CENTRAL BANK OF INDIA AND ANR.versusSAXONS FARMS AND ORS.

A                   CENTRAL BANK OF INDIA AND ANR.
                                  v.
                        SAXONS FARMS AND ORS.

                                     OCTOBER 7, 1999

B                  [G.T. NANAVATI AND S.N. PHUKAN, JJ.]

          Criminal Law :

          Negotiable lnstrnments Act, 1881 : Section 138 proviso, clause (b ).

c '      Notice-Object of-Last line of notice stated : "Kindly arrange to make
  the payment.... ''-Held : Object of notice is to give a chance to the drawer of
  the cheque to rectify his omission and also to protect an honest drawer-There
                                                                                    -
  fore, in the notice a demand for payment of the amount of cheque has to be
  made-Last line of the notice is clear demand for payment-Hence, High
D Court e"ed in overlooking this demand for payment and in quashing the
   complaint under S.482 Cr.P.C.--Criminal Procedure Code, 1973, S.482.

         Notice-Requirements of-Held: (i) Should be in writin~ (ii) Should
  be given within fifteen days of return of cheque as unpaid and (iii) A demand
E for payment of the amount of cheque has to be made.
          Notice-Demanding payment-Service of-Held : Is a condition prece-
    dent for filing complaint under S.138.

          Section 138 proviso, clause (a)--chequ~resentation of-Number of
F times-Held : Drawee has the right to present a cheque any number of times
    within its period of validity.

         Respondent No. 1. partnership firm took a loan of over a crore of
  rupees from the appellant-Bank and towards part- repayment of the above
G loan issued three cheques. These cheques were presented for collection but
  were received back with the remarks "Funds insufficient". Thereafter, the
  appellant sent two notices to respondent No. 1 stating that it would re-
  present these cheques again and if the same were returned unpaid, the
  matter would be reported to the police. The notices further reserved the
  right to file a criminal case against respondent No. 1 if it did not arrange to
H make the payment. Admittedly, Respondent No. 1 received the notices.
                                           534
                   CENTRAL BANK OF INDIA v. SAXONS FARMS                      535

              All the cheques were re-presented to the bank but were returned with   A
       the same remarks "funds insufficient". Thereupon, the appellant-bank
       filed complaints under Section 138 of the Negotiable Instruments Act, 1881
     · in the court of the Judicial Magistrate First Class who took cognizance of
       the complaints. But High Court quashed the complaint under Section 482
       of the Criminal Procedure Code, 1973 on the ground that there was no          B
       proper notice as required under Section 138 of the Act and held that there
       was no demand of payment. Hence this appeal.

            Allowing the appeals, this Court

            HELD: 1.1. Though, no form of notice is prescribed in Clause (b) · C
      of the proviso to Section 138 of the Negotiable Instruments Act, 1881 the
      requirement is that notice shall be given in writing within fifteen days of
      receipt of information from the bank regarding return of the cheque as
      unpaid and in the notice a demand for payment of the amount of the
      cheque has to be made. [537-H; 538-A]                                       D
            1.2. The object of the notice is to give a chance to the drawer of the
      cheque to rectify his omission and also to protect honest drawer. Service of
      notice of demand in Clause (b) of the proviso to Section 138 is a condition
      precedent for filing a complaint under Section 138 of the Act.[538-B]
                                                                                     E
            2.1. Regarding demand for payment, the High Court was of the
      opinion that "the intention in the notice was that the cheque was being
      presented again and the applicant/petitioner should arrange the payment
      on re-presentation of the cheque". [538-E]
                                                                                     F
             2.2. However, a cheque can be presented any number of times to the
      bank within the period of its validity. Therefore, the appellant-bank had a
      legal right to re-present the cheques to the bank as indicated in the notices
      and, therefore, respondents could have arranged payment either through
      bank or directly to the appellant-bank. By not doing so the provision of
      Section 138 is clearly attracted. [538-F; G]                                  G

            3. In the present case, the last line of the notice reads : "Kindly

--    arrange to make the payment to avoid the unpleasant action of my client".
      This is a clear demand as required under Section 138(b) proviso. The High
      Court erred in overlooking this last line in the notice and in holing that H
                                                                                      •


         536                  SUPREME COURT REPORTS [1999] SUPP. 3 S.C.R.

     A there was no demand of payment. [538-D; E]

               CRIMINAL APPELLATE JURISDICTION                   Criminal Appeal
•·       Nos. 1056-57 of 1999.

               From the Judgment and Order dated 7.8.97 of the Madhya Pradesh
     B High Court in Cr!. M.A. No. 636-37 of 1997.

              Altaf Ahmed, Additional Solicitor General, (O.C. Mathur, Ms.
         Meera Mathur), for J.B.D. & Co. for the Appellants.

               R.F. Nariman, Ms. Kamakshi S. Mehlwal, Uma Nath Singh, Amit
     C Dharpan and Rajiv Mehta for the Respondents.
               The Judgment of the Court was delivered by

               PHUKAN, J. Leave granted.

     D         These two appeals are by the complainants against the judgment and
         order of the learned Single Judge of the High Court of Madhya Pradesh,
         Gwalior Bench passed in Misc. Cr!. Case Nos. 636 and 637 of 1997. By the
         impugned judgment and order the High Court allowed the petitions filed
         under Section 482 Crl.P.C. and quashed the criminal proceedings namely
     E   case Nos. 172 and 1156 of 1995 pending before the Judicial Magistrate,
         First Class, Gwalior.

