2022 (12) TMI 558 - HC - Indian Laws

Dishonor of cheque u/s 138 - validity of statutory demand notice - as per the legal notice, the respondents have claimed the entire outstanding amount from the petitioners instead of raising claim of cheque amount - partial discharge of their contractual liability - HELD THAT - It is accepted proposition of law that a notice has to be read as a whole and in the demand notice, a demand for cheque amount is required to be made. If no such demand is made, then the demand notice would not pass the test of legal requirement of section 138 NI act. If in addition to the cheque amount, the claims of interest, cost etc. are also made, then the validity of the notice would depend upon the language of the notice. If in the demand notice, the breakup of the claims i.e., cheque amount, interest, damages etc. are specifically and distinctly mentioned then the demand notice is not bad in law for the purpose under section 138 of NI Act. It was held in case of Suman Sethi V Ajay K. Churiwal and another 2000 (2) TMI 822 - SUPREME COURT The Supreme Court in case of M/s Rahul Builders V Arihant Fertilizers Chemicals 2007 (11) TMI 399 - SUPREME COURT as relied upon by the petitioners considered the issue that failure on the part of complainant to serve proper notice, strictly in terms of proviso appended to section 138 of NI Act would lead to quashing of criminal proceedings. The perusal of demand notice 14.03.2013 reflects that although the respondents have also referred the dishonor of three cheques, subject matter of the present complaint but they have claimed the entire outstanding amount - The legal notice is not confined to the cheque amount. The respondents have not specifically asked for the payment of cheque amount within the stipulated period within the mandate of section 138 of NI Act. The cheque amount is not separately mentioned and identifiable from entire outstanding amount - In notice, an omnibus demand is made without specifying the cheque amount and as such notice dated 14.03.2013 failed to meet legal requirements of section 138(b) of NI Act. The demand notice accordingly is bad in law i.e., as per section 138(b) of NI Act. Impugned order and proceedings quashed.

Summary

Issues Involved:
1. Validity of the legal notice under Section 138 of the Negotiable Instruments Act (NI Act).
2. Compliance with the statutory requirements of Section 138 of the NI Act.
3. Grounds for quashing the criminal complaint.

Issue-wise Detailed Analysis:

1. Validity of the Legal Notice under Section 138 of the NI Act:
The petitioners challenged the legal notice dated 14.03.2013, arguing it demanded Rs.17,92,572.23/- instead of the cheque amount of Rs.3,50,000/-. The legal notice must demand the cheque amount to comply with Section 138 of the NI Act. The respondents claimed the entire outstanding amount, including interest and costs, which was not in line with the statutory requirements. The Supreme Court in M/s Rahul Builders V Arihant Fertilizers & Chemicals held that a notice must demand the cheque amount specifically, and failure to do so renders the notice invalid.

2. Compliance with the Statutory Requirements of Section 138 of the NI Act:
Section 138 outlines the conditions for an offence, including presenting the cheque, its dishonor, and issuing a proper demand notice. The Supreme Court in K. Bhaskaran V Sankaran Vaidhyan Balan and Kusum Ingots & Alloys Ltd. V Pennar Peterson Securities Ltd. identified the essential components for an offence under Section 138. The notice must demand the cheque amount within 30 days of dishonor, and the drawer must fail to pay within 15 days of receiving the notice. The respondents' notice did not meet these requirements as it demanded the entire outstanding amount rather than the specific cheque amount.

3. Grounds for Quashing the Criminal Complaint:
The petitioners argued that the trial court's order was arbitrary and based on conjectures. They also contended that the respondents had already filed a civil suit for the outstanding amount, making the criminal complaint redundant. The Supreme Court in Smt. Nagawwa V Veeranna Shivalingappa Konjalgi outlined scenarios where a magistrate should not take cognizance, including when the complaint lacks essential ingredients of the offence. The respondents' notice was deemed invalid as it did not demand the cheque amount specifically, failing to meet the legal requirements of Section 138(b) of the NI Act.

Conclusion:
The High Court found that the legal notice dated 14.03.2013 did not comply with Section 138 of the NI Act as it demanded the entire outstanding amount instead of the cheque amount. Consequently, the impugned order dated 28.06.2018 and the criminal complaint were quashed. The petition was disposed of, and all pending applications were addressed accordingly.