S.138 NI Act | Cause Of Action U/S 142(1)(B) Only Arises After Expiry Of 15 Days For Payment Of Amount: Allahabad High Court

The Allahabad High Court has held that the cause of action under Section 142(1)(b) of the Negotiable Instruments Act, 1881 arises after expiry of 15 days granted to the drawer to pay the amount to the payee/cheque holder under clause (c) of Section 138 of the Act.

Section 142(1) of the NI Act provides that a complaint must be made within 1 month of the date from which the cause of action arises under clause (c) of Section 138. Clause (c) of Section 138 provides that action under Section 138 may be initiated if the drawer of the cheque fails to pay the amount due to the payee/ holder of the cheque within 15 days from the date of notice. Further, Section 142(1)(b) provides that if sufficient cause is shown, delay in filing the complaint may be condoned by the Court.

Petitioner's cheque dated 18.09.2019 was presented by the respondent to the bank. The same was returned on grounds of "Amount Insufficient" on 17.12.2019. On 04.01.2020 respondent issued a notice to the petitioner regarding return of the cheque which was received by the petitioner on 08.01.2020.

Counsel for petitioner argued that the limitation for filing complaint would start from 08.01.2020 i.e. when the legal notice was received by the petitioner. Accordingly, the complaint filed by the respondent was liable to be rejected.

The Court observed that Section 142 begins with a non-obstante clause where a Court cannot take cognizance unless a written complaint is made before it within 1 month of the date from which the cause of action arises under clause (c) of Section 138.

The Court observed that in MSR Leathers v. S. Palaniappan And Another, the Supreme Court had held that all three conditions specified under Section 138 must be satisfied to institute proceedings under the Negotiable Instruments Act.

The Court held that since the notice was received by the petitioner on 08.01.2020, the petitioner had 15 days from that date to make payment and the cause of action for filing the complaint under Section 142 arose upon expiry of the period of 15 days.

“The complaint having been filed on 20.02.2020, was within the prescribed period of one month as per clause (b) of sub­Section (1) of Section 138, from the date on which the cause of action arose on 23.01.2020, and accordingly the court concerned would be within its right to take cognizance of the offence, as provided under Section 142,” held Justice Dr. Yogendra Kumar Srivastava.

Accordingly, while dismissing the petition under Article 227 of the Constitution of India, the Court upheld the summoning order challenged by the petitioner.

Case Title: Sudesh Kumar vs. State of UP and another 2024 LiveLaw (AB) 149 [MATTERS UNDER ARTICLE 227 No. ­ 7895 of 2023]

Case Citation: 2024 LiveLaw (AB) 149

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