CRIMINAL APPEAL NO. 525 OF 2005
S.B. Sinha, J.
1. 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.
2. Appellant is a partnership firm.
Respondent No. 1 entered into a contract with it for construction of a
building and factory premises. Appellant 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. Upon 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:
" Your 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.
In 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."
3. As 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. The said application
was rejected. A revision application filed thereagainst before the
District and Sessions Judge, Neemuch was also dismissed.
4. The 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:
(i) 15 days' notice having not been
served upon Respondent No. 1, the same was not valid in law.
(ii) 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.
5. Mr. 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:
(i) Section 138 of the Act does not postulate a 15 days' notice;
(ii) 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
6. Mr. 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.
7. Relevant portion of Section 138
of the Act reads as under:
"138. 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:
Provided 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."
8. 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 aforementioned finding.
9. We 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.
10. 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. The 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. Pursuant
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.
11. 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:
"8. 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
9. 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
[Underlining 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.
12. On 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,
"...However, 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.
Significantly, 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 "
13. As 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.
14. For the reasons aforementioned,
there is no merit in this appeal which is dismissed accordingly.
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