Wind-Up Notice On Default Not Akin To Cheque Dishonour: Sc

The Supreme Court today held that a notice for the winding up of a company for failure to pay debt would not amount to notice for dishonour of a cheque under the Negotiable Instruments Act.

It also stated that criminal proceedings can be initiated if the cheque is dishonoured for a second time, if the complaint in the first instance was after the period of limitation.

A division bench consisting of Justice K T Thomas and Justice R S Sethi stated so while dismissing the appeal of Uniplas India Ltd, its managing director and vice-president.

The company had issued two cheques to another which were dishonoured by the Oriental Bank of Commerce. The payee then issued notice to Uniplas and a criminal complaint was filed.

Uniplas argued that the cheques were presented earlier and dishonoured, but the payee did not complain within the time fixed by the Negotiable Instruments Act.

Therefore, the payee cannot complain after presenting the cheques for the second time. It can be done only once on the same cheques, it was argued.

Further, it submitted that the notice in the first instance when the cheques were dishonoured were under winding up proceedings under the Companies Act.

There cannot be a second notice on the same cheques under the Negotiable Instruments Act.

The Supreme Court rejected both arguments and upheld the order of the Delhi high court against Uniplas.

The notice under Section 434 of the Companies Act was different from notice under Section 138 of the Negotiable Instruments Act.

Since in this case, the notice was under Section 138 and within 15 days prescribed, the complaint was well within time and proceedings can be carried on, the Supreme Court said.