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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.