punjab and Haryana High Court holding that
the proceedings initiated on the basis of a complaint alleging infraction of
Section 138 of the Negotiable Instrument Act, 1881 (in short the 'Act') was
not maintainable. Therefore, the proceedings were quashed, allowing the
petition filed under Section 482 of the Code of Criminal Procedure, 1973 (in D
short 'the Code').

Background facts filtering out unnecessary details are as under :

The complaint was filed by the appellant alleging that in the year 1995
respondent no.I had issued a cheque for a sum of Rs. 5,15,053.72 representing E
balance amount payable to the appellant for supply of goods to a partnership
firm of which respondents are partners. It was indicated that the total amount
payable was Rs. 49,21,482.72 as against which the accused persons had paid
Rs. 44,06,429/-, leaving balance of Rs. 5,15,053.72. A cheque [drawn on
Oriental Bank of Commerce, Ladwa branch (Account no.954)]was issued for F
the same amount on 27.1.1995. The cheque was signed by respondent no.I
Yashpal Singh, for the firm and respondent no.2 Nirpal Singh, was a partner
of the partnership firm, namely, M/s Sat Guru Rice Traders, New DelhL The
cheque was dishonoured due to inadequacy of funds in the account. Intimation
was given on 6.2.1995. Notice was issued by the appellant demanding payment
by lawyer's notice dated 17.2.1995. The amount was not paid. The respondents G
requested the appellant for some time to make the payment. On the request
of the respondents, the cheque was again presented on 6. 7 .1995 and it was
again dishonoured due to inadequacy of funds. Intimation in this regard was
sent to the appellant on 10.7. I 995. Again, lawyer's notice was sent on
24.7.1995. Reply was sent by the respondents on 16.8.1995 refuting the H
1032 SUPREME COURT REPORTS [2005) 3 S.C.R.

A allegations contained in the legal notice. The complaint was lodged on
28.8.1995. Charges were framed.

Respondent filed an application for discharge which was dismissed by
the trial court by order dated 29 .1.2002. The order was challenged before the
High Court which by the impugned judgment held that the requirements of
B Section 142 of the Act were not met.

In support of the appeal, learned counsel for the appellant submitted
that the High Court was not right in entertaining the petition under Section
482 of the Code. The High Court lost sight of the fact that the application
was filed by the respondents long after the charges were framed. High Court
C has erroneously placed reliance on this Court's decision in Sadanandan
Bhadran v. Madhavan Sunil Kumar, [1998] 6 SCC 514. On the contrary, the
decision in Dalmia Cement (Bharat) Ltd v. Galaxy Traders & Agencies Ltd
and Ors., [200 I] 6 SCC 463 is applicable. The period of limitation has to be
reckoned from 10.8.1995 i.e. the date on which the respondents-accused
D persons replied to the legal notice dated 24.7.1995. As the complaint was
filed on 28.8.1995 the same was well within· time. It was submitted that the
respondent-accused persons categorically stated in their reply dated l 0.8.1995
that the first notice had not been served on them.

Learned counsel for the respondent-accused persons on the other hand,
E submitted that the High Court had rightly taken the view that the requirements
of Section 142 were not met. It was pointed out that the effect of the first
notice was lost in view of the fact that the second notice was given. The High
Court has rightly applied the ratio in Sadanandan Bhadran 's case (supra). It
is not in dispute that there was issuance and receipt of the lawye( ~ notices
F on both the occasions. In fact, the acknowledgement of service of first notice
has been filed by the complainant-appellant himself and at all stages the case
proceeded on the footing that the first notice had been issued and served. The
High Court has categorically noted that the first notice had been served on
the respondent. With reference to the complaint it was submitted that the
G appellant himself accepted that the first notice had been served. Therefore, he
cannot be permitted to take the different stand that the notice was not served
and in any event the second notice did not provide the cause of action.

For resolution of the controversy Sections 13 8 and 142 of the Act are
relevant. They read as follows :
H
PREM CHAND VIJA Y KUMAR v. YASH PAL SINGH [PASA YAT, J.] 1033

"Section 138 : A'
Dishonour of cheque for insufficiency, etc. offunds 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 B
because of the amount of money 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
~at 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 one
year, or with fine which may extend to twice the amount of the
cheque, or with both :

Provided that nothing contained in this section shall apply unless -

(a) the cheque has been presented to the bank within a period of six D
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, as the case
may be, makes a demand for the payment of the said amount of
money by giving a notice in writing, to the drawer of the cheque, E
within fifteen 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 F
said notice.

