2026 (1) TMI 207 - HC - Indian Laws

Delayed cheque dishonour notice u/s138(b) and late filing u/s142(b) led to complaint rejection

A complaint under s.138 NI Act was challenged as non-maintainable due to an unduly delayed statutory notice and limitation. The HC held that issuance of ... Dishonour of Cheque - Seeking the quashing of the Complaint Case under Section 138 of the Negotiable Instruments Act, 1881 - maintainability of complaint when the Legal Notice was issued nearly 7 months after the dishonor of the cheque contrary to the 30-day mandate under Section 138(b) NI Act - time limitation - Complaint was filed in Patiala House Courts which lack territorial jurisdiction - raising of presumption under Sections 118 and 139 of the NI Act in favor of the holder - existence of debt or not. Whether the Complaint has been filed in accordance with S.138 NI Act? - HELD THAT:- The Complaint merely states the cheque was presented on 30.04.2021 and returned on 03.05.2021. It is rightly stated by the petitioner that a Legal Notice issued on 30.12.2021 for dishonor of Cheque in May, 2021 makes it invalid - Without a valid statutory Notice within the prescribed 30-day of dishonor of the Cheque, the cause of action under Section 138 NI Act, did not crystallize. The Complaint is therefore, liable to be rejected as it does not meet the requirements of S.138 NI Act - considering that there was Covid -19 prevailing during the entire 2021, the delay in giving the Legal Notice is condonable, it may further be examined whether the Complaint is maintainable on other grounds. Whether the Cheque was given as Security? - HELD THAT:- There is no cogent basis disclosed by the petitioner, to assert that it was a security cheque given to secure the Loan amount. Pertinently, the precise case is that since there was no security available, out of the total loan of Rs. Rs. 5,00,000/- along with interest, only an amount of Rs. 2,60,000/-, was disbursed. As per the Petitioner, the loan amount was paid between August, 2017 till February, 2019 and there was a misunderstanding about the small balance amount of Rs. 50,000/- and also that initial Security Cheque was misplaced. If only a small amount remained to be paid at the time of issuance of Cheque on, there was no question of giving the Cheque for the entire loan amount. There is no basis to claim it was a security Cheque and not given towards existing Legal Liability - Moreover, even if it is accepted that the cheque was given as security for a loan, it crystallizes into a legally enforceable debt on a subsequent date; the cheque, even if originally a “security” one, assumes the character of a cheque issued in discharge of that debt for the purpose of Section 138. The Security Cheques are only given to be utilised if subsequently, during the business transactions, certain liabilities arise which are not fulfilled by the Petitioners - The petitioner has asserted that the entire Loan except a small amount of Rs.50,000/- remains to be paid. This contention that there is outstanding loan amount or that it stood paid, is a disputed facts to be proved by evidence, which cannot be a ground to challenge the maintainability of the Complaint itself. This contention of Petitioner is, therefore, not tenable. Whether Complaint was Filed within Limitation? - HELD THAT:- Proviso to Section 142(b) NI Act allows the court to take cognizance of a Complaint after the prescribed period, if the complainant satisfies the court that he had “sufficient cause” for not filing the Complaint within the prescribed period. A perusal of the TCR reveals that the Complainant did not file any Application for condonation of delay along with the Complaint. The Complaint erroneously claims that the limitation was extended up to “28.03.2022” and claims the Complaint is within time - It is settled law that cognizance of a time-barred Complaint, without an Application for condonation of delay and an order condoning the delay, is bad in law - The Complaint under S.138 NI Act is liable for rejection as being barred by limitation. Whether Complaint was filed in the Court having Territorial Jurisdiction? - HELD THAT:- When the cheque is delivered for collection through an account, the Complaint is to be filed before the Court where the payee or the holder in due course maintains his bank - The Complaint states the “Home Branch” of the Complainant’s Bank is situated at R.K. Puram, which falls within the New Delhi District. Therefore, this contention does not hold any merit. Thus, it is established that the Complaint has not been filed within the timeline prescribed under S.138 NI Act and is barred by limitation - petition allowed. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether the statutory demand notice under Section 138(b) of the Negotiable Instruments Act, 1881 was issued within the prescribed time so as to crystallize a valid cause of action. (ii) Whether the complaint was filed within limitation under Section 142(b) of the Negotiable Instruments Act, 1881 as extended during the COVID-19 period, and whether cognizance could be taken without an application/order for condonation of delay. (iii) Whether the court in which the complaint was instituted had territorial jurisdiction under Section 142(2)(a) of the Negotiable Instruments Act, 1881, based on the location of the payee's bank branch where the account is maintained. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i): Validity of statutory demand notice under Section 138(b) NI Act Legal framework: The Court examined the requirement under Section 138(b) that a written demand notice must be issued 'within thirty days' of receipt of information from the bank regarding dishonour. Interpretation and reasoning: The dishonour memo was dated 03.05.2021, whereas the demand notice was issued on 30.12.2021, i.e., nearly seven months later. The complaint contained no averment of any subsequent presentation of the cheque that could have renewed the cause of action. On the pleaded facts, the notice was therefore outside the statutory timeline and was treated as invalid for the dishonour in May 2021. Conclusion: In the absence of a valid notice within the prescribed period, the cause of action under Section 138 did not crystallize on the complaint's own showing; the complaint did not satisfy the statutory pre-condition. Issue (ii): Limitation for filing the complaint under Section 142(b) NI Act and effect of COVID extension; necessity of condonation Legal framework: The Court applied Section 142(b), under which a complaint must be filed within one month of the cause of action, and also considered the proviso permitting cognizance beyond time only upon the complainant showing 'sufficient cause' and the court condoning delay. The Court also applied the COVID-related extension directions referenced in the judgment, which granted 90 days from 01.03.2022 where limitation expired between 15.03.2020 and 28.02.2022. Interpretation and reasoning: On the complaint's own dates, service of notice was stated as 31.12.2021; the 15-day period expired on 15.01.2022; and cause of action arose on 16.01.2022. Ordinary limitation would have run till 15.02.2022, which fell within the pandemic-extension bracket. Applying the extension, the complaint could be filed within 90 days from 01.03.2022, i.e., by 29.05.2022. The record reflected physical filing on 24.06.2022, beyond the extended deadline. No application for condonation of delay was filed, and the summoning order took cognizance without recording satisfaction regarding delay or condoning it. Conclusion: The complaint was time-barred even after applying the extended limitation, and cognizance taken without an application/order condoning delay was held bad in law. This limitation defect was decisive and required rejection/quashing. Issue (iii): Territorial jurisdiction under Section 142(2)(a) NI Act Legal framework: The Court examined Section 142(2)(a), which fixes jurisdiction where the cheque is delivered for collection through an account at the branch of the bank where the payee/holder maintains the account. Interpretation and reasoning: Although it was argued that the cheque was presented at another branch, the complaint stated that the payee's 'Home Branch' (where the account is maintained) was located within the relevant district. On that pleaded basis, the Court held that the chosen forum satisfied Section 142(2)(a). Conclusion: The territorial jurisdiction objection was rejected; however, despite jurisdiction being found proper, the complaint and summoning order were quashed because the proceedings were barred by limitation and did not comply with the statutory timeline requirements.