Second Notice After Issuing Fresh Cheque Does Not Bar A Cheque Bounce/ Dishonour Complaint

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Case Name: M/s Sicagen India Ltd. v. Mahindra Vadineni

Supreme Court of India ruled that a second notice under section 138 of Negotiable Instrument Act, 1881 after new cheques are presented does not make the complaint un-maintainable.

Facts of the Case and Issue

Respondents in the present case wrote three cheques which were returned with the message “insufficient funds”. Appellant issued a notice to the respondent demanding the sum due. Respondent complying with the notice re-issued the cheques but they were also dis-honored, another notice was issued by the Appellant. On not receiving the payment Appellant filed a section 138 complaint in the District Court of Madras. Respondent filed a section 482 petition for quashing of a criminal complaint before the Madras High Court on the ground that the complaint was filed on the second notice and hence not maintainable. Madras High Court ruled in favor of Respondent saying that complaint filed on second notice and with the same cause of action is not maintainable and quashed the proceedings. Upset by this verdict, Appellant appealed in the Supreme Court of India.

The main Issue before the division bench of Supreme Court was whether the prosecution based upon second or successive dishonor of the cheque is permissible or not?

Judgment

Division Bench of Justice R. Bhanumati and Justice Indira Banerjee relying on Three-judge Bench decision of the Supreme Court of India in MSR Leathers v. S.Palaniappan and Another decided the case in favor of the Appellant. They cited the relevant part of the MSR Leathers judgment which said that :

“ there is nothing in the provision of section 138 of the Act that forbids the holder of the Cheque to make a second or successive presentation of the cheque and institute the criminal complaint based on the second or successive dishonor of the cheque on its presentation.”

Moreover, Judge also added that High Court’s verdict is liable to be set aside and resting on the reasoning in MSR Leathers it can be concluded without a doubt that complaint filed on the basis of second statutory notice is not barred.

Counsel for respondent raised various arguments such as i) the cheques were not issued ii) amount payable is not legally enforceable debt but the bench refused to entertain them, restored the complaint and sent the matter back to the District Court, saying parties are free to raise relevant contentions at the Trial before the District Court.

Learnings of the Case

From this case, we learn that a cheque bounce complaint based on second notice is valid only if the fresh cheques presented were also dis-honored.

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