Court’s Decision
The Madras High Court quashed criminal proceedings under Section 138 of the Negotiable Instruments Act, 1881 on the ground that the statutory notice issued to the accused was defective and failed to meet the mandatory requirements prescribed under the Act. The Court emphasized that a notice demanding “payment” of the cheque amount is sine qua non under the proviso to Section 138. A mere intimation that a cheque has been dishonoured is not sufficient.
The Court held:
“In the absence of a demand for payment in the notice, the notice cannot be termed as a valid statutory notice under the provisions of the Negotiable Instruments Act.”
Accordingly, the Court allowed the criminal original petition and quashed the proceedings pending before the trial court.
Facts
The petitioner, a partnership firm, faced criminal prosecution under Section 138 of the Negotiable Instruments Act, 1881. The complaint was initiated on the ground that the petitioner issued a cheque which got dishonoured due to insufficient funds. The complainant claimed that after the dishonour, a legal notice was sent to the petitioner within the statutory timeframe. The complaint was filed upon non-payment within 15 days from receipt of the notice.
The petitioner challenged the complaint on the ground that the statutory notice was not valid under Section 138 as it did not contain a proper “demand” for payment but merely stated that the cheque had been dishonoured.
Issues
- Whether the statutory notice issued by the complainant fulfilled the mandatory requirements under the proviso to Section 138 of the Negotiable Instruments Act?
- Whether proceedings under Section 138 could be sustained when the notice did not contain a specific demand for payment?
Petitioner’s Arguments
The petitioner contended that the legal notice issued by the complainant failed to demand payment of the cheque amount, which is a condition precedent for initiating prosecution under Section 138 of the Negotiable Instruments Act. It was argued that the notice merely stated that the cheque was dishonoured and did not call upon the accused to make payment within 15 days, as required by the Act.
It was further submitted that such a defect goes to the root of the complaint and cannot be cured at a later stage, and that continuation of the proceedings would amount to abuse of process of law.
Respondent’s Arguments
The respondent, i.e., the complainant, argued that the notice was sent within the stipulated time and the dishonour was duly communicated. It was contended that the accused was made aware of the dishonour and had the opportunity to settle the amount. Therefore, the essence of the requirement under the Act was met.
The complainant emphasized that the proceedings had already commenced before the trial court, and the petition under Section 482 CrPC was an attempt to delay the trial.
Analysis of the Law
The Court analysed the provisions of Section 138 and its proviso, which mandates the following for constituting an offence:
- A cheque must be presented within its validity period.
- On dishonour, a notice must be issued within 30 days.
- The notice must contain a demand for payment.
- The drawer must fail to pay within 15 days from receipt of the notice.
It was noted that while the first two conditions were met, the third—demand for payment—was missing. The Court referred to established legal principles that the statutory notice is not a mere formality but a substantive requirement that ensures fairness and provides an opportunity to the drawer to rectify the dishonour before facing criminal consequences.
Precedent Analysis
The Court relied heavily on the judgment in Suman Sethi v. Ajay K. Churiwal (2000) 2 SCC 380, where the Supreme Court held that a notice that merely informs the drawer about dishonour without demanding payment would not fulfill the requirement under Section 138.
It also cited:
- K.R. Indira v. Dr. G. Adinarayana (2003) 8 SCC 300 – Affirmed that the notice must make a specific demand for payment of the cheque amount.
- M/S. Sil Import, USA v. Exim Aides Silk Exporters (1999) 4 SCC 567 – Emphasized the sanctity of demand notice in cheque bounce cases.
These judgments were instrumental in reinforcing the position that the notice must not be vague or merely informative; it must be a formal demand for payment.
Court’s Reasoning
The Court found that the legal notice in question merely stated that the cheque was dishonoured and informed the petitioner of the consequences under the Negotiable Instruments Act. However, it lacked a specific call to action or demand to pay the amount within 15 days.
The Court held:
“Unless the drawer of the cheque is called upon specifically to pay the amount, the drawer cannot be prosecuted for the offence under Section 138.”
It also observed that the complainant could have rectified the error by issuing a proper notice but failed to do so and instead proceeded with the complaint prematurely.
Conclusion
The Court concluded that the statutory notice issued by the complainant was defective and did not comply with the mandatory conditions under the proviso to Section 138 of the Negotiable Instruments Act. As a result, the proceedings before the trial court were quashed, and the petition under Section 482 CrPC was allowed.
Implications
- Reaffirms that a valid statutory notice is a sine qua non for initiating prosecution under Section 138.
- Clarifies that a mere intimation of dishonour is insufficient without a formal demand for payment.
- Highlights the necessity of precision and compliance in cheque bounce matters to avoid dismissal of cases on technical grounds.
- Serves as a caution to complainants to draft statutory notices carefully to withstand judicial scrutiny.
Cases Referred and Their Relevance
- Suman Sethi v. Ajay K. Churiwal (2000) 2 SCC 380: Clarified that absence of a demand in the notice renders it invalid under Section 138.
- K.R. Indira v. G. Adinarayana (2003) 8 SCC 300: Confirmed that a specific demand is a prerequisite.
- Sil Import, USA v. Exim Aides (1999) 4 SCC 567: Emphasized mandatory nature of a proper notice.
FAQs
Q1. Can a cheque bounce complaint be quashed for not demanding payment in the legal notice?
Yes. As held in this judgment, a complaint under Section 138 cannot proceed unless the statutory notice contains a clear and unambiguous demand for payment.
Q2. Is informing about dishonour sufficient under the law?
No. The law requires a formal demand to be made in the notice. Simply stating that the cheque has bounced is not enough.
Q3. Can the complainant correct a defective notice later?
Not after the limitation period. A fresh notice within the time permitted by law may be issued, but the original complaint based on a defective notice is not sustainable.
