Judgment Date  08 Jan 2019                                                                                         Click Here To Read Digest

CRIMINAL APPEAL Nos. 26-27 OF 2019 (@ SPECIAL LEAVE PETITION (CRL.)NOS. 6789-6790 OF 2015)


1.Leave granted.

2. These appeals arise out of the judgment and orders dated
14.11.2011 in Crl.O.P.No. 20401 of 2011 and 15.12.2014 in
Crl.O.P.S.R.No. 55782 of 2014 passed by the High Court of
Judicature at Madras in and by which the High Court has quashed the
criminal complaints filed by the appellant – complainant under
Section 138 of the Negotiable Instruments Act.

3. For convenience, the facts in C.C.No. 4029/2010 (Crl.O.P. No.
20401 of 2011) are referred to. Case of the appellant-complainant
is that they had business dealings with the respondents and in the
course of business dealings, the respondents had issued three
cheques viz.
1. Cheque 316693 dated 20.07.2009 for Rs.1,44,362/-
2. Cheque 316663 dated 30.07.2009 for Rs.4,26,400/-
3. Cheque 316692 dated 10.08.2000 for Rs.4,48,656/-
The three cheques were presented for collection and the same were
dishonoured and returned with the endorsement “insufficient
funds”. The appellant-complainant had issued first notice to the
respondent(s) on 31.08.2009 demanding the repayment of the amount.
The cheques were again presented and returned with the endorsement
“insufficient funds”. The appellant had issued a statutory notice
on 25.01.2010 to the respondent(s). Since the cheque amount was not
being paid, the appellant-complainant had filed the complaint under
Section 138 of the Negotiable Instruments Act based on the second
statutory notice dated 25.01.2010.

4. The respondent(s)-accused filed petition before the High Court
under Section 482 Cr.P.C. seeking to quash the criminal complaint
filed by the appellant-complainant on the ground that the complaint
was not filed based on the first statutory notice dated 31.08.2009
and the complaint filed based on the second statutory notice dated
25.01.2010 is not maintainable. The High Court quashed the
complaint by holding that “the amount has been specifically
mentioned in the first notice and, thereafter, the complainant
himself has postponed the matter and issued the second notice on
25.01.2010 and the complaint filed on the same cause of action was
not maintainable .

5. We have heard Mr. K.K. Mani, learned counsel appearing on
behalf of the appellant as well as Mr. B. Karunakaran, learned
counsel appearing on behalf of the respondents.

6. The issue involved whether the prosecution based upon second
or successive dishonour of the cheque is permissible or not, is no
longer res integra. In Sadanandan’s case it was held that while
second and 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 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 correctness of the
decision in Sadanandan’s case was doubted and referred to the
larger bench.

7. Three-Judge Bench of this Court in 2013 ((1) SCC 177 MSR
Leathers vs. S. Palaniappan and Another held that there is nothing
in the provisions of Section 138 of the Act that forbids the
holder of the Cheque to make successive presentation of the cheque
and institute the criminal complaint based on the second or
successive dishonour of the cheque on its presentation. In
paragraphs 29 and 33 this Court held as under:
29 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 creditability 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. Reported in (2006) 3 SCC 658; C. C. Alavi Haji v. Palapetty Muhammed reported in (2007) 6 SCC 555 and Damodar S. Prabhu v. Sayed Babalal H. reported in (2010) 5 SCC 663. Having said that, we must add that one of the salutary principles of interpretation of statues 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 lonh 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 decision of this Court in New India Sugar Mills Ltd. v. CST reported in 1963(2) Suppl. SCR 459 = 1963 AIR 1207 wherein this Court observed:
“8. … It is a recognized rule of interpretation of statutes that the expressions used therein should ordinarily be understood in a sense in which they best harmonise with the object of the statue, and which effectuate the object of the legislature. If an expression is susceptible of 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”
33. 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 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 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. (underlining added)

8. In the present case as pointed out earlier that cheques were
presented twice and notices were issued on 31.08.2009 and
25.01.2010. Applying the ratio of MSR Leathers (supra) the
complaint filed based on the second statutory notice is not barred
and the High Court, in our view, ought not to have quashed the
criminal complaint and the impugned judgment is liable to be set

9. Learned counsel appearing on behalf of the respondent(s),
inter alia, raised various points including, that :- (i) the
cheques were not issued; (ii) that the amount payable is not
legally enforceable debt and (iii) the person who issued cheques
whether was in effective control of the management of the
respondent(s). All the contentions raised by the respondent are
refuted by the learned counsel for the appellant. Since the matter
is remitted back to the Trial Court, all contentions raised by the
parties are left open to be raised before the Trial Court. The
impugned judgment of the High Court is set aside and the appeals
are allowed.

10. The Complaint CC No. 4029 of 2010 before the Court of XVIII,
Metropolitan Magistrate at Saidapet, Chennai is restored to the
file of the Trial Court and the Trial Court shall proceed with the
matter in accordance with law after affording sufficient
opportunity to both the parties.

11. The respondents are at liberty to make appropriate application
before the Trial Court for dispensing with personal appearance and
the same be considered by the Trial Court in accordance with law.

……………………………………………………………J. [R. BANUMATHI]
…………………………………………………………….J. [INDIRA BANERJEE]


January 23, 2019

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