2004 (9) TMI 688 - SC - Indian Laws

Timeline for filing Section 138 complaint clarified by Supreme Court

The Supreme Court upheld the maintainability of a complaint under Section 138 of the Negotiable Instruments Act, emphasizing the need to file the ... - Issues:1. Maintainability of the complaint under Section 138 of the Negotiable Instruments Act.2. Interpretation of Sections 138, 141, and 142 regarding the timeline for filing a complaint.3. Validity of the notice issued demanding payment under the cheque.4. Direction for furnishing a bank guarantee during the pendency of a civil suit.Issue 1: Maintainability of the complaint under Section 138 of the Negotiable Instruments ActThe complaint was filed under Section 138 of the Negotiable Instruments Act due to the dishonour of a cheque. The appellant argued that the complaint was not maintainable as it was filed after the expiration of the prescribed timeline following the dishonour of the cheque. The High Court dismissed the revision application challenging the maintainability of the complaint. The Supreme Court referred to a previous judgment to clarify that a fresh right accrues to the payee upon each presentation and dishonour of the cheque. The Court held that the complaint should have been filed within one month of the failure to make payment after the second notice, as per the provisions of the Act.Issue 2: Interpretation of Sections 138, 141, and 142 regarding the timeline for filing a complaintThe key contention was whether the one-month period for filing a complaint under Section 142(b) should be calculated from the first notice or the second notice demanding payment under the cheque. The Court analyzed the provisions of Sections 138, 141, and 142 in conjunction with the proviso to clarify that a cause of action arises only once, and subsequent notices do not reset the timeline for filing a complaint. The Court emphasized that the period for filing the complaint should be reckoned from the day following the expiry of the 15-day period after the second notice, as per the Act.Issue 3: Validity of the notice issued demanding payment under the chequeThe respondent argued that the first notice issued demanding payment under the cheque did not qualify as a notice under the proviso to Section 138. However, the Court disagreed, stating that the contents of the notice clearly demanded immediate payment failing which legal action would be taken. The Court held that the first notice met the requirements of a notice under the proviso to Section 138, supporting the maintainability of the complaint.Issue 4: Direction for furnishing a bank guarantee during the pendency of a civil suitDuring the proceedings, it was noted that a civil suit for recovery of amounts due had been filed by the respondent. Considering the technical grounds on which the complaint was being quashed, the Court directed the appellant to furnish a bank guarantee to secure the amount in dispute. The appellant agreed to furnish the bank guarantee, and the Court directed the same to be done within six weeks to satisfy any potential decree in the pending civil suit, without expressing any view on the suit's merits or the adjustment of the advance amount.In conclusion, the Supreme Court allowed the appeal subject to the direction for furnishing the bank guarantee, emphasizing the importance of adhering to the timelines and provisions outlined in the Negotiable Instruments Act for filing complaints related to dishonoured cheques.