Can a dishonoured cheque be presented again in bank for payment?

Can a dishonoured cheque be presented again in bank for payment?

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Question: The cheque given to me by a person (who owes me money) was dishonoured by the bank and was returned to me. I issued notice to that person, but he requested me to present the cheque again in the bank. My concern is that if I present the cheque again in the bank, whether I would lose the chance to file a case of cheque bouncing under Section 138 of Negotiable Instruments Act in the court? Can a dishonoured cheque be presented in the bank again for payment?

Answer: Yes, you can present the cheque again in the bank for payment, even if it was dishonoured on the first occasion. However, it goes without saying that the cheque can be presented again in the bank only during the period of its validity. Normally, the period of validity of the cheque is 3 months. If the cheque is dishonoured for the second time, you can again issue a notice to the person who issued the cheque and if he fails to make the payment of the amount even after notice, you can still file a case under Section 138 of the N.I. Act within the period permitted under that section, if all other conditions mentioned in that section are satisfied.

In this regard, it may be pertinent to point out that recently in the case of MSR Leathers v. S. Palaniappan, (2013) 1 SCC 177, a three-judge bench of the Supreme Court held as under:

“What is important is that neither Section 138 nor Section 142 or any other provision contained in the Act forbids the holder or payee of the cheque from presenting the cheque for encashment on any number of occasions within a period of six months of its issue or within the period of its validity, whichever is earlier. That such presentation will be perfectly legal and justified was not disputed before us even at the Bar by the learned counsel appearing for the parties and rightly so in the light of the judicial pronouncements on that question which are all unanimous.”

The Supreme Court further held that:

“It follows that the complainant may, even when he has the immediate right to institute criminal proceedings against the drawer of the cheque, either at the request of the holder/payee of the cheque or on his own volition, refrain from instituting the proceedings based on the cause of action that has accrued to him. Such a decision to defer prosecution may be impelled by several considerations but more importantly it may be induced by an assurance which the drawer extends to the holder of the cheque that given some time the payment covered by the cheques would be arranged, in the process rendering a time-consuming and generally expensive legal recourse unnecessary. It may also be induced by a belief that a fresh presentation of the cheque may result in encashment for a variety of reasons including the vicissitudes of trade and business dealings where financial accommodation given by the parties to each other is not an unknown phenomenon. Suffice it to say that there is nothing in the provisions of the Act that forbids the holder/payee of the cheque to demand by service of a fresh notice under clause (b) of the proviso to Section 138 of the Act, the amount covered by the cheque, should there be a second or a successive dishonour of the cheque on its presentation.”

The Supreme Court further observed as under:

“…we have no hesitation in holding that a prosecution based on a second or successive default in payment of the cheque amount should not be impermissible simply because no prosecution based on the first default which was followed by a statutory notice and a failure to pay had not been launched. If the entire purpose underlying Section 138 of the Negotiable Instruments Act is to compel the drawers to honour their commitments made in the course of their business or other affairs, there is no reason why a person who has issued a cheque which is dishonoured and who fails to make payment despite statutory notice served upon him should be immune to prosecution simply because the holder of the cheque has not rushed to the court with a complaint based on such default or simply because the drawer has made the holder defer prosecution promising to make arrangements for funds or for any other similar reason. There is in our opinion 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 or successive time.”

The Supreme Court held thus that the prosecution based upon second or successive dishonour of the cheque is also permissible so long as the same satisfies the requirements stipulated in the proviso to Section 138 of the Negotiable Instruments Act. An earlier contrary decision of a two-judge bench of the Supreme Court in the case of Sadanandan Bhadran v. Madhavan Sunil Kumar, (1998) 6 SCC 514 : 1998 SCC (Cri) 1471, was overruled by the three-judge bench in the above MSR Leathers v. S. Palaniappan case.

 

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