Section 138 NI Act Notice Invalid if Demanded Amount Exceeds Cheque Value: Supreme Court

In hearing the appeal which challenges the High Court of Delhi's decision to quash a criminal complaint filed under Sections 138, 141, and 142 of the Negotiable Instruments Act, 1881 (138 NI Act), the Supreme Court dismissed the appeal holding the notice as invalid and bad in law.

The matter is stemmed from a transaction involved a Memorandum of Understanding for the sale of land and a cheque issued by the accused for Rs. 1,00,00,000/- (Rupees one crore), which was dishonoured due to insufficient funds. Upon the dishonour of the said cheque, the appellant (complainant) issued two demand notices (dated June 8, 2012, and September 14, 2012), wherein they demanded Rs. 2,00,00,000/-.

The Accused/Respondent herein sought discharge of charges, contending that the notice of demand as aforementioned was not in terms of Proviso (b) to Section 138 of the NI Act, however, the plea for discharge was dismissed by the Metropolitan Magistrate. The Respondent then appealed before the High Court of Delhi where it was observed by the High Court found that the demand notice not conforming to the Proviso (b) of Section 138 of the NI Act, since it varies with the cheque amount, and the High Court quashed the complaint.

Aggrieved by the High Court quashing of complaint, the appellant/complainant argued before the Apex Court. The appellant/complainant took the defense that the variation in the amount was merely a "typographical inadvertent mistake" due to a "cut paste command" from another notice.

The Apex Court, referring to catena of its earlier judgment such as in case of K.R. Indira vs. Dr. G. Adinarayana reitrated the components and aspects with which the offences under section 138 NI Act completes. For Proviso (b), Section 138 NI Act, the Court referred to judgment in case of Suman Sethi vs. Ajay K. Churiwal & Anr wherein there is an explanation on the proviso (b) & (c) of Section 138 NI Act.

Supreme Court observed that the Penal statutes, such as the NI Act, must be construed and applied strictly, and courts must insist upon strict literal compliance with statutory conditions. The principle of inferential or implied compliance is inapplicable.

On explaining the meaning of "Said Amount of Money" the Apex Court held that the phrase "the said amount of money" in Proviso (b) to Section 138 unequivocally refers solely to the cheque amount. This amount is "connectible with and operates in conjunction with" the amount mentioned in the parent part of Section 138.

Furthermore, the Apex Court held that it is mandatory that the demand in the statutory notice must be the very amount of the cheque, which is required to be complied with meticulously, and even a "typographical error" can be no defense, as such an error is fatal to the notice’s legality and none other.

That the notice must be precise while mentioning the amount, and if the amount demanded in the notice is different than the actual cheque amount, or if an ambiguous demand is made, the notice is invalid in the eye of law, and all proceedings under Section 138 would fall flat.

Thus, the Supreme Court dismissed the appeal, upholding the quashing of the criminal complaint under 138 NI Act and held that the demand notice under Proviso (b) to Section 138 of the NI Act was invalid because the amount mentioned and demanded was double the actual cheque amount. The Court reitrated that since the required rigor of law was strict, the notice stood invalid and bad in law, despite the cheque number being mentioned.

Coram: B. R. Gavai, CJI and N.V Anjaria, J.