S.138 NI Act | Court Can Take Cognizance Of Complaint Based On Notice Pursuant To 'Re-Presentation' Of Cheque: Orissa High Court

A Single Judge Bench of Justice Radha Krishna Pattanaik observed,

"...if the entire purpose underlined Section 138 of the N.I. Act is to compel the drawers to honour their commitments made in course of business or other transactions, there is no reason why a person who has issued a cheque which is dishonoured and who failed to make payment despite statutory notice served upon him should be immune to prosecution simply because the holder of the cheque had not rushed to the court with a complaint based on such default or for the reason that the drawer has made the holder defer prosecution promising to make arrangements for funds or on account of any other similar situation."

Brief facts:

The petitioner is the accused in a complaint case pending before the court below for an offence punishable under Section 138 of the Act, which has been filed by O.P. No. 1 alleging that the petitioner had taken a hand loan of Rs. 40,000/- to meet his personal needs. When it could not be paid back, on 15^th May, 2010, some henchmen of O.P. No. 1 forcibly entered inside his residence and managed to obtain a cheque for an amount of Rs. 40,000/- and thereafter, presented it before the bank for encashment. However, it could not be honoured for insufficient funds in the account and again after five months, it was again submitted and yet dishonoured with a similar endorsement dated 18th October, 2010.

The petitioner has approached the Court by invoking jurisdiction under Section 482 Cr.P.C. assailing legality of the order of cognizance dated 2nd February 2011 passed by S.D.J.M., Khurda on the grounds inter alia that it is not sustainable in law and therefore, liable to be quashed.

Question of Law:

Whether on the basis of a statutory notice issued by O.P. No. 1 subsequent to dishonour of cheque about five months before, the court below could have entertained the complaint and taken cognizance of offence under Section 138 of the N.I. Act as against the petitioner?

Contentions:

Mr. A. Pattanaik, counsel for the petitioner, contended that for dishonour of cheque due to insufficiency of funds in the account, the court below could not have taken cognizance of the offence under Section 138, especially when it was presented for encashment once again after about five months. He argued that the same is not permitted under law. He disputed the maintainability of the complaint for a cause of action dated 18th October, 2010 when the cheque was dishonoured for insufficient funds on an earlier occasion as well.

Mr. D.R. Parida, Additional Standing Counsel for the respondent, submitted that there is no wrong or illegality in the impugned order under because the O.P. No. 1 could have presented cheques for more than once and in that regard, no prohibition lies.

Decision of the Court:

The Court made a reference to M/s. Sicagen India Ltd. v. Mahindra Vadideni & Ors., wherein the Apex Court held that even a second statutory notice after re-presentation of cheque is maintainable in law. The issue before the Supreme Court was whether a criminal complaint based on a subsequent or successive statutory notice filed under Section 138 is maintainable.

The Supreme Court observed that such an issue is no longer res integra and referred to one of its earlier judgments in Sadanandan Bhadran v. Madhavan Sunil Kumar, where it was held that second and successive presentation of a cheque is legally permissible as long as it is within six months or validity of the cheque, whichever is earlier. The correctness of Sadanandan Bhadran (supra) was doubted and referred by the Supreme Court to a larger Bench and accordingly, in Leathers v. S. Palaniappan & Anr., (2013) 1 SCC 177, it was reiterated that no prohibition exists against subsequent presentation of cheque and institution of a criminal complaint based on the dishonour of the same.

In Leathers case, the Supreme Court noted 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. It was further held therein that no real or qualitative difference exists 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.

Accordingly, the Court found that O.P. No. 1 did not send any statutory notice after the cheque was dishonoured in the month of May, 2010 but once again presented it within the validity period of the cheque. Thereafter, it issued the statutory notice as required under law and under such circumstances, it cannot be said that the complaint is invalid. With the above conclusion, the Court held that the contention of the petitioner vis-à-vis maintainability of the complaint on the ground raised is misconceived and therefore, cannot be sustained.

Case Title: Sri Gadadhar Barik v. Sri Pradeep Kumar Jena & Anr.

Case No: CRLMC No. 1157 of 2011

Judgment Dated: 07 April 2022

Coram: Justice Radha Krishna Pattanaik

Counsel for the Petitioner: Mr. A. Pattanaik, Advocate

Counsel for the Respondents: Mr. D.R. Parida, Additional Standing Counsel

Citation: 2022 LiveLaw (Ori) 39