Cheue Bounce Complaint based on Second Notice is Maintainable- Supreme Court

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January 17, 2019

In the case, the Supreme Court has reiterated the settled position of law that complaint for cheque bounce under Section 138 of Negotiable Instrument Act, 1881 based on a second statutory notice is maintainable.

Case Name: M/S. Sicagen India Ltd. v. Mahindra Vadineni & Ors.

Facts of the case- In the case, the parties had business dealings and in the course of their business, the respondents had issued three cheques to the Appellant. When the cheques were presented for collection, they were dishonored with the endorsement “insufficient funds”. Aggrieved by the same, the appellant issued first notice to the respondents demanding repayment of the amount. However, the cheques were again presented and returned with the endorsement “insufficient funds”. Thereafter, appellant issued a second statutory notice to the respondent. Since the cheque amount was not being paid, the appellant complainant filed complaint under Section 138 of the Negotiable Instruments Act based on the second statutory notice.

When the matter came before the High Court, the Court quashed the complaint on the ground that “the amount has been specifically mentioned in the first notice and, thereafter, the complainant himself has postponed the matter and issued the second notice and the complaint filed on the same cause of action was not maintainable.

Aggrieved by the High Court’s order, the Appellants approached the Supreme Court.

Bench’s Verdict

The Two-Judge Bench of the Supreme Court in view of the settled law allowed the appeal and set aside High Court’s verdict by making the following observations in the case:

The Supreme Court Bench while arriving at it’s judgment made reference to Three-Judge Bench decision in the case of MSR Leathers vs. S. Palaniappan and Another[1], wherein the Apex Court held that there is nothing in the provisions of Section 138 of the Negotiable Instruments Act, 1881 that forbids the holder of the Cheque to make successive presentation of the cheque and institute the criminal complaint based on the second or successive dishonour of the cheque on its presentation.

In view of the aforesaid precedent, the Supreme Court in the instant case has held that the complaint filed based on the second statutory notice is not barred and the High Court ought not to have quashed the criminal complaint.

The entire case can be accessed here.

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IMPORTANT JUDGMENTS ON CHEQUE BOUNCE/SECTION 138 OF NI ACT

Notice of Dishonor of Cheque: Law and Important Judgments

[1] 2013 ((1) SCC 177