Builders Vs. M/S. Arihant Fertilizers & Chemical & Anr  Insc 1113
(2 November 2007)
Sinha & Harjit Singh Bedi
APPEAL NO. 525 OF 2005 S.B. SINHA, J:
Failure on the part of the appellant to serve a proper notice strictly in terms
of proviso appended to Section 138 of the Negotiable Instruments Act (for short
"the Act") whether would lead to quashing of a criminal proceedings
initiated by II Additional Sessions Judge, Neemuch on a complaint made by the
appellant herein is the question involved in this appeal which arises out of a
judgment and order dated 22.11.2004 passed by the High Court of Madhya Pradesh
in Misc. Criminal Case No. 2924 of 2004.
Appellant is a partnership firm. Respondent No. 1 entered into a contract with
it for construction of a building and factory premises.
executed the said contract. It submitted bills for execution of contractual
work for a sum of Rs. 26,46,647/-. Respondent No. 1 had made payments of Rs. 17,74,238/-
and a balance of Rs. 8,72,409/- was said to be outstanding. A cheque for a sum
of Rs. 1,00,000/- drawn on Federal Bank Limited, Indore was issued by Respondent No. 1 in favour of the appellant.
presentation of the said cheque, it was not honoured on the ground that Respondent
No. 1 had closed its account with the bank. A notice dated 31.10.2000 was sent
by it to Respondent No. 1 stating:
cheque No. 693336 dated 30/4/2000 for Rs. 1,00,000/- has also been
returned unpassed by the bank authorities with the plea that A/C No. 1461 has
already been closed. Hence the undersigned is now free to take up any legal
step against you to get the amount of my pending bills.
view of the above, you are requested to remit the payment of my pending bills
within 10 days from the date of receipt of this letter otherwise suitable
action as deemed fit will be taken against you."
despite receipt of the said notice, Respondent No. 1 did not make any payment,
a complaint petition was filed on 11.12.2000. An application was filed by
Respondent No. 1 for rejection of the said complaint inter alia on the ground
that the notice issued by the appellant was not a valid one.
said application was rejected. A revision application filed thereagainst before
the District and Sessions Judge, Neemuch was also dismissed.
High Court, however, by reason of its impugned order, in exercise of its
jurisdiction under Section 482 of the Code of Criminal Procedure (Code), has
quashed the criminal proceedings pending against it holding:
days' notice having not been served upon Respondent No. 1, the same was not
valid in law.
The complainant by reason of the said notice having demanded a sum of Rs. 8,72,409/-
as against the cheque which was for a sum of Rs. 1,00,000/- only, the notice
was vague and did not serve the statutory requirements of Provisos (b) and (c)
of Section 138 of the Act.
Sushil Kumar Jain, learned counsel appearing on behalf of the appellant
submitted that the High Court committed a serious error in passing the impugned
judgment so far as it failed to consider:
Section 138 of the Act does not postulate a 15 days' notice;
Non-payment of the amount of cheque being Rs. 1,00,000/- being a part of the
demand sum of Rs. 8,72,409/-, no exception thereto could be taken.
Sanjeev Sachdeva, learned counsel appearing on behalf of Respondent No. 1, on
the other hand, supported the judgment contending that the notice in question
does not sub-serve the requirements of Section 138 of the Act.
Relevant portion of Section 138 of the Act reads as under:
Dishonour of cheque for insufficiency, etc., of funds in the account .Where any
cheque drawn by a person on an account maintained by him with a banker for
payment of any amount of money to another person from out of that account for
the discharge, in whole or in part, of any debt or other liability, is returned
by the bank unpaid, either because of the amount of money standing to the
credit of that account is insufficient to honour the cheque or that it exceeds
the amount arranged to be paid from that account by an agreement made with that
bank, such person shall be deemed to have committed an offence and shall,
without prejudice to any other provision of this Act , be punished with
imprisonment for a term which may extend to one year, or with fine which may
extend to twice the amount of the cheque, or with both:
that nothing contained in this section shall apply unless ( a ) * * * ( 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; 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 fifteen days of the receipt of the said notice."
Section 138 does not speak of a 15 days' notice. It contemplates service of
notice and payment of the amount of cheque within 15 days from the date of
receipt thereof. When the statute prescribes for service of notice specifying a
particular period, it should be expressly stated. In absence of any such
stipulation, it is difficult to hold that 15 days' notice was thereby
contemplated. The High Court, therefore, was not correct in arriving at the
have noticed hereinbefore the notice dated 31.10.2000 issued by the appellant
to Respondent No. 1. An information thereby was only given that the cheque when
presented was returned "unpassed" by the bank authorities on the plea
that the account had been closed. It was averred that in such a situation the
complainant was free to take any legal steps against the accused to get the
amount of his pending bills. By the operative portion of the said notice, the
respondent was called upon to remit the payment of his pending bills, otherwise
suitable action shall be taken.