Explanation - For the purposes of this section, "debt or other liability"
means a legally enforceable debt or other liability.

Section 142 : G
Cognizance of offences - Notwithstanding anything contained in the
Code of Criminal Procedure, 1973 (2 of 1974), -

(a) no court shall take cognizance of any offence punishable under
Section 138 except upon a complaint, in writing, made by the payee H
1034 SUPREME COURT REPORTS [2005)3 S.C.R.

A 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;

B (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
C Magistrate of the first class shall try any offence punishable under
Section 138."

Clause (a) of the proviso to Section 138 does not put any embargo
upon the payee to successively present a dishonoured cheque during the
period of its validity. This apart, in the course of business transactions it is
D not uncommon for a cheque being returned due to insufficient funds or
similar such reasons and being presented again by the payee after sometime,
on his own volition or at the request of the drawer, in expectation that it
would be encashed. The primary interest of the payee is to get his money and
not prosecution of the drawer, recourse to which, normally, is taken out of
compulsion and not choice. On each presentation of the cheque and its
E dishonour, a fresh right-and not a 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.
F But once he gives a notice under clause (b) of Section 138, he forfeits
such fight 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.

G In a generic and wide sense (as in Section 20 of the Civil Procedure
Code, 1908 (in short 'CPC') "cause of action" means every fact which it is
necessary to establish to support a right or obtain a judgment. Viewed in that
context, the following facts are required to be proved to successfully prosecute
the drawer for an offence under Section 138 of the Act :

H (a) that the cheque was drawn for payment of an amount of money
PREMCHANDVIJAY KUMAR v. YASHPAL SINGH [PASAYAT, J.] 1035

for discharge of a debt/liability and the cheque was dishonoured; A
(b) that the cheque was presented within the prescribed period;

(c) that the payee made a demand for payment of the money by
giving a notice in writing to the drawer within the stipulated period;
~ B
(d) that the drawer failed to make the payment within 15 days of the
receipt of the notice.

Proceeding on the basis of the generic meaning of the term "cause of action'',
certainly each of the above facts would constitute a part of the cause of
action but clause (b) of Section 142 gives it a restrictive meaning, in that, it C
refers to only one fact which will give rise to the cause of action and that is
the failure to make the payment within 15 days from the date of the receipt
of the notice. A combined reading of Sections 138 and 142 makes it clear
that cause of action is to be reckoned accordingly. The combined reading of
the above two sections of the Act leaves no room for doubt that cause of D ,
action within the meaning of Section 142(c) arises - and can arise - only
once.

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. E
As not~d in Sadanandan Bhadran 's case (supra) once a notice under
clause (b) of Section 138 of the Act is "received" by the drawer of the
cheque, the payee or holder of the cheque forfeits his right to again present
the cheque as cause of action has accrued when there was failure to pay the
amount within the prescribed period and the period of limitation starts to run F
which cannot be stopped on any account.

One of the indispensable factors to form the cause of action envisaged
in Section 138 of the 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 G
the drawer of the cheque "within fifteen days of the 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 settled that if dishonour of a cheque has once snowballed H
1036 SUPREME COURT REPORTS (2005] 3 S.C.R.

A into a cause of action it is not permissible for a payee to create another cause
of action with the same cheque.

In Sil Import, USA v. Exim Aides Silk Exporters, Bangalore, (1999] 4
SCC 567, it was held that the language used in Section 142 admits of no
doubt that the magistrate is forbidden from taking cognizance of the offence
B if the complaint was not filed within one month of the date on which the
cause of action arose. Completion of the offence is the immediate forerunner
of rising of the cause of action. In other words, cause of action would arise
soonafter sompletion of the offence and period of limitation for filing of the
application starts simultaneously running.
c It is to be noted that though a somewhat confusing statement was made
by the respondents regarding the receipt of the first lawyer's notice. Therefore,
what was kept alive was a fresh right and not cause of action. Therefore,
Sadanandan Bhadran 's case (supra) was rightly applied. The impugned
judgment does not suffer from any infirmity to warrant interference.
D
The appeal is dismissed.

D.G. Appeal dismis~d.

-,

I
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