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IN SUPREME COURT OF INDIA Page 1 of 4

CASE NO.:
Appeal (crl.) 525 of 2005

PETITIONER:
M/s. Rahul Builders

RESPONDENT:
M/s. Arihant Fertilizers & Chemical & Anr

DATE OF JUDGMENT: 02/11/2007

BENCH:
S.B. Sinha & Harjit Singh Bedi

JUDGMENT:
J U D G M E N T

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:

"\005Your 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.
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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 taken.

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 .\027Where 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\027
( 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
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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 as bad.
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
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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."

[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, thus:

"...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\005"

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.