2000 (2) TMI 822 - SC - Companies Law

Whether the notice in question issued under proviso (b) to Section 138 of the Act was valid or not? Held that - In the notice in question the said amount i.e. the cheque amount has been dearly stated. Respondent No. 1 had claimed in additional to the cheque amount, incidental charges and notice charge. These two amounts are severable. In the notice it was clearly stated that on failure to comply with the demand necessary legal steps will be taken up. If respondent No. 1 had paid the cheque amount he would have been absolved from the criminal liability under Section 138. Appeal dismissed.

Summary

Issues: Validity of notice under Section 138 of the Negotiable Instruments Act, 1881

Analysis:
The judgment revolves around the validity of a notice issued under proviso (b) to Section 138 of the Negotiable Instruments Act, 1881. The appellant issued a cheque which bounced due to insufficient funds. The respondent issued a notice demanding payment within 15 days, as required by law. The Metropolitan Magistrate initially deemed the notice invalid as the demand exceeded the cheque amount. However, the High Court overturned this decision, emphasizing that the notice was valid as it clearly demanded the cheque amount. The Supreme Court analyzed Sections 138 and 139 of the Act to interpret the requirement of the notice. It held that the demand in the notice must be strictly for the cheque amount, as penal provisions are to be construed strictly. The Court cited precedents to support this interpretation and emphasized that any additional claims in the notice should be severable from the cheque amount demand.

The Court further discussed the purpose of the notice under Section 138, highlighting that it aims to give the drawer an opportunity to rectify the situation. It clarified that failure to meet the demand within 15 days leads to criminal liability under Section 138, but payment of the cheque amount within the specified period absolves the drawer from this liability. The judgment stressed that any other claims beyond the cheque amount do not invalidate the notice and can be pursued through civil proceedings. Additionally, the Court addressed the presumption under Section 139, stating that it applies only to the "said amount" demanded in the notice.

In the specific case, the notice issued by the respondent demanded the cheque amount along with incidental and notice charges. The Court found these additional amounts to be severable from the cheque amount demand, making the notice valid. It concluded that the respondent would have been absolved from criminal liability if the cheque amount had been paid within the stipulated time. The judgment dismissed the appeal, ruling that the notice was legally sufficient, and upheld the High Court's decision setting aside the Magistrate's order.

This detailed analysis of the judgment showcases the Court's interpretation of the legal provisions governing the validity of notices under Section 138 of the Negotiable Instruments Act, emphasizing the strict construction of penal provisions and the importance of clarity in the demand made through such notices.