Supreme Court of India

Date of Judgement: 10.09.2013

Negotiable Instruments Act Section 138 – Complaint can be Filed Even after Second Notice

This matter was referred before the larger Bench by order dated 25th March, 2009. The question referred to the larger Bench was : “whether the action of the appellant was time-barred under Section 138(b) of the Negotiable Instruments Act or not ?”

2. The facts of the case, briefly stated, are that the respondent issued four cheques to the appellant on 14th August, 1996. The appellant presented those four cheques on 21st November, 1996 and on presentation, those cheques were returned by the Bank with an endorsement “not arranged funds for”. At the request of the respondent, the appellant did not present the said cheques since the respondent agreed to settle the dispute. However, the respondent failed to settle the dispute subsequently. In these circumstances, on 8th January, 1997, the appellant sent a notice (to the respondent) under section 138(b) of the Negotiable Instruments Act, 1881 (hereinafter referred to as ‘the Act’). The respondent duly received the said notice. Subsequent thereto, those cheques were again presented before the Bank on 21st January, 1997
by the appellant. On presentation, the said cheques were dishonoured for want of sufficient funds.
3. On 28th January, 1997 the appellant sent a notice under Section 138(b) of the Act and called upon the respondent to pay the said amount with interest within 15 days. The respondent duly received the said notice on 3rd February, 1997.
4. From the said facts, it appears that while the first notice dated 8th January, 1997 was beyond the limitation period, as required under Section 138(b) of the Act, the second notice sent by the appellant under the Act was within the limitation period from the date the Bank informed the appellant on the second occasion, i.e., on 28th January, 1997. Thereafter, the appellant filed a complaint before the Trial Court on 4th March, 1997. In the circumstances, the question arises whether the action of the appellant was time-barred under Section 138(b) of the Act or not.

5. The Division Bench since expressed their Lordships’ reservation about the correctness of the law laid down in Sadanandan Bhadran vs. Madhavan Sunil Kumar [1998 (6) SCC 514] and felt that it requires to be considered by a larger Bench and the matter was placed before the Hon’ble Chief Justice for consideration.

10. In the result, their Lordships overruled the decision in Sadanandan Bhadran’s case (supra) and held that the prosecution based on second or successive dishonour of the cheque is also permissible so long as it satisfies the requirements stipulated under the proviso to Section 138 of the Act.
11. In the light of the said decision, we set aside the order passed by the High Court and allow these appeals.

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