               Respondent No. 1, a partnership firm, took a loan of over a crore of
         rupees from the appellant-bank and towards part re-payment of the above
     F   loan, issued three cheques dated 29 .3.94, for Rs. 1 lakh, Rs. 2 lakhs and
         Rs. 39,50,000. All three cheques were presented to the bank for collection
         but receiv~ back by the appellant unpaid on 25.4.94 and 19.6.94 with the
         remarks "funds insufficient". The appellant bank sent two registered
         notices dated 2.5.94 and 27.6.94 through the advocate and there was no
         dispute that the notices were received. All the cheques were again
     G   presented to the bank but returned with the same remarks namely "funds
         insufficient". Thereafter, the appellant-bank approached the Judicial
         Magistrate First Class by filing two complaints under Section 138 of the



     H
         Negotiable Instruments Act, 1881 (for short the Act). The Magistrate took
         cognizance in respect to both the complaints but the High Court quashed
         the criminal proceedings only on the ground that there was no proper
                                                                                      -
          CENTRAL BANK OF INDIA v. SAXONS FARMS [PHUKAN, J.]                   537

     notice as required under Section 138 of the Act.                                 A

           We have heard the learned counsel for the parties and the short
     question to be decided is whether there were valid notices as required
     under Clause (b) of the proviso to Section 138 of the Act.

           We extract below the relevant portion of the notices which is same         B
     in both the notices :

•'
             "The bouncing of the two cheques is a most serious matter. The
             said act of issuance of cheques knowing fully well that the same
             shall not be paid statutes an offence under Section 138 of the
             Negotiable Instruments Act. As per the provisions of this act my
                                                                                      c
             client through this notice informs you that my client shall represent
             the two cheques again and if the same are returned unpaid, my
             client shall report the matter to the Police for initiating ap-
             propriate criminal action against you all. My client further reserves
             the right to file criminal case against all of you for the non-payment   D
             of the cheques in question and details given above. Kindly arrange
             to make the payment of the cheques if you intend to avoid the
             unpleasant action of my client."

          . Section 138 of the Act, inter alia, provides that where any cheque
                                                                                      E
     drawn by a person on an account maintained by him with a banker for
     payment of any amount of money to another person is returned by the bank
     unpaid, either because of the amount of money standing to the credit of
     that account is insufficient to honour the cheque or that it exceeds the
     amount arranged to be paid from that account, such person shall be
     deemed to have committed an offence under the above Section. According           F
     to the proviso to the said Section unless the three clauses mentioned
     therein are fulfilled the provisions of the Section shall not apply. In these
     appeals we are concerned with Clause (b) which is quoted below :

             "(b) the payee or the holder in due course of the cheque, as the         G
•            case may be, makes a demand for the payment of the said amount
             of money by giving a notice in writing, to the drawer of the cheque,
             within fifteen days of the receipt of information by him from the
             bank regarding the return of the cheque as unpaid; and"

          Though, no form of notice is prescribed in the above Clause (b) the         H
    538                   SUPREME COURT REPORTS [1999] SUPP. 3 S.C.R.

A requirement is that notice shall be given in writing within fifteen days of
    receipt of information from the bank regarding return of the cheque as
    unpaid and in the notice a demand for payment of the amount of the
    cheque has to be made.

          The object of notice is to give a chance to the drawer of the cheque
B   to rectify his omission and also to protect honest drawer. Service of notice
    of demand in Clause (b) of the proviso to Section 138 is a condition
    precedent for filing a complaint under Section 138 of the Act. In the
    present appeals there is no dispute that notices were in writing and these
    were sent within fifteen days of receipt of information by the
C   appellant-bank regarding return of cheques as unpaid. Therefore, only
    question to be examined whether in the notice there was a demand for
    payment.

          The last line to the portion of notice extracted above reads as
D under:
            "Kindly arrange to make the payment to avoid the unpleasant
            action of my client." In our opinion it is a clear demand as required
            under Clause (b) of Section 138.

E          Regarding demand for payment, the High Court was of the opinion
    that "the intention in the notice was that cheque was being presented again
    and the applicant/petitioner should arrange the payment on
    re-presentation of the cheque". The High Court over looked the last line
    of notice as indicated above and, therefore, erred in holding that there was
F   no demand of payment.

           A cheque can be presented any number of times to the bank within
    the period of its validity. In view of the above, appellant-bank had a legal
    right to re-present the cheques to the bank as indicated in the notices and,
    therefore, respondents could have arranged payment either through bank
G   or directly to the appellant bank. By not doing so the provision of Section
    138 is clearly attracted.

           In the notices it was stated that on re-presentation of the cheques if-
    returned unpaid, the appellant-bank would report the matter to the police
H   for initiating appropriate criminal action against the respondents. Drawing
         CENTRAL BANK OF INDIA v. SAXONS FARMS (PHUKAN,'J.]                  539

    our attention to the above statement in the notices it is urged on behalf of    A

-   the respondents that the intention of the appellant "bank was to start police
    investigation and not to file complaint under Section 138 of the Act.

          Under Section 142 of the Act, court can take cognizance of an
    offence punishable under Section 138 only on a complaint in writing made
    by the payee. Therefore, the police could not have started investigation        B
    under Section 138 of the Act. But if a cheque is dishonoured drawer may
    expose himself to prosecution under various Sections of the Indian Penal
    Code which are cognizable and police could take up investigation. What
    was indicated in the notice was that in addition to the legal action by the
    appellant-bank under the Act, option was kept open for taking action            c
    against the respondents under the provisions of Indian Penal Code by
    informing the police. Therefore, the contention of learned counsel for the
    respondents has no force.

         For the reasons stated above we hold that notices were valid and
    proper and, therefore, the High Court erred in holding that there was no D
    proper notice for payment as required under Section 138 _oLthe Act.

         In the result, both the appeals are allowed by quashing the impugned
    judgment and order of the High Court and court below is directed to
    proceed with the trial in both the complaint petitions.

    v.s.s.                                                     Appeals allowed.