Cheque Dishonour By Itself Doesn't Create S.138 NI Act Offence; It Arises On Failure To Pay After 15 Days Of Demand Notice Receipt : Supreme Court

In this case, the moratorium was declared on 25.07.2018. The cheque was issued and was dishonoured prior to the declaration of moratorium. However, the demand notice was issued on 06.08.2018, after the moratorium. Hence, the Court held that the cause of action for the offence under Section 138 of the NI Act would commence after a period of 15 days calculated from 06.08.2018 and it would be 21.08.2018, but by this time moratorium had already been imposed on 25.07.2018.

"The return of the cheques dishonoured simpliciter does not create an offence under section 138 NI Act...In other words, the cause of action arises only when the amount remains unpaid even after the expiry of fifteen days from the date of receipt of the demand notice," the Court observed.

The Court noted that Clause (c) of the proviso to Section 138 of the NI Act makes it clear that cause of action arises only when demand notice is served and payment is not made pursuant to such demand notice within the stipulated fifteen-day period. Reference was also made to the decision in Jugesh Sehgal v. Shamsher Singh Gogi (2009) 14 SCC 683 which explained the ingredients of Section 138 of NI Act offence as follows:

"It is manifest that to constitute an offence under Section 138 of the Act, the following ingredients are required to be fulfilled:

(i) A person must have drawn a cheque on an account maintained by him in a bank for payment of a certain amount of money to another person from out of that account.

(ii) The cheque should have been issued for the discharge, in whole or in part, of any debt or other liability.

(iii) That cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier.

(iv) That cheque is returned by the bank unpaid, either because of the amount of money standing to the credit of the 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 the bank.

(v) The payee or the holder in due course of the cheque makes a demand for the payment of the said amount of money by giving a notice in writing to the drawer of the cheque, within 15 days of the receipt of information by him from the bank regarding the return of the cheque as unpaid.

(vi) The drawer of such cheque fails to make payment of the said amount of money to the payee or the holder in due course of the cheque within 15 days of the receipt of the said notice.

Being cumulative, it is only when all the aforementioned ingredients are satisfied that the person who had drawn the cheque can be deemed to have committed an offence under Section 138 of the Act."

Since the cause of action for S.138 NI Act offence arose after the company was subjected to a moratorium under the IBC, the Court held that the proceedings against the appellant cannot be sustained.

Accordingly, the Court allowed the appeal and quashed the cheque dishonour case against the appellant.

Case Title: VISHNOO MITTAL VERSUS M/S SHAKTI TRADING COMPANY

Citation : 2025 LiveLaw (SC) 314

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Appearance:

For Petitioner(s) Mr. Abhishek Anand, Adv. Ms. Mithu Jain, AOR Mr. Karan Kohli, Adv. Mr. Krishna Sharma, Adv. Ms. Vanshika Dhoot, Adv.

For Respondent(s) Mr. A D S Jattana, Adv. Mr. Triloki Nath Razdan, AOR Mr. Prashant Shukla, Adv. Mrs. Anushree Shukla, Adv.