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INTRODUCTION
The dishonour of cheques has long posed significant challenges in commercial transactions, raising questions of both civil and criminal liability. One recurring issue under Section 138 concerns the statutory demand notice required under proviso (b) of the Negotiable Instruments Act, 1881 (“the Act”). The law mandates that upon dishonour of a cheque, the payee or holder in due course must issue a notice demanding payment of the dishonoured amount within a stipulated time. While the provision appears straightforward, disputes often arise regarding the validity of such notices, particularly when there is a discrepancy between the cheque amount and the amount mentioned in the notice, or when the notice contains additional claims like interest, damages, or legal costs.
The central legal question is just how strictly must the notice match up with the cheque amount to be called as ‘said amount’ incorporated in the language of Section 138, proviso (b). One side favours a broad equitable approach to favour the Complainant who is owed monies and while the other side underscores the strict compliance doctrine applicable under penal statutes as such this matter has ignited conflicting debates.
When navigating these debates, the courts have been called upon for balancing two competing considerations that is firstly, the Act’s commercial purpose, which seeks to promote confidence in financial transactions by deterring cheque dishonour; Secondly, the technical rigour of criminal law, which demands exact adherence to statutory conditions.
SUPREME COURT RECENT RULING:
The recent Supreme Court judgment in Kaveri Plastics v. Mahdoom Bawa Baharudeen Noorul[1] has once again underlined the strict compliance requirements under Section 138 of the Act. The Court while dismissing the SLP, addressed a crucial question as to whether a demand notice under proviso (b) to Section 138 remains valid if it mentions an amount different from the dishonoured cheque. The Court reaffirmed the principle that strict compliance with statutory requirements is indispensable under Section 138 of the Negotiable Instruments Act, 1881. The Court held that the statutory notice must demand precisely the cheque amount, neither more nor less. Any discrepancy, even if explained as a typographical or inadvertent error, is fatal to the validity of the notice. It was also held that the errors in the amount, however minor or unintended, vitiate the notice and render the prosecution unsustainable.
FACTS OF THE CASE
- The cheque(s) which were issued by the Accused No.1 to the Appellant herein, under a Memorandum of Understanding (“MoU”) was retuned on the ground ‘insufficient funds’. In pursuance thereof, the Appellant issued a demand notice dated 08.06.2012 to the Accused No. 1 Company and its directors and vide the said Notice, while stating that the cheque amount was for Rs. 1,00,00,000/- sought the entire debt i.e., Rs. 2,00,00,000/-. Since, no payment was made to the Appellant, a criminal complaint came to be filed which was quashed by the High Court on the grounds of discrepancy in the amounts mentioned in the statutory notice. Said Order was assailed before the Hon’ble Supreme Court.
- Appellant argued that the Court ought to have looked at the substance of the matter rather than becoming technical. It was also argued by the Appellant that offence under Section 138 of the Act is a civil wrong in the colour of criminal offence, due to which technicality should not prevail.
On the other hand, Respondent argued that in the notice under Section 138 (b) of the Act, gave incorrect details as the amount claimed was of Rs. 2,00,00,000/- while the cheque of Rs. 1,00,00,000/- was issued and it was urged that the notice was invalid in the eyes of law. It was further argued that such discrepancy cannot be termed as a mere a typographical error.
- Respondent while relying on R. Indira vs Dr. G Adinarayana[2] highlighted the important components rather stages of Section 138 of the Act which would make the offence complete, and urged that it is only the amount of the dishonored cheque which would be termed as “said amount of money” for the purposes of Section 138 (b).
DECISIONS RELIED AND PREVAILING LAW ON THE SUBJECT THUS FAR:
After relying on the case of Suman Sethi vs Ajay K. Churiwal & Anrs [3] the Court observed that phrase “payment of any amount of money” mentioned in Section 138, means the cheque amount itself. Therefore, any notice under clause (b) of the proviso must specifically demand payment of the cheque amount. The Court further observed that a specific demand in the notice has to be made for the cheque amount only. However, seeking additional amounts, such as notice charges and other costs that are distinct and severable from the cheque amount mentioned in the notice, cannot be branded as bad in law.
In case of Central Bank of India vs Saxons Farms and others[4] for the purpose of proviso (b) to Section 138 of the Act, the Court emphasized the purpose of the notice is to give the drawer a fair chance to make payment and avoid criminal prosecution. If the drawer complies by paying the cheque amount within 15 days, no offence is made out. This mechanism balances deterrence with fairness, ensuring the provision does not become unduly harsh.
