2025 (12) TMI 1604 - HC - Indian Laws

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 ... Maintainability of complaint - Dishonour of Cheque - joint complaint was filed in respect of two cheques issued in favour of two different companies and two demand notices were sent - Earlier the entire proceeding was quashed - HELD THAT:- In the case of Manzoor Ahmed Sofi [2022 (12) TMI 1589 - JAMMU & KASHMIR AND LADAKH HIGH COURT] a joint complaint was filed before the Magistrate alleging that by way of an agreement, the accused allotted some work in partnership and an amount was outstanding as the cost of work and the petitioner issued three cheques out of which two were for an amount of ₹6 lakhs and Rs. 5 lakhs and one cheque for an amount of ₹6 lakhs was issued in favour of the respondent no. 2, which were presented for engagement and were returned on presentation for the reason of insufficiency of funds. Joint legal notice of demand was issued and ultimately the complaint was filed. The only ground agitated was regarding maintainability as it was a joint complaint on behalf of two or more persons is not maintainable as the same is not contemplated either under the provisions of the Cr.Pc or in the N.I Act 1881. The High Court considered various judicial pronouncement and found divergent views expressed by different High courts regarding maintainability of a joint complaint and agreed with the view expressed by the co-ordinate bench of the Jammu and Kashmir and Ladakh High Court in the case of Mohammad Safi Mir versus Haji Bashir Ahmed Dar [2021 (4) TMI 1106 - JAMMU & KASHMIR HIGH COURT] while dealing with a similar question, held that a joint complaint by two or more persons is not maintainable. It is the settled law that for each distinct offence of which any person is accused, there should be a separate charge and there is no provision dealing with joinder of charges, authorising two or more complaints to file a single complaint in terms of Section 138 of N.I Act, it is only the person who is signatory to cheque and the said cheque is drawn by that person on account maintained by him and issued for discharge in whole or in part of any debt or other liabilities and said cheque is returned and paid who can be prosecuted under the provision .Therefore, this provision does not speak about joint liability. The other point raised by the petitioner regarding invoking of arbitration clause, the judgement relied upon by the learned Advocate of the Opposite Party in the case of Krishna agencies [2008 (11) TMI 746 - SUPREME COURT] where the point raised that the applicant already taken records to arbitration proceedings and therefore the dispute was obviously a civil nature and criminal complaint could not be proceeded with. It was held by the Hon’ble Supreme Court that there can be no bar to the simultaneous continuance of a criminal proceeding and civil proceeding if the two arises from separate causes of action - In this case, the dispute was regarding dishonour of cheques attracts the provisions specially mentioned in the Negotiable Instrument Act however the present petitioner never made attempt to invoke the said clause, even when the legal notice was given to M/s Terra Motors and the said company gave reply informing that the cheques were placed for encashment in the month of September, 2023 but dishonoured. Therefore, on that score also, the proceeding cannot be quashed which has been lodged under Section 138 of N.I Act. Lastly, the point regarding premature filing of the complaint it can be seen that the first notice was received on October 13, 2023, and a complaint was lodged on November 22, 2023, that is more than after one month from the date of receipt of notice - the notices were again sent through registered post, which was received by accused on November 7, 2023, and if the date of filing the complaint is counted from that date then it would be on the 15th day which may not be considered in terms of the settled law - This Court is unable to accept such contention as it is clear that the notice was received firstly on 13th of October 2023 and therefore the complaint can be said to be lodged within time. Thus, instead of quashing of the entire proceeding, it is allowed to be continued so far the cheque being no. 801263 dated 26th September 2023 of Rs. 31,50,000/- issued in favour of the Opposite Party no. 2 being the complainant no.1, Terra Motors, India Pvt Ltd by the petitioner and so far the proceeding regarding the dishonour of cheque no, 801268 dated 21st September 2023 of Rs. 1,50,000/- against opposite party No. 3, M/S Terra Financial services Private Limited is concerned, the same stand quashed with the liberty to the complainant to lodge the complaint against the said company for taking appropriate legal remedy in respect of the cheque issued in his favour. This revisional application is allowed in part. 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.