Re: Legal Opinion regarding period of limitation for filing Case under Negotiatable Instrument Act, 1881, A/C. Company 1.
We refer to your letter dated 29.01.2007 regarding the captioned subject.
We have perused the contents of your letter along with all other papers/documents. It appears that in order to discharge partial loan liability with the Bank 1, (the “Bank”) the Borrower issued three (3) separate cheques of Bank 2, vide cheque No. 0343650 dated 20.09.2006 for Tk. 4.00 lac, cheque No. 0343651 dated 25.09.2006 for Tk. 4.00 lac and cheque No. 0343652 dated 28.09.2006 for Tk. 5.00 lac and the said cheques were dishonoured on the following manner:
|Sl||Cheque No.||Date of Issue||Date of Dishonoured||Amount||Date of serving of Legal Notice|
|1||0343650||20.09.2006||20.09.2006, 11.01.2007, 15.01.2007||4.00 lac||Not served yet|
|4.00 lac||Not served yet|
In such circumstances, you require our legal opinion regarding the following matters:
a) Whether the period of limitation for filling suit under negotiable instrument act is calculated from the 1st date on which the cheques were dishonoured or the last date they were dishonoured.
b) As, the Bank has not initiated any legal action yet, whether there are any scope to file suit at pressent under the provisions of the negotiable Instrument Act 1881.
Our Opinion :
In order for there to be an offence under section 138 of the Negotiable Instrument Act 1881 the following conditions has to be satisfied:
a) 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;
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 30 days of the receipt of the information by him from the bank regarding the return of the cheque unpaid, and
c) 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 30 days of receipt of the said notice.
The first two cheques:
The first two cheques being cheques nos. 0343650 and 0343651dated 20.09.2006 and 25.09.2006 respectively, were presented three times within the period of six months from the date on which they were drawn. There is established case law supporting the view that the holder of the cheque is at liberty to present the cheque on more than one occasion till it is honoured/encashed within 6 months from the date of drawing. So the holder of the cheque is not obliged to issue notice making demand for the payment of the account within 30 days of the receipt of the information by him from the bank regarding the return of the cheque on the very first occasion since he may present the cheque more than once within 6 months from the date of drawing. If any cheque is presented to the Bank twice or on many more times, within six months i.e. the validity period of the cheque, computation of the period for prosecution under section 138 of the Negotiable Instrument Act should be done from which the cheque is lastly returned.
As these two cheques were lastly returned on 15.01.2007, AB Bank still has 30 days from 15.01.2007 to serve legal notices on the drawer. If the drawer fails to make payment of the due amount within 30 days of the receipt of the notice, AB Bank shall have 30 days to file a case under Section 138 of the 1881 Act.
The third cheque:
The third cheque being cheque no. 0343652 dated 28.09.2006 was presented three times within the period of six months from the date on which it drawn i.e. on 01.10.2006, 11.01.2007 and 15.01.2007. However, AB Bank has served Legal Notice dated 15.10.2006 on the Drawer, i.e. within 30 days of 1st date of dishonour of the cheque.
There is established case law supporting the view that there cannot be recurring causes of action under Section 138 and Section 141 of the 1881 Act. If the complainant has availed the provisions of section 138 (b) of the 1881 Act, i.e. served a legal notice, within 30 days of the 1st day the cheque was dishonoured he cannot avail the provisions of this section again after subsequent dishonour of the check.
So in our opinion, as legal notice have been served by AB Bank in relation to the third cheque on or about 15.10.2006, the limitation period for filing case under 138 of the NI Act passed. However, AB Bank may send another legal notice demanding payment of the cheque amount but if the drawer fails to pay the said amount and AB Bank file complain case against the drawer, the drawer may raise the defence of limitation.
If you have any further query, please do not hesitate to contact the undersigned.
For: “The Lawyers & Jurists”