SUPREME COURT OF INDIA

Rahul Builders

v.

Arihant Fertilizers & Chemical

Section 138 of the Negotiable Instruments Act, 1881 - Penalty - For dishonour of cheque for insufficiency, etc., of funds in account - Whether section 138 contemplates 15 days’ notice to drawer of cheque - Held, no - Whether an omnibus notice without specifying as to what was amount due under dishonoured cheque, would not subserve requirement of law - Held, yes - Whether where complainant, in notice under section 138, did not call upon respondent to pay amount payable under cheque, but demanded entire amount payable by respondent, notice was vague and did not serve statutory requirements of provisos (b) and (c) to section 138 and, therefore, High Court was justified in quashing criminal complaint against respondent - Held, yes

Facts

The respondent issued a cheque for Rs. 1 lakh as against outstanding bill of Rs. 8,72,409 on account of execution of contractual work by the appellant-firm. Upon presentation of the said cheque, it was not honoured on the ground that the respondent had closed its account with the concerned bank. Thereupon the appellant issued a notice requesting the respondent to remit the payment of pending bill within 10 days from the date of receipt of the notice otherwise suitable action would be taken against it. As the respondent did not make the payment, the appellant filed a complaint against the respondent under section 138. The respondent filed an application for the rejection of the said complaint inter alia on the ground that the notice issued by the appellant was not a valid one. The trial court rejected the said application of the respondent. The High Court, however, quashed the criminal proceedings against the respondent, holding that 15 days notice having not been served upon the respondent, the same was not valid, and that the complainant by reason of said notice having demanded a sum of Rs. 8,72,404 as against the cheque which was for a sum of Rs. 1,00,000, the notice was vague and did not serve statutory requirements of provisos (b) and (c) of section 138.

On appeal to the Supreme Court :

Held

Section 138 does not speak of a 15 days’ notice. It contemplates the service of notice and payment of the amount of cheque within 15 days from the date of receipt thereof. When the statute prescribes for the 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. [Para 8]

By the impugned notice issued by the appellant to the respondent, only an information was given that the cheque, when presented, was returned ‘unpassed’ by the bank authorities on the plea that the account had been closed. 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 would be taken. [Para 9]

Service of a notice, it is trite, is imperative in character for maintaining a complaint. It creates a legal fiction. Operation of section 138 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, the complaint petition would not be maintainable. The Parliament, while enacting the said provision, consciously imposed certain conditions. One of the conditions is 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. The respondent 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 amount 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 amount of Rs. 1,00,000 which was tendered to the complainant by cheque dated 30-4-2000. What was, therefore, demanded was the entire sum and not a part of it. [Para 10]

As in the instant case no demand was made for payment of cheque amount, impugned order could not be faulted. [Para 13]

Accordingly, the appeal was to be dismissed.