Joint s.138 cheque-bounce complaint for two payees: split required; one payee's case quashed, other continues despite arbitration clause

A joint complaint under s.138 NI Act covering dishonour of two cheques issued in favour of two distinct payees was held impermissible, since each dishonour constitutes a separate offence and neither the NI Act nor CrPC provides for joinder enabling multiple complainants to prosecute within a single complaint; consequently, proceedings relating to the cheque issued to the second payee were quashed with liberty to file an independent complaint. Invocation of an arbitration clause was held not to bar prosecution because civil and criminal proceedings may run concurrently on separate causes of action and the accused had not pursued arbitration; therefore, the s.138 proceeding for the cheque issued to the remaining complainant was allowed to continue. The complaint was also held not premature as it was filed after expiry of the statutory period from first receipt of demand notice.

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ISSUES PRESENTED AND CONSIDERED

1. Whether a single complaint under Sections 138 and 142 of the Negotiable Instruments Act, 1881, jointly filed by two distinct payees/complainants in respect of dishonour of two different cheques issued in favour of each of them, is maintainable; and if not, whether the entire proceeding must be quashed or can be allowed to continue in respect of one cheque/payee.

2. Whether the existence of an arbitration clause in the underlying commercial arrangement requires quashing of the Section 138 proceeding relating to dishonour of cheques.

3. Whether the complaint was liable to be quashed as "premature" for alleged non-compliance with the 15-day period after service of statutory demand notice, in view of multiple notices and different dates of receipt.

ISSUE-WISE DETAILED ANALYSIS

1. Maintainability of a joint complaint by two payees for two cheques and the proper relief

Legal framework: The Court examined the scheme of Section 138 of the Negotiable Instruments Act, 1881 as applied in the judgment, emphasising that the offence is cheque-specific and relates to dishonour of a cheque drawn for discharge of debt or liability, followed by statutory notice and failure to pay within the stipulated period. The Court also proceeded on the basis that there is no provision authorising a "joint complaint" by multiple complainants for distinct cheques issued in favour of different entities and that Section 138 does not contemplate joint liability of complainants/payees for the purpose of maintaining one consolidated complaint.

Interpretation and reasoning: The Court found, on admitted facts, that two separate cheques were issued on different dates in favour of two different companies and that separate statutory notices were also issued/served on different dates. On those facts, the Court held the maintainability objection to be well-founded: the usual and legally appropriate course would be to lodge two separate complaints for the two separate dishonours. However, the Court declined to quash the entire proceeding merely because of this "procedural irregularity", holding that the foundation of the complaint was affected only to the extent it improperly combined distinct causes pertaining to two different payees/cheques. The Court adopted the course of permitting continuation as to one cheque/payee while quashing as to the other, with liberty to pursue appropriate remedy separately.

Conclusions: The joint complaint was held not maintainable in its combined form. The proceeding was permitted to continue only in respect of the cheque issued in favour of one complainant, while the portion relating to the cheque issued in favour of the other complainant was quashed with liberty to institute appropriate proceedings separately for that cheque.

2. Effect of arbitration clause on continuation of Section 138 prosecution

Legal framework: The Court considered the contention that disputes under the agreement should be referred to arbitration, and applied the principle (as relied upon in the judgment) that criminal proceedings and civil proceedings can continue simultaneously when arising from separate causes of action.

Interpretation and reasoning: The Court treated dishonour of cheques as attracting the special statutory offence under the Negotiable Instruments Act, distinct from contractual disputes referable to arbitration. The Court also noted that the accused had not attempted to invoke the arbitration clause even upon exchange of legal notices, and held that the arbitration clause did not negate or bar prosecution for cheque dishonour.

Conclusions: The proceeding under Section 138 was not quashed on the ground of an arbitration clause; arbitration was held not to bar continuation of the cheque dishonour prosecution.

3. Alleged premature filing vis-à-vis the 15-day period after service of notice

Legal framework: The Court examined the statutory requirement that the drawer must be given 15 days from receipt of demand notice to make payment, failing which the cause of action to file complaint arises.

Interpretation and reasoning: The Court found that the demand notice was first received on 13 October 2023 and the complaint was filed on 22 November 2023, i.e., well beyond 15 days from first service. Although another notice sent through registered post was received later (7 November 2023), the Court rejected the argument that limitation/maintainability should be tested only from that later date. The Court concluded that, since initial service was on 13 October 2023, the complaint could not be treated as premature.

Conclusions: The complaint was held not to be premature; the maintainability challenge on the 15-day requirement was rejected.

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