SortMyLawSchool | Header Banner
SortMyLawSchool | Header Banner
  1. Home
  2. / Subject
  3. /Insurance and Banking Law

MSR Leathers v. S. Palaniappan 2012 ALL SCR 3025

MSR Leathers v. S. Palaniappan 2012 ALL SCR 3025

FACTS-

  • The respondent-accused issued four cheques to the appellant on 14th August, 1996.
  • The appellant-complainant presented the cheques on 21st November, 1996, but they were returned by the bank due to insufficient funds.
  • The respondent promised to settle the dispute, so the appellant didn't present the cheques again immediately.
  • When the dispute wasn't settled, the appellant sent a notice under Section 138(b) of the Negotiable Instruments Act, 1881, on 8th January, 1997.
  • The cheques were presented again on 21st January, 1997, and were dishonoured once more.
  • Another notice was sent to the respondent on 28th January, 1997, demanding payment within 15 days.
  • The lower court, relying on Sadanandan Bhadran v. Madhavan Sunil Kumar decided the matter in favour of respondent – accused. HC also upheld the decision of lower court.
  • In Sadanandan Bhadran’s case the court ruled that subsequent dishonour of cheque will not entitle payee/holder to give statutory notice and file a compliant on its behalf.
  • In appeal before the SC, the matter was referred to the larger bench.

ISSUE-

  • Whether the action of the appellant was time-barred under Section 138(b) of the Act due to the delay in sending the first notice and whether the new cause of action arise when same cheque is presented again and dishonoured.

RULE-

  • On Subsequent dishonour of the cheque the payee/ holder of the cheque can send a statutory notice under 30 days from the date of subsequent dishonour of cheque. Also, complaint filed on the basis of that notice will be within time period.

HELD-

  • Section 138 of the Negotiable Instruments Act outlines three conditions for dishonour of a cheque to constitute an offense.
  • These conditions are timely presentation of the cheque to the bank, issuance of a written demand for payment within 30 days of receiving notice of dishonour, and failure of the drawer to make payment within 15 days of receiving the demand notice.
  • The Act allows the payee or holder to present the cheque for encashment multiple times within six months of issuance or its validity period.
  • Prosecution under Section 138 is permissible for second or successive dishonour of the cheque as long as the conditions of the Act are met.
  • The court noted that the law laid down in a previous case, Sadanandan Bhadran v. Madhavan Sunil Kumar, needed reconsideration.
  • They emphasized that the purpose of Section 138 is to ensure that drawers honor their commitments made through cheques.
  • The court overruled the previous decision and held that prosecution based on second or successive dishonour of a cheque is permissible if it meets the conditions stipulated under the proviso to Section 138 of the Act.
  • Consequently, they set aside the order passed by the High Court and allowed the appeals.

COMMENTARIES RATIO/NOTE-

 

  • [s 138] Dishonour of cheque for insufficiency, etc., of funds in the account.—

 [s 138.12.1] Prosecution Based on Second or Successive Default in Cheque Payment

 There is no real or qualitative difference between a case where default is committed and prosecution immediately launched and another where the prosecution is deferred till the cheque presented again gets dishonoured for the second time or successive times [Bir Singh v Mukesh Kuma].