by Cheque Bounce Case under Section 138 of the Negotiable Instruments Act, 1881: Dismissal Due to Invalid Notice
In India, cheque bounce cases are governed by Section 138 of the Negotiable Instruments Act, 1881. This section imposes criminal liability on the issuer of a cheque that is dishonored by the bank due to insufficient funds or if it exceeds the amount arranged to be paid from that account. A key procedural requirement in such cases is the issuance of a valid legal notice to the drawer of the cheque. Failure to adhere to this requirement can result in the dismissal of the complaint. This blog discusses the implications of an invalid notice, particularly when the notice includes amounts beyond the cheque value, such as interest and compensation, and references the recent Supreme Court judgment in Upasna Mishra vs. Trek Technology India Pvt. Ltd., SLP (Cr) No. 9062/2023.
Legal Framework under Section 138 of the NI Act, 1881
Section 138 mandates that the payee or holder in due course of a dishonored cheque must issue a legal notice to the drawer, demanding the payment of the cheque amount within 30 days of receiving information about the dishonor from the bank. The drawer then has 15 days from the receipt of the notice to make the payment. If the payment is not made within this period, the payee or holder in due course can initiate legal proceedings under Section 138.
Importance of Valid Legal Notice
The validity of the legal notice is crucial in a cheque bounce case. According to the law, the notice must explicitly demand the amount mentioned in the cheque. If the notice demands an amount that includes interest, compensation, or any other charges beyond the cheque amount, it may be considered invalid. This can lead to the dismissal of the complaint on the grounds that the statutory requirement has not been met.
Case Analysis: Upasna Mishra vs. Trek Technology India Pvt. Ltd.
In the landmark judgment of Upasna Mishra vs. Trek Technology India Pvt. Ltd., SLP (Cr) No. 9062/2023, the Supreme Court of India dealt with the issue of an invalid notice under Section 138. The notice in question demanded payment of the cheque amount along with interest and compensation. The Supreme Court held that:
Specificity of the Demand: The legal notice under Section 138 must specifically mention the cheque amount. Any additional demands for interest, compensation, or other charges render the notice invalid.
Statutory Compliance: The court emphasized strict compliance with the statutory requirements under Section 138. Deviations from the prescribed format, especially in the demand notice, undermine the legal process and can lead to the dismissal of the case.
Judicial Precedents: The court referred to previous judgments that underscored the necessity of a clear and specific demand for the cheque amount. Any ambiguity or inclusion of additional amounts violates the legislative intent and the procedural requirements.
Implications of the Judgment
The judgment in Upasna Mishra vs. Trek Technology India Pvt. Ltd. has significant implications for parties involved in cheque bounce cases:
Payees and Holders in Due Course: They must ensure that the legal notice strictly adheres to the statutory requirements, demanding only the cheque amount. Any additional demands must be excluded to avoid dismissal of the complaint.
Drawers of Cheques: They can challenge the validity of the notice if it includes amounts beyond the cheque value. This can be a strong defense leading to the dismissal of the case.
Legal Practitioners: Lawyers drafting notices for cheque bounce cases must exercise caution and precision, ensuring that the notice complies with the requirements laid down by the Supreme Court and the NI Act.
Conclusion
The Supreme Court’s judgment in Upasna Mishra vs. Trek Technology India Pvt. Ltd. reinforces the importance of a valid legal notice under Section 138 of the NI Act, 1881. It highlights the necessity of demanding only the cheque amount in the notice and adhering to the statutory requirements. This judgment serves as a crucial reminder for payees, drawers, and legal practitioners to meticulously follow the procedural mandates to ensure the efficacy and validity of cheque bounce complaints.
By understanding and adhering to these legal requirements, parties can effectively navigate the complexities of cheque bounce cases and safeguard their rights under the law.
UPASANA MISHRA Vs. TREK TECHNOLOGY INDIA PVT. LTD
Supreme Court Of India
Head Note
A notice of demand made under the N.I. Act demand shall not be omnibus, there must be a clear demand for the cheque amount lest notice will be invalid.
Criminal Appeal No……. of 2023
Special Leave Petition (Crl.) No.9062/2023
UPASANA MISHRA Appellant
VERSUS
TREK TECHNOLOGY INDIA PVT. LTD. Respondent
O R D E R
1. Leave granted.
2. The appellant assails the final order dated 13.04.2023 passed by the High Court of Delhi at New Delhi in CRMC No.2528/2023. As per the impugned order, the prayer of the petitioner for quashing
the summoning order dated 19.01.2016 passed by the learned Metropolitan Magistrate, NI Act 02, South East, Saket Courts, New Delhi in CC No.631164/2016 was dismissed.
