The British Month and the NI Act

A person is deemed to have committed an offence, within the meaning of Section 138 of the Negotiable Instruments Act, 1881 (the “Act”), when any cheque drawn by him, on an account maintained by him with a banker, for payment of any amount of money to another person, in whole or partial discharge of a legally enforceable debt or other liability, is returned by the bank unpaid for insufficiency of funds etc. However, nothing in Section 138 applies unless:

  1. the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier [Section 138(a)],
  2. the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid [Section 138(b)], and
  3. the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice [Section 138(c)].

The third condition is of special importance to us, in the context of what we are about to discuss, and in light of the mandate of Section 142(b) of the Act which states, in essence, that: notwithstanding anything contained in the Code of Criminal Procedure, 1973 no Court shall take cognizance of any offence punishable under section 138 except upon a complaint made, by the payee or the holder in due course of the cheque, within one month of the date on which the cause-of-action arises under clause (c) of the proviso to section 138; provided that the cognizance of a complaint may be taken by the Court after the prescribed period, if the complainant satisfies the Court that he had sufficient cause for not making a complaint within such period.

In ECON Antri Ltd. v. Rom Industries Ltd. and Anr., 2013 (10) SCALE 555 (“ECON“) a Full Bench of the Honb’le Supreme Court of India was called upon to decide, in effect, whether the calculation of the aforesaid one month must be reckoned by excluding the date on which the cause of action arises.

Previously, in Saketh India Ltd. and Ors. v. India Securities Ltd., (1999) 3 SCC 1 (“Saketh”) and in SIL Import, USA v. Exim Aides Silk Exporters, (1999) 4 SCC 567 (“SIL Import”), a Division Bench comprised of Hon’ble Justices K.T. Thomas and M.B. Shah (who were in common in both the matters), had adopted different approaches in answering the question. This, a tad unnecessarily, caused the reference to a Full Bench.

To elaborate a little further – in Saketh, the cause of action arose, within the meaning of Section 138(c), on 15.10.1995. The complaint was filed on 15.11.1995. If the cause-of-action day was to be included – the complaint, it could be said, was filed on the 32nd day since 15.10.1995, i.e., a day late. However, if the cause-of-action day was to be excluded – the complaint, it could be said, was filed on the 31st day since 15.10.1995, i.e., within one month of the accrual of the cause of action [Do Note: Section 142(b) does not say ‘30 days’ but ‘one month’ and October has an extra day]. The SC, in Saketh, decided in favour of the latter interpretation.

In SIL Import, the cause of action arose, within the meaning of Section 138(c), on 26.6.1996. The complaint was filed on 8.8.1996. The Division Bench, this time, did hold that the last day when the complaint could have been filed was 26.7.1996 – which one has to assume, even in the absence of any deliberation in the judgment, was based on the interpretation that the cause-of-action day was to be excluded. For, the number of days between 26.6.1996 and 26.7.1996 including the date 26.6.1996 is 31 days – which cannot be considered a month – even though the 31 days between 15.10.1995 and 15.11.1995 was considered a month in Saketh – because June, as opposed to October, does not have an extra day. However, the number of days between 26.6.1996 and 26.7.1996 excluding the date 26.6.1996 is an exact ‘one month’ as is prescribed in Section 142(b). We cannot ignore or eschew the word ‘British calendar’ while construing a “month” under the Act [See, Ambalal Joshi v. The State of Gujarat, 2014 (2) SCALE 515].

Nevertheless, in ECON the Full Bench held that “undoubtedly the view taken in SIL Import runs counter to the view taken in Saketh”. But there was little characterization of what really, “undoubtedly”, the divergence of opinion was. Though it is true, as has been aptly put by Hon’ble Justice Ranjana Prakash Desai, that the reasoning of the Court in SIL Import had little reference to some important decisions.

The alleged divergence aside – after ECON, it is now beyond doubt that Saketh has laid down the correct proposition of law (or a more reasoned proposition of law) – especially in regard to the principal it relied upon, referencing Haru Das Gupta (1972) 1 SCC 639 and Section 9 of the General Clauses Act, 1897: “as a general rule the effect of defining a period from such a day until such a day within which an act is to be done is to exclude the first day and to include the last day”.

What effect does all of this have on litigation concerning cheque-bouncing matters – one may ask. First and foremost, for the purpose of calculating the period of one month, which is prescribed under Section 142(b) of the Act, the period has to be reckoned by excluding the date on which the cause of action arose; Secondly, this is only important to the extent however, that a party, who does not file the complaint within one month, does not wish to take a risk of satisfying the Court, later, that there was a sufficient cause behind not doing so; Finally, it is better for a party, who does not file the complaint within one month, to perhaps present the cheque again and in the manner and within the time stipulated under the proviso to Section 138 followed by a notice within the meaning of clause( b) of the proviso to Section 138 – for every time the drawer fails to make the payment of the amount within the stipulated period of fifteen days, after the date of receipt of such notice, a fresh cause of action would accrue to the payee (or the holder of the cheque) to institute proceedings for prosecution of the drawer [as has been held in MSR Leathers, (2013) 1 SCC 177 and has been described by me previously]. A fresh cause of action would mean a fresh calculation of the ‘one month’ described in Section 142(b).

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