Service of a notice, it is trite, is imperative in character for maintaining a
complaint. It creates a legal fiction. Operation of Section 138 of the Act is
limited by the proviso. When the proviso applies, the main Section would not.
Unless a notice is served in conformity with Proviso (b) appended to Section
138 of the Act, the complaint petition would not be maintainable. The
Parliament while enacting the said provision consciously imposed certain
conditions. One of the conditions was service of a notice making demand of the
payment of the amount of cheque as is evident from the use of the phraseology
"payment of the said amount of money". Such a notice has to be issued
within a period of 30 days from the date of receipt of information from the
bank in regard to the return of the cheque as unpaid.
statute envisages application of the penal provisions. A penal provision should
be construed strictly; the condition precedent wherefor is service of notice.
It is one thing to say that the demand may not only represent the unpaid amount
under cheque but also other incidental expenses like costs and interests, but
the same would not mean that the notice would be vague and capable of two
interpretations. An omnibus notice without specifying as to what was the amount
due under the dishonoured cheque would not subserve the requirement of law.
Respondent No. 1 was not called upon to pay the amount which was payable under
the cheque issued by it. The amount which it was called upon to pay was the
outstanding amounts of bills, i.e., Rs. 8,72,409/-. The noticee was to respond
to the said demand.
thereto, it was to offer the entire sum of Rs. 8,72,409/-. No demand was made
upon it to pay the said sum of Rs. 1,00,000/- which was tendered to the
complainant by cheque dated 30.04.2000. What was, therefore, demanded was the
entire sum and not a part of it.
Mr. Jain relied upon a decision of this Court in Suman Sethi v. Ajay K. Churiwal
and Another [(2000) 2 SCC 380] wherein it was stated:
It is a well-settled principle of law that the notice has to be read as a
whole. In the notice, demand has to be made for the "said amount"
i.e. the cheque amount. If no such demand is made the notice no doubt would
fall short of its legal requirement. Where in addition to the "said
amount" there is also a claim by way of interest, cost etc. whether the
notice is bad would depend on the language of the notice. If in a notice while
giving the break-up of the claim the cheque amount, interest, damages et c. are
separately specified, other such claims for interest, cost etc. would be
superfluous and these additional claims would be severable and will not
invalidate the notice. If, however, in the notice an omnibus demand is made
without specifying what was due under the dishonoured cheque, the notice might
well fail to meet the legal requirement and may be regarded as bad.
This Court had occasion to deal with Section 138 of the Act in Central Bank of India v. Saxons Farms 3 and held that the
object of the notice is to give a chance to the drawer of the cheque to rectify
his omission. Though in the notice demand for compensation, interest, cost etc.
is also made the drawer will be absolved from his liability under Section 138
if he makes the payment of the amount covered by the cheque of which he was
aware within 15 days from the date of receipt of the notice or before the
complaint is filed."
is ours for emphasis] As therein, some other sums were indicated in addition to
the amount of cheque, it was, therefore, not held to be a case where the
dispute might be existing in respect of the entire outstanding amount.
this aspect of the matter, we may consider K.R. Indira v. Dr. G. Adinarayana
[(2003) 8 SCC 300] wherein this Court upon noticing Suman Sethi (supra) stated
the law, thus:
according to the respondent, the notice in question is not separable in that
way and that there was no specific demand made for payment of the amount
covered by the cheque. We have perused the contents of the notice.
not only the cheque amounts were different from the alleged loan amounts but
the demand was made not of the cheque amounts but only the loan amount as
though it is a demand for the loan amount and not the demand for payment of the
cheque amount, nor could it be said that it was a demand for payment of the cheque
amount and in addition thereto made further demands as well. What is necessary
is making of a demand for the amount covered by the bounced cheque which is
conspicuously absent in the notice issued in this case. The notice in question
is imperfect in this case not because it had any further or additional claims
as well but it did not specifically contain any demand for the payment of the cheque
amount, the non-compliance with such a demand only being the incriminating
circumstance which exposes the drawer for being proceeded against under Section
138 of the Act"
in the instant case, no demand was made for payment of the cheque amount, we
are of the opinion that the impugned judgment cannot be faulted.
For the reasons aforementioned, there is no merit in this appeal which is