Case: M/s. Uniplas India Ltd. and Ors Vs. State and Anr

(c) if it is proved to the satisfaction of the Court that the company is unable to pay its debts and, in determining whether a company is unable to pay its debts, the Court shall take into account the contingent and prospective liabilities of the company. (2) The demand referred to in Clause (a) of Sub-section (1) shall be deemed to have been duly given under the hand of the creditor if it is signed by any agent or legal adviser duly authorised on his behalf, or in the case of a firm, if it is signed by any such agent or legal adviser or by any member of the firm. 8. What is provided in the section is that a creditor should make a demand requiring the company to pay the amount due to the creditor. The mode of making such demand is also delineated in the section. If any such demand is made, could it be said that such demand would be useful only for the purpose of winding up of the company? Clause (b) of the proviso to Section 138 of the NI Act also contemplates the making of a demand for payment of the cheque amount as an indispensable step to snowball into a cause of action. The said proviso is extracted below for being used in this context : (b) 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 fifteen days of the receipt of information by him from the Bank regarding the return of the cheque as unpaid. 9. If any notice is issued under Section 434 of the Companies Act within 15 days of the information from the Bank regarding return of the cheque drawn by a company as unpaid, such a notice would as well be good enough under Clause (b) of the proviso to Section 138 of the NI Act. This Court has held in Sadanandan Bhadran (supra) that a complainant cannot create successive causes of action with the same cheque. If no complaint is filed on the first cause of action the payee is disentitled to create another cause of action to file a complaint for the purpose of launching a prosecution on it. Para 6 of the said decision contains the thrust of the reasoning. After referring to the four factual premises necessary to concatenate into a cause of action M.K. Mukherjee, J. has said thus : If we were to proceed on the basis of the generic meaning of the term cause of action, certainly each of the above facts would constitute a part of the cause of action but then it is significant to note that Clause (b) of Section 142 gives it a restrictive meaning, in that, it refers to only one fact which will give rise to the cause of action and that is the failure to make the payment within 15 days from the date of the receipt of the notice. The reason behind giving such a restrictive meaning is not far to seek. Consequent upon the failure of the drawer to pay the money within the period of 15 days as envisaged under Clause (c) of the proviso to Section 138, the liability of the drawer for being prosecuted for the offence he has committed arises, and the period of one month for filing the complaint under Section 142 is to be reckoned accordingly. The combined reading of the above two sections of Act leaves no room for doubt that cause of action within the meaning of Section 142(c) arises — and can arise — only once. 10. The said decision was followed by this Court in SIL Import, USA v. Exim Aides Silk Exporters, Bangalore, III (1999) CCR 15 (SC)=IV (1999) SLT 317=I (2000) BC 668 (SC)=1999 (4) SCC 567 . 11. One of the indispensable factors to form the cause of action envisaged in Section 138 of the NI Act is contained in Clause (b) of the proviso to that section. It involves the making of a demand by giving a notice in writing to the drawer of the cheque within fifteen days of receipt of information by him from the bank regarding the return of the cheque as unpaid. If no such notice is given within the said period of 15 days no cause of action could have been created at all. 12. Thus, it is well neigh settled that if dishonour of a cheque has once snowballed into a cause of action it is not permissible for a payee to create another cause of action with the same cheque. The question in this case is, did the payee issue notice within 15 days after the first dishonour of the cheque. The question can as well be put in another form. Was the notice dated 1.12.1995 within 15 days of the date of intimation from the bank regarding dishonour, or was it sent after that period of 15 days ? In fact, that is the crux of the issue involved in this case. 13. Appellants have not stated that the interval between the date of the earlier dishonour of the cheque and the notice dated 1.12.1995 did not exceed the statutory period of 15 days. To a query by us learned Counsel for the appellants candidly admitted that the notice of 1.12.1995 was issued only after the expiry of 15 days from receipt of the intimation from Bank regarding the dishonour. If so the said dishonour remained without any further escalation and need not snowball into a cause of action. Its corollary is that the payee was not prevented from presenting the cheque once again within the permitted period and to make use of such presentation and the subsequent dishonour for a cause of action to be founded for launching a complaint as in the present case. 14.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]. If any notice is issued under Section 434 of the Companies Act within 15 days of the information from the Bank regarding return of the cheque drawn by a company as unpaid, such a notice would as well be good enough under Clause (b) of the proviso to Section 138 of the NI Act. This Court has held in Sadanandan Bhadran (supra) that a complainant cannot create successive causes of action with the same cheque. If no complaint is filed on the first cause of action the payee is disentitled to create another cause of action to file a complaint for the purpose of launching a prosecution on it. Para 6 of the said decision contains the thrust of the reasoning. After referring to the four factual premises necessary to concatenate into a cause of action M.K. Mukherjee, J. has said thus :If we were to proceed on the basis of the generic meaning of the term cause of action, certainly each of the above facts would constitute a part of the cause of action but then it is significant to note that Clause (b) of Section 142 gives it a restrictive meaning, in that, it refers to only one fact which will give rise to the cause of action and that is the failure to make the payment within 15 days from the date of the receipt of the notice. The reason behind giving such a restrictive meaning is not far to seek. Consequent upon the failure of the drawer to pay the money within the period of 15 days as envisaged under Clause (c) of the proviso to Section 138, the liability of the drawer for being prosecuted for the offence he has committed arises, and the period of one month for filing the complaint under Section 142 is to be reckoned accordingly. The combined reading of the above two sections of Act leaves no room for doubt that cause of action within the meaning of Section 142(c) arises — and can arise — only once10. The said decision was followed by this Court in SIL Import, USA v. Exim Aides Silk Exporters, Bangalore, III (1999) CCR 15 (SC)=IV (1999) SLT 317=I (2000) BC 668 (SC)=1999 (4) SCC 567 11. One of the indispensable factors to form the cause of action envisaged in Section 138 of the NI Act is contained in Clause (b) of the proviso to that section. It involves the making of a demand by giving a notice in writing to the drawer of the cheque within fifteen days of receipt of information by him from the bank regarding the return of the cheque as unpaid. If no such notice is given within the said period of 15 days no cause of action could have been created at all12. Thus, it is well neigh settled that if dishonour of a cheque has once snowballed into a cause of action it is not permissible for a payee to create another cause of action with the same cheque. The question in this case is, did the payee issue notice within 15 days after the first dishonour of the cheque. The question can as well be put in another form. Was the notice dated 1.12.1995 within 15 days of the date of intimation from the bank regarding dishonour, or was it sent after that period of 15 days ? In fact, that is the crux of the issue involved in this case13. Appellants have not stated that the interval between the date of the earlier dishonour of the cheque and the notice dated 1.12.1995 did not exceed the statutory period of 15 days. To a query by us learned Counsel for the appellants candidly admitted that the notice of 1.12.1995 was issued only after the expiry of 15 days from receipt of the intimation from Bank regarding the dishonour. If so the said dishonour remained without any further escalation and need not snowball into a cause of action. Its corollary is that the payee was not prevented from presenting the cheque once again within the permitted period and to make use of such presentation and the subsequent dishonour for a cause of action to be founded for launching a complaint as in the present case.