J&K High Court Clarifies Legal Position Under Negotiable Instruments Act, 1881

The High Court of Jammu and Kashmir and Ladakh has ruled in the case of Fayaz Ahmad Rather Vs Tariq Ahmad Wani that the mere issuance or dishonour of a cheque does not give rise to a cause of action under Section 138 of the Negotiable Instruments Act, 1881. The offence is only complete when the drawer fails to make the payment within fifteen days of receiving a demand notice.

Key Highlights of the Judgment

Single Complaint for Multiple Dishonoured Cheques is Maintainable

• Justice Sanjay Dhar ruled that multiple dishonoured cheques can be included in a single complaint if a consolidated legal notice is issued and remains unpaid.
• The Court observed: “The issue as to whether a single complaint would be maintainable in respect of more than three cheques has been dealt with by various High Courts of this Country and it has been the consistent view of the Courts that a single complaint in respect of dishonour of more than three cheques is maintainable if a consolidated notice of demand is served upon the accused.”

Case Background: Land Deal & Dishonoured Cheques

• Tariq Ahmad Wani (Respondent) agreed with Fayaz Ahmad Rather (Petitioner) to purchase a piece of land for ₹20 lakh.
• During verification, it was discovered that the land was mortgaged with a bank, leading Wani to demand a refund.
• To repay the amount, the petitioner issued four post-dated cheques of ₹5 lakh each, which were later dishonoured due to insufficient funds.
• A single legal notice was sent demanding payment within fifteen days.
• Upon non-payment, the respondent filed a complaint before the Special Mobile Magistrate (Sub Judge), Pulwama, which took cognizance and issued process against the petitioner.

Petitioner’s Argument: Complaint Not Maintainable Under Section 219 CrPC

• Advocate M. Amin Khan, representing the petitioner, argued that:
  • The complaint was not maintainable as it combined four instances of cheque dishonour, violating Section 219 of the Criminal Procedure Code (CrPC).
  • Section 219 CrPC states that no more than three offences of the same kind committed within a year can be tried together.
  • Since each cheque dishonour was a separate offence, separate complaints should have been filed.

Respondent’s Counter-Argument: Complaint is Legally Permissible

• Advocate Syed Sajad Geelani, representing the respondent, contended that:
  • The four cheques were issued for the same transaction.
  • A consolidated legal notice was served, making a single complaint valid.
  • The cause of action arose only after the petitioner failed to pay within fifteen days of receiving the notice.

Court’s Interpretation of Section 138 NI Act

Justice Dhar reaffirmed the four essential ingredients of an offence under Section 138 of the Negotiable Instruments Act (NI Act), 1881:

1. The cheque must be issued for a legally enforceable debt or liability.
2. The cheque must be dishonoured due to insufficient funds or exceeding the arranged amount.
3. A demand notice must be served on the drawer within thirty days of dishonour.
4. The drawer must fail to make the payment within fifteen days of receiving the notice.

The Court emphasized:

“All the aforesaid four requirements have to be satisfied for constituting an offence under Section 138 of the NI Act. Thus, unless a demand notice is served by the payee upon the drawer of the cheque after receipt of information regarding dishonour of the cheque and the drawer of the cheque fails to make payment within fifteen days despite receipt of such notice of demand, the offence under Section 138 NI Act would not be complete.”

• The Court ruled that mere dishonour of a cheque is not sufficient to constitute an offence. The offence is complete only when payment is not made within fifteen days of receiving the demand notice.

Why Section 219 CrPC Does Not Apply

• The petitioner relied on the Supreme Court’s ruling in Vani Agro Enterprises v. State of Gujarat (2019) to argue that separate complaints were necessary.
• However, the High Court distinguished the case, noting that Vani Agro dealt with consolidation of multiple complaints, not the maintainability of a single complaint for multiple dishonoured cheques.
• The Court ruled that Section 219 CrPC is not applicable because:
  • The offence occurred only once, when the petitioner failed to pay within fifteen days of receiving the joint legal notice.
  • The four cheques were part of a single transaction, making a single cause of action valid.

Court’s Final Decision

• The High Court dismissed the petitioner’s challenge and held that the complaint was legally sustainable.
• It reaffirmed that a single complaint for multiple dishonoured cheques is valid, provided a consolidated demand notice is issued and remains unpaid beyond the statutory period.

This ruling clarifies the legal position on multiple dishonoured cheques under the NI Act and reaffirms that a single complaint is maintainable if a consolidated legal notice is issued.

Case Title: Fayaz Ahmad Rather Vs Tariq Ahmad Wani

Citation: (Case No.:CRM(M) No.405/2023)

Click Here to Read the original Judgment: Click Here