Fact of the Case
Kaveri Plastics, lodged a criminal complaint against the respondent on the grounds of 138, 141 and 142 of the Negotiable Instruments Act, 1881 (NI Act). The background facts are that accused No. 1, M/s. On 30.04. 2012, Nafto Gaz India Private Limited signed a Memorandum of Understanding (MoU) with the complainant-appellant over the sale of land. Accused No. 1 made a cheque with number 876229 of cheque of amount Rs. 1,00, 00,000/- (Rupees One Crore) under the MoU as regards part liability. The cheque was written on the Indian overseas bank, R.K. Puram, Delhi.
The bounced cheque was returned to the ground on the basis of; there is not enough money. After that, the appellant sent two demand notices which were dated 08.06.2012 and 14.09.2012.
Most importantly in the two notices, the complainant requested the accused to pay him/her payment in the sum of Rs. 2,0,00,000/- (Rupees two crores) failure to which a lawsuit would be filed.
The accuser respondent made an application to seek discharge on the basis that the notice of demand was not in the terms of Proviso (b) to Section 138 of the NI Act, since the amount of the cheque was equal to the amount of the demand. Despite the discharge plea being dismissed by the Metropolitan Magistrate on 06.10.2021, the respondent petitioned to the High Court of Delhi. The Criminal Complaint No. 523804 of 2016 was invalidated by the High Court as the demand notice was invalidized by the discrepancy between the cheque and the amount.
Issues
Validity of Notice: Is the notice posted under Proviso (b) to Section 138 of the NI Act valid in the eye of law where the sum stated and required in the notice does not correspond to the amount the cheque was written to.
Typographical Error Defence: The count that such variance was typographical error may have been a grounds that could be disallowed by law.
Legal Provisions Involved
The disliked legal regulations in force here are concerned with the crime of dishonour of cheque in Negotiable Instruments Act, 1881 (NI Act):
- Section 138 of the NI Act: Deal with the dishonour of a cheque on the grounds of insufficiency of funds and the resulting punishable offence.
- Proviso (a) to Section 138: Obligatoriness of the cheque: This demands that it is presented to the bank before its period of validity.
- Proviso (b) of Section 138: Requires the payee or holder in due course to make a demand to pay the said amount of money by giving a written notice to the drawer within thirty days of having been informed of the cheque remaining unpaid.
- Proviso (c) to Section 138: Obligates the drawer not to pay the said amount within fifteen days of the notice to him. Both parties argue that it is necessary to focus on these matters.
Arguments
Arguments of the Appellant
- Typographical Error/Inadvertent Mistake: According to the case, the appellant claimed that the company had a typographical mistake when referring to the Rs. 2,00,00,000/- in the notice, rather than to Rs. 1,00,00,000/-. This unintentional error was a result of a “cut paste command” since the complainant had already given out other notices on the same day with a cheque amount of read 2,00,00,000/-.
- Nature of Offence: The offense of Section 138 is literally a civil tort masquerading as a criminal offense, and technicality must not be allowed to carry the day.
- Purpose of Notice: It was pointed out based on the Central Bank of India and Anr. vs. Saxons Farms and Ors. that the purpose of the notice under Proviso (b) is to provide the drawer with an opportunity to correct his/her failure to do so, and defend an honest drawer.
- Reading the Notice as a Whole: By referring to Suman Sethi vs. Ajay K. Churiwal and Anr., it was asked that the notice was to be read as a whole and the contents clearly indicated the real facts.
Arguments of the Respondent
- Variance Makes Notice Invalid: The respondent emphasized the impossibility of variance of notice between the demand in the legal notice and the amount of the cheques and said that this point is res integra (settled law). Repeated Error: In both the notices issued, the same amount was demanded (08.06.2012 and 14.09.2012) Rs. 2,00,00,000/-, though the same was not demanded in each case.
- False Plea: The fictitious information about the complaint of typographical mistake was described as a false and a stock plea.
Court Analysis
- The case presented by N.V. Anjaria, J., was concerned with the meaning of the words said amount of money that appeared in Proviso (b) to Section 138 of the NI Act.
- Severability (Not Applicable Here): The Court remembered, that in the case where the notice is duly stating the amount of the cheque in it, but asserts other severable amounts (e.g. interest, costs or damages), the notice is not voided. The notice does not however pass the test of law on the legal requirement of an ambiguous demand being made, but not specifying the amount due under the dishonoured cheque.
- Failure to state the cheque amount in the Notice, or stating any amount other than the true cheque amount The Court stated that not making a mention with regard to the cheque amount or making a mention with regard to a different amount in the actual cheque amount makes the notice invalid in law.
- The principle of reading the notice as a whole is not to be applied and applied in a case where the amount in question is not correct.
- Typographical Error Rejected the argument that the difference was a simple error of typing or mistake was denied. The Court made a decision that even typing mistake would not be a defence because it would be deadly to the legality of the notice. The explanation in the current case was notably inadmissible since the failure to pay 2,00,000/- was made and repeated in both the notices of 08.06.2012 and 14.09.2012.
JUDGMENT
The case was upheld by the Supreme Court which stated that the notice was unlawfully incorrect. This is a prime component of the offence in Section 138 of the NI Act as the notice requiring payment of the amount of the dishonoured cheque is not done. When the main ingredient is not fulfilled because there is an element of misfunction, between the amount on the cheque and the amount stated on the notice, the proceedings on Section 138 should fail.
The Court decided that to give a valid notice under Proviso (b) to Section 138 of the NI Act, it is necessary that, under Proviso (b) of Section 138 of the NI Act the amount of the notice read said amount is that very amount of cheque, and no other. The amount of the cheque was 1,00,000/-, though the amount was required in the notice was 2,00,00,000/-, this created an ambiguity and differentiation with regard to the soothed amount. The notice was therefore bad and invalid in law. The appeals were ruled out by the Supreme Court which did not see a reason to interfere with the impugned order of the High Court which had justifiably dismissed the complaint.
CONCLUSION
The Supreme Court upheld that the demanding nature of Proviso (b) of the Section 138 of the NI Act on obligatory strict compliance on the demand notice is that the statutory demand notice must stipulate the amount of the dishonoured cheque. Said amount is used in the words as the amount of cheques are necessarily meant.
In the instant case, it is unnecessary to mention that the notice being invalid and legally flawed as the cheque was drawn to the amount of 1,00,00,000/- and the amount demanded was 2,000,000/-, made the notice invalid. The argument that the mismatch was a typing mistake or accident was overturned, particularly because the mistake was repeated in two notices.
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WRITTEN BY Manisha Kunwar
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