2025 (4) TMI 685 - HC - Indian Laws

Validity of SCN - correctness of legal notice issued u/s 138(b) of the Negotiable Instruments Act 1881 (NI Act) - the inclusion of an additional demand beyond the cheque amount thereby invalidating the proceedings under Section 138 of the NI Act - HELD THAT - The Hon ble Supreme Court in Suman Sethi Versus Ajay K. Churiwal and another 2000 (2) TMI 822 - SUPREME COURT has laid down the legal test for determining the validity of a demand notice under Section 138 of the NI Act by holding that If in a notice while giving the break up of the claim the cheque amount interest damages etc. are separately specified other such claims for interest cost etc. would be superfluous and these additional claims would he severable- and will not invalidate the notice. If however in the notice an omnibus demand is made without specifying what was due under the dishonored cheque notice might well fail to meet the legal requirement and may be regarded as bad. From the above pronouncement it is evident that a notice is legally valid as long as it specifies the cheque amount separately and any additional claim such as interest or costs is severable. Turning to the facts of the present case a perusal of the legal notice (Annexure P-3) demonstrates that it explicitly demands the cheque amount of Rs.3 lakhs and separately specifies an additional amount of Rs.22, 000/- as cost of the notice. Since the additional demand is severable and does not obscure the primary claim for the cheque amount the notice cannot be said to be omnibus in nature. Conclusion - A legal notice under Section 138(b) of the NI Act is valid if it specifies the cheque amount separately and any additional claims are severable. An additional demand does not invalidate the notice as long as it does not obscure the primary claim. The argument that the notice is invalid is devoid of merit. The present petition stands dismissed.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

1. Whether the legal notice issued under Section 138(b) of the Negotiable Instruments Act, 1881 (NI Act) was defective due to the inclusion of an additional demand beyond the cheque amount, thereby invalidating the proceedings under Section 138 of the NI Act.

2. Whether the summoning order issued by the Trial Court was legally sustainable given the alleged defect in the legal notice.

ISSUE-WISE DETAILED ANALYSIS

1. Validity of the Legal Notice under Section 138(b) of the NI Act

Relevant legal framework and precedents: The legal framework under Section 138(b) of the NI Act mandates that a legal notice must unequivocally demand the cheque amount. The Supreme Court in Suman Sethi Versus Ajay K. Churiwal established that a notice is valid if it specifies the cheque amount separately and any additional claims are severable. This principle was reiterated in the case of Upasana Mishra Versus Trek Technology India Pvt. Ltd.

Court's interpretation and reasoning: The Court examined whether the legal notice in question met the statutory requirements. The notice demanded Rs.3 lakhs as the cheque amount and separately specified Rs.22,000/- as the cost of the notice. The Court found that the additional demand was severable and did not obscure the primary claim for the cheque amount.

Key evidence and findings: The legal notice explicitly demanded the cheque amount separately from the additional costs, aligning with the statutory requirements and the test laid down by the Supreme Court.

Application of law to facts: The Court applied the principles from Suman Sethi and Upasana Mishra to determine that the notice was not omnibus and thus legally valid.

Treatment of competing arguments: The petitioner argued that the notice was invalid due to the additional demand, relying on Upasana Mishra. However, the Court found this reliance misplaced as the notice met the legal requirements by specifying the cheque amount separately.

Conclusions: The Court concluded that the legal notice was valid and did not invalidate the proceedings under Section 138 of the NI Act.

2. Legality of the Summoning Order

Relevant legal framework and precedents: The validity of a summoning order under Section 138 of the NI Act depends on the compliance of the legal notice with statutory requirements.

Court's interpretation and reasoning: Since the legal notice was found valid, the foundation of the complaint remained intact, rendering the summoning order legally sustainable.

Key evidence and findings: The summoning order was based on the legal notice, which was determined to be valid.

Application of law to facts: The Court applied the statutory requirements and precedents to uphold the summoning order.

Treatment of competing arguments: The petitioner's argument regarding the invalidity of the summoning order was dismissed as it was contingent on the alleged defect in the legal notice, which the Court found to be without merit.

Conclusions: The Court concluded that the summoning order was legally sustainable.

SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: The Court reiterated the principle from Suman Sethi: "If in a notice while giving the break up of the claim the cheque amount, interest, damages etc. are separately specified, other such claims for interest, cost etc. would be superfluous and these additional claims would he severable- and will not invalidate the notice."

Core principles established: A legal notice under Section 138(b) of the NI Act is valid if it specifies the cheque amount separately and any additional claims are severable. An additional demand does not invalidate the notice as long as it does not obscure the primary claim.

Final determinations on each issue: The Court determined that the legal notice was valid, and the summoning order was legally sustainable. The petition was dismissed, and the proceedings under Section 138 of the NI Act were allowed to continue.