MSR Leathers Vs. S. Palaniappan and Anr.

MSR Leathers Vs. S. Palaniappan and Anr.

(2013) 10 SCC 568

Prosecution based on second or successive dishonour of cheque shall be permissible.


S. Palaniappan (Respondent) issued four cheques to MSR Leathers (Appellant) on 14th August, 1996. These cheques were presented to the bank by the Appellant on 21st November 1996 and were subsequently returned by the bank. At the request of the Respondent, the Appellant did not present the said cheques as the Respondent agreed to settle the dispute. However, the Respondent failed to settle the dispute subsequently.

The Appellant sent a notice to this effect under Section 138(b) of Negotiable Instruments Act (the “Act”) on 8th January 1997, which the respondent duly received. The cheques were again presented to the bank on 21st January 1997 and were again  dishonoured. On 28th January 1997, the Appellant sent another notice under Section 138(b) of the Act to the Respondent which was duly received on 3rd February 1997. Thereafter, the Appellant filed a complaint before the Trial Court on 4th March, 1997.

Note: It is to be noted that while the first notice dated 8th January, 1997 was beyond the limitation period, as required Under Section 138(b) of the Act, the second notice sent by the Appellant under the Act was within the limitation period from the date the Bank informed the Appellant on the second occasion, i.e., on 28th January, 1997.

Issue: Whether the action of the Appellant was time-barred Under Section 138(b) of the Negotiable Instruments Act, 1881 (NI Act).


The Court held that proviso to Section 138 of the NI Act stipulates three distinct conditions, which must be satisfied before dishonour of the cheque can constitute an offence and becomes punishable. These are-

  1. The cheque ought to have 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.
  2. The payee or the holder in due course of the cheque, as the case may be, ought to make 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.
  3. The drawer of such a cheque should have failed to make 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.

Fulfilment of those three conditions constitutes an offence Under Section 138 and it can then be said that an offence under the said section has been committed by the person issuing the cheque.

The Supreme Court further held that-

  • No court shall take cognizance of any offence punishable under Section 138 except when a complaint in writing is made by the payee or by the holder in due course and such complaint has to be made within one month from the date on which the cause of action arises under Clause (b) of the proviso to Section 138.
  • Neither Section 138 nor Section 142 of the NI Act or any other provision contained in the NI Act prevents the holder or the payee of the cheque from presenting the cheque for encashment for any number of occasions within a period of six months from the date of its issuance or within a period of its validity, whichever is earlier. The payee would not lose his right to institute such proceedings on a subsequent default that satisfies all the three requirements of Section 138.


The Supreme Court eventually held that prosecution based on second or successive dishonour of the cheque is also permissible so long as it satisfies the requirements stipulated under the proviso to Section 138 of the NI Act. The Apex Court thus set aside the order passed by the High Court and allowed the appeals.


This decision of Supreme Court in 2013, overruled a previous judgement of the Supreme Court of India in Sadanandan Bhadran vs Madhavan Sunil Kumar [1998 (6) SCC 514] in which it was held that a prosecution can be launched only at the time of first dishonour of the cheque and there cannot be more than one cause of action. The Apex Court in MSR Leathers made some of the important observations related to Section 138 of the NI Act-  

  • Allowing a fresh presentation of the cheque to the bank gives the drawer further opportunity to make the payment and avoid prosecution.
  • Just because the holder does not rush to the Court with the complaint on the first instance of dishonour and provides the drawer more time to avoid prosecution, should not make the drawer immune from any further prosecution, in case the cheque gets dishonoured again.
  • The decision in Sadanand Bhadran case did not allow the parties to avoid prosecution and resolve the matter among themselves even if they want to. 

However, the Apex Court recently in Dashrath Rupsingh Rathod  vs. State of Maharashtra [MANU/SC/0655/2014] decided on August 1, 2014, remarked that  MSR Leathers cannot, be taken as an authority for determining whether the proviso stipulates conditions precedent for launching a prosecution or ingredients of the offence punishable under Section 138 of the Act. The Court in Dashrath Rupsingh Case clearly observed that though Sadanandan Bhadran may have been overruled to the extent it held that successive causes of action cannot be made a basis for prosecution, but the distinction between the ingredient of the offence, on the one hand, and conditions precedent for launching prosecution, on the other, drawn in the said judgment  cannot be faulted.

Author(s):  Akshay Goel (HNLU, Raipur) & Vivek Verma (NUJS, Kolkata)

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