Landmark Judgement of Supreme Court on Limitation in Cheque Bounce Case

Landmark Judgement of Supreme Court on Limitation in Cheque Bounce Case

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Limitation in Cheque Bounce Case
Limitation in Cheque Bounce Case

Introduction

A cheque is said to have “bounced” when it is submitted to the bank for payment after being received from the drawer and is turned down and returned unpaid. The person who signs the cheque to authorize payment of the specified sum to the payee is the drawer. The individual who receives the cheque and gives it to the bank to be cashed in the amount stated on it is known as the payee.

The cheque may bounce for several reasons, including an incorrect date, an inconsistency in the words and numbers indicating the payment amount, an inconsistency in the signature, or a tempered cheque. However, because these are very minor causes of cheque bounces, the drawer may issue a new cheque to correct the error and pay the payee the correct amount.

The period of limitation in filing cheque bounce cases is of utmost importance, a case can be easily approved or dismissed based on the limitation set even if there is a delay of one day. With the help of a landmark judgment the limitation period of filing a case under Section 138 of the N.I. Act, 1881 is discussed below.

Section 138 of the Negotiable Instruments Act 1881

Section 138: Dishonour of cheque for insufficiency, etc., of funds in the account:

1[Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honor the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offense and shall, without prejudice to any other provision of this Act, be punished with imprisonment for 2[a term which may be extended to two years], or with fine which may extend to twice the amount of the cheque, or with both:

Provided that nothing contained in this section shall apply unless–

(a) the 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;

(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving notice; in writing, to the drawer of the cheque, 3[within thirty days] of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and

(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.

On the bare perusal of the above-mentioned section, three main points are to be kept in mind before filing a complaint under Section 138 of the Act i.e.

  1. Validity of Cheque,
  2. Send notice within 30 days of receiving the return cheque memo, and
  3. Wait for 15 days before filing a criminal complaint.

When does the cause of action arise in a cheque bounce case?

The day on which the cause of action arises for filing a criminal complaint is mentioned under Section 142 Sub-Section (b) of the Act which states that,

Section 142:   Cognizance of offenses:

(b) such complaint is made within one month of the date on which the cause of action arises under clause (c) of the proviso to section 138:

[Provided that the cognizance of a complaint may be taken by the Court after the prescribed period if the complainant satisfies the Court that he had sufficient cause for not making a complaint within such period;]

In simple words, only after the completion of 15 days from sending the cheque bounce notice, on the 16th day, the cause of action arises i.e. within the next 30 days the criminal complaint under Section 138 of the Act is registered by the aggrieved person.

Landmark judgment of Supreme Court on Limitation in Cheque Bounce

Laxmi Chand Goyal vs Gajanand Burange on 28 November, 2018 [Criminal Appeal No 1229 of 2022 (Arising out of SLP(Crl) No 1415 of 2019)]

Brief facts of the case

  • On 7 November 2005, a notice was addressed by the respondent to the appellant alleging that the appellant had taken a cash loan of Rs 2.5 lakhs and had furnished a cheque dated 28 October 2005 towards repayment.
  • The notice alleged that the cheque was returned by the bank to the respondent due to insufficiency of funds in the account of the appellant. The notice dated 7 November 2005 was received by the appellant on 8 November 2005.
  • The respondent instituted a complaint against the appellant under Section 138 of the Act on 22 November 2005. On 1 February 2011, the trial court acquitted the appellant.
  • The order of acquittal was questioned before the Hon’ble High Court in appeal. By a judgment dated 28 November 2018, the High Court has allowed the appeal and convicted the appellant for an offence punishable under Section 138 of the Act awarding a sentence of a fine in the amount of Rs 3 lakhs.
  • Aggrieved by the order of the Hon’ble High Court the appellant approached the Hon’ble Supreme Court wherein the issue related to the limitation period of filing the complaint was raised.

It was observed by the Hon’ble Court while looking at the facts of the case that the notice was received by the appellant on 8 November 2005, and the complaint was filed before the period of fifteen days was complete. The complaint could have been filed only after 23 November 2005 but was filed on 22 November 2005. In view of the legal bar which is created by Section 142(b) of the Act, as explained in the three-Judge Bench decision of this Court, taking of cognizance by the Court was contrary to the law and the complaint was not maintainable before the expiry of the period of fifteen days from the date of its receipt by the appellant.

Judgement in Gajanand Burange vs Laxmi Chand Goyal

The following order was passed by the Hon’ble Supreme Court:

  1. The impugned judgment and order of the Single Judge of the High Court of Chhattisgarh dated 28 November 2018 was set aside; and
  2.  The respondent was given the liberty to institute a fresh complaint as the earlier complaint could not be presented within the time prescribed by Section 142(b) of the Act.

Conclusion

The bare perusal of the above-mentioned judgment clarifies the importance of the limitation period in the approval and dismissal of cases under Section 138 of the Act. The duration mentioned in Sections 138 and 142(b) of the Act should be compulsorily adhered to by the aggrieved party before taking any step for filing a cheque bounce case.

If doubts still persist, contact our Legal Experts at

https://www.aapkaconsultant.com/legal-opinion-legal-shots

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