2003 (10) TMI 385 - SC - Companies Law

Whether the notice in question purportedly issued under clause (b) of proviso to section 138 of the Act and valid or not? Held that - Appeal dismissed. 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 expose the drawer for being proceeded against under section 138 of the Act. That being the position, the ultimate conclusion arrived at by the trial Court and the High Court do not call for interference in these appeals, though for different reasons indicated.

Summary

Issues:
Validity of notice under clause (b) of proviso to section 138 of the Negotiable Instruments Act, 1881.

Analysis:

1. Background of the Case:
The case involved complaints filed by appellants against the respondent for dishonored cheques. The trial court acquitted the accused, stating that the cheques were misused. Three appeals were filed, and one was allowed, finding the respondent guilty under section 138 of the Act.

2. Validity of Notice:
The main issue revolved around the validity of the notice sent by the appellants to the respondent under clause (b) of the proviso to section 138. The High Court held that a common notice was not in accordance with the law as separate cheques were involved in different loan transactions.

3. Legal Provisions:
Sections 138 and 139 of the Act were crucial in determining the validity of the notice. Section 138 outlines the dishonor of a cheque and the necessary conditions for an offense. Section 139 creates a presumption in favor of the holder of the cheque.

4. Interpretation of Notice Requirements:
The Supreme Court emphasized the importance of the notice in giving the drawer a chance to rectify the situation. It was noted that the demand in the notice must relate to the "said amount of money" described in the provision. Failure to comply within 15 days of notice can lead to liability under section 138.

5. Precedent and Legal Liability:
Referring to previous judgments, the Court highlighted that the legal liability under section 138 ceases if the cheque amount is paid within the stipulated period. The offense under section 138 requires a series of acts to be completed.

6. Final Decision:
The Court dismissed the appeals, stating that the notice in question did not specifically demand payment of the cheque amount, which is a crucial requirement under section 138. The absence of such a demand exposed the drawer to liability. The judgment was based on the lack of a specific demand for the cheque amount in the notice, despite other incidental demands being made.

In conclusion, the Supreme Court upheld the importance of a valid notice under section 138 of the Act and emphasized the specific demand for the payment of the bounced cheque amount as a critical factor in determining liability.