Holding

Section 138 does not mandate a fifteen‑day notice period and a notice demanding payment of the total outstanding sum, even without a separate specification of the cheque amount, satisfies proviso (b), making the complaint maintainable and the High Court's quashing erroneous.

Summary

M/s. Rahul Builders entered into a construction contract with Mis. Arihant Fertilizers, which later defaulted on payments. The latter issued a cheque for Rs.1,00,000 that was returned unpaid because its account was closed. Rahul Builders sent a notice on 31‑Oct‑2000 demanding payment of the pending bills (Rs.8,72,409) within 10 days, but the notice did not separately specify the cheque amount. A complaint under Section 138 of the Negotiable Instruments Act was filed; the High Court quashed the proceedings on the ground that the notice was invalid and vague, and that a 15‑day notice period was required. The Supreme Court held that Section 138 does not prescribe a 15‑day notice period, that the notice need not isolate the cheque amount provided it demands payment of the amount covered by the cheque, and therefore the complaint was maintainable. Consequently, the High Court’s order was set aside and the appeal dismissed.

Issues considered

The notice served complied with the proviso (b) of Section 138 of the Negotiable Instruments Act?
Whether Section 138 requires a notice to be given within fifteen days of receipt of information from the bank?
Whether a notice that demands payment of the total outstanding amount, without separately stating the cheque amount, satisfies the statutory requirement?
Whether the High Court was correct in quashing the criminal proceedings on the basis of an alleged invalid notice?

Legislation cited

Code of Criminal Procedures. 482
Negotiable Instruments Act, 1881s. 138

Subjects

Negotiable Instruments ActSection 138cheque dishonournotice requirementpenal provisioncriminal complaintinterpretation of statutesnotice period

Judgment

+ MIS. RAHUL BUILDERS A
v.
MIS. ARIHANT FERTILIZERS AND CHEMICAL AND ANR.

NOVEMBER 02, 2007
B
[S.B. SINHA AND HARJIT SINGH BEDI, JJ.]
1
•
Negotiable Instruments Act, 1881:
s.138, proviso (b)-Dishonour ofcheque-Complaint petition-
c
Maintainability of, when no specific demand made in notice for
payment ofmnount covered by cheque-Held: Not maintainable since
service ofnotice not in conformity with proviso (b) to s.138-Also the
section does not speak of 15 days' notice-In absence of such
stipulation, it cannot be held to be so contemplated--Notice-~
D
lnter71retation of sratutes.
~
_,.,
lnte17Jretation of statutes:
Proviso-Applicability of-Held: When proviso applies, main
section would not.
E
Appellant and Respondent No.1 entered into a contract.
Appellant submitted bills for execution of contractual work for R$.
26.46 lacs. RespondentNo.1 paid Rs.17.74 lacs. Balance of Rs. 8.72
lacs was outstanding. Respondent No.1 issued a cheque for Rs. 1
lac in favour of appellant which on presentation was dishonoured on F
;;_ the ground that Respondent No.1 had closed its account with the
Bank.

Appellant sent letter dated 31.10.2000 to Respondent No.1
requesting to make payment of pending bills within 10 days.
G
Respondent No.1 did not make payment. Appellant filed complai11t
petition on 11.12.2000. The High Court quashed the proceedings
-.( -
holding that 15 days' notice having not been served upon
Respondent No. 1, the same was not valid in law and that the notice
was vague and did not serve the statutory requirements of Provisos
951 H
'
_J
I
952 SUPREME COURT REPORTS (2007] 11 S.C.R.
\--

'"'i·-
A (b) and (c) of s.138 of the Negotiable Instruments Act, 