In similar case of K.R. Indira (Supra) the Court has laid down the ingredients of Section 138, including the mandatory requirement that the notice must demand payment of the cheque amount. In that case, since the notice failed to specify the precise cheque amount, it was declared invalid. The ruling reinforced the idea that specific demand for the cheque sum is indispensable.
Additionally, in case of Rahul Builders v. Arihant Fertilizers [5] the complainant sent a notice demanding the entire outstanding liability for Rs. 8,72,409/-, although the dishonoured cheque was for only Rs.1,00,000/-. The Court held that the demand must strictly match the cheque amount. It was observed in this case that the service of notice is a trite and imperative character for maintaining the complaint. Since the notice demanded more amounts, it was defective. This decision reflects the strict construction principle applicable to penal provisions.
Further, the Hon’ble Supreme Court in the case of Dashrathbhai Trikambhai Patel v. Hitesh Mahendrabhai Patel[6], while reiterating earlier rulings had observed that the notice must demand the “said amount of money,” i.e., the cheque amount, and compliance with the provisos to Section 138 is mandatory. The judgment further reinforced consistency in interpretation and confirmed that statutory conditions cannot be diluted.
In Gokuldas v. Atal Bihari[7], it was held by the Madhya Pradesh High Court that even a small variance in cheque amount and notice amount renders the notice invalid, as Section 138 is a technical offence requiring strict compliance.
In M/s Yankay Drugs v. Citibank[8], it was held by the Andra Pradesh High Court, if the notice demands either more or less than the cheque amount, prosecution fails, as the statutory requirement is not met. Therefore, mentioning the cheque amount is very much mandatory.
Further, in Chhabra Fabrics v. Bhagwan Dass[9], it was held by the High Court of Punjab & Haryana that even typographical mistakes, such as in cheque number, cannot be excused when they affect compliance with Section 138.
Further, in K. Gopal v. T. Mukunda[10], the Karnataka High Court observed that a mismatch where cheques worth Rs. 2,00,000/- each was issued but the demand for only Rs. 10,000/- was made in the legal notice, which invalidated the notice, despite arguments of typographical error.
Also, the Court, after referring to the case of Sunglo Engineering v. State and others[11], opined that a demand for double the cheque was held to be fatal, mirroring the Kaveri Plastics situation.
The Court also referred to M. Narayanan Nambiar vs State of Kerala[12], which had in turn referred to English decision for rule of construction of penal provision, Dyke vs Elliot[13], wherein the Privy Council’s decision is a classic authority on the strict construction of penal statutes and wherein, Lord Justice James had observed that: Firstly, Courts must ensure that the act charged as an offence is clearly within the plain meaning of the statutory words; Secondly, Judges should not “strain” the language to cover situations that might have been intended but are not expressly included; and Lastly, penal liability must be confined strictly to what Parliament has enacted, without resorting to notions of equity or any presumed intent.
By citing this case, the Supreme Court reinforced that Section 138 proviso(b) cannot be interpreted liberally to excuse errors in the demand notice. If the cheque amount is misstated, the requirement of the offence is not technically completely met with.
CONCLUSION:
In conclusion, while the reasoning is doctrinally sound, especially in light of the rule that criminal law must be construed strictly, it also reveals a tension between technical compliance and substantive justice. The very object of Section 138 is to deter dishonour of cheques and to instil confidence in commercial transactions. When a cheque amount is clearly described in the notice, along with cheque number, date, and bank details, treating an inadvertent mistake in figures as fatal seems to prioritise technicality over substance.
This judgment serves as a strong reminder to lawyers that precision in drafting statutory notices and especially under Negotiable Act, 1881 is non-negotiable. Until the legislature or judiciary provides leeway for minor errors, the safest course is meticulous compliance.
By:
Ishwar Ahuja, Partner, Saga Legal
Shilpa Gireesha, Associate, Saga Legal.
[1] 2025 INSC 1133
[2] (2003) 8 SCC 300
[3] (20000 2 SCC 380
[4] (1999) 8 SCC 221.
[5] (2008) 2 SCC 321
[6] (2023) 1 SCC 578
[7] MCRC 5458 /2023
[8] 2001 DCR 609
[9] Crl. Appeal No. 1772/ 2002
[10] Criminal Appeal No. 1011/2010.
[11] Crl. M.C. No. 3 /2021.
[12] AIR 1963 SC 1116
[13] (1872) 4 PC 184