3. Heard learned counsel appearing for the appellant as also the learned counsel appearing for the respondent.
4. Paradoxically, learned counsel on both sides relies on the decision of this Court in “Suman Sethi Vs. Ajay K. Churiwal & Another [(2002) 2 SCC 380)]”. While the appellant contends that in terms of the dictum laid in the said decision, Annexure P-2 notice dated 02.12.2013 is invalid for non-adherence with the mandatory legal requirement under the provisions of the Negotiable Instruments Act, 1881 (for short, ‘N.I. Act’), the learned counsel for the respondent would submit that in terms of the dictum laid down in the said decision, it is perfectly legal and valid. In view of the rival contentions, we have carefully gone through Annexure P-2 notice bearing in mind the dictum laid down by this Court in the case of Suman Sethi (supra).
5. The relevant paragraph of the decision in Suman Sethi’s case (supra) is extracted for a proper disposal of this case:
“8. It is 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. cheque amount. If no such demand is made the notice no doubt would fall short of its legal requirement. Where in addition to “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 etc. are separately specified, other such claims for interest, cost etc. would be superfluous and these additional claims would he severable- and will not invalidate the notice. If, however, in the notice an omnibus demand is made without
specifying what was due under the dishonored cheque, notice might well fail to meet the legal requirement and may be regarded as bad.
9. This Court had occasion to deal with Section 138 of the Act in Central Bank of India & Anr. v. M/s. Saxons Farms & Ors., JT (1999) 8 SC 58 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 drawer will be absolved from his liability under Section 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 complaint is filed.
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.”
(Emphasis added)
6. A bare perusal of the decision referred (supra) would reveal that a demand in addition to the cheque amount in a demand notice by itself would not make it invalid. In other words, as held therein, in the demand notice, demand has to be made for the ‘cheque amount’ and therefore, notice sans such demand would fall short of legal requirement. At the same time, we will reiterate
the position that if in a notice while giving the break up of the claim the cheque amount interest, damages, etc. are separately specified and these additional claims would be severable, such demand would not invalidate the notice. In short, in a notice of demand made under the N.I. Act demand shall not be omnibus, there must be a clear demand for the cheque amount lest notice will be invalid. This law laid down as above has to be applied to decide the validity or otherwise of Annexure P-2-demand notice.
7. The last paragraph in Annexure-P2 notice carries the demand and we will refer to the demand made thereunder. It read, thus:
“9. ……………………………………….. …………………………………………………
I, therefore through this legal notice call upon you to make the party of the doubt amount of the cheque i.e. Rs.6,50,000/- (Rs. Six Lakh Fifty Thousand Only) with interest @12% per annum since 12.11.2013 and further pay the damaged at Rs.50,000/- (Rs. Fifty Thousand Only) per month within stipulated period from the receipt of this notice failing which I have clear instructions from my aforesaid clients to take legal action against you in the competent courts, holding you responsible for entire cost and consequences with litigation charges of Rs.5,500/- (Rs. Five Thousand Five Hundred Only) as charges of this notice.
Copy of this kept for further reference.”
(Emphasis added)
8. A scanning of Annexure-P2 notice would reveal that an omnibus demand for Rs.6,50,000/- was made in addition to the demand for interest @12 per annum since 12.11.2013, the date of returning of the cheque, Rs.50,000/- towards damages and Rs.5,500/- as notice charge. The demand is omnibus as relates the amount of Rs.6,50,000/- as admittedly, it is not the cheque amount and in addition under Annexure P-2-notice, interest @12% per annum from 12.11.2013, damages at Rs.50,000/- per month and Rs.5,500/- as notice charge were also demanded. Such circumstances discernible from the demand notice on application of the law laid by this Court in the case of Suman Sethi (supra), would make Annexure-P2 notice of demand invalid. Hence, we are of the view that the impugned order invites interference. In that view of the matter, the Appeal
stands allowed. Consequently, the impugned order dated 13.04.2023 passed by the High Court of Delhi at New Delhi in CRMC No.2528/2023 stands set aside and as a necessary sequel, the summoning order dated 19.01.2016 passed by the learned Metropolitan Magistrate, NI Act 02, South East, Saket Courts, New Delhi shall also stand quashed.
9. Pending application(s), if any, shall stand disposed of.
…………………J.
(C.T. RAVIKUMAR)
…………………J.
(SANJAY KUMAR)
NEW DELHI;
DECEMBER 12, 2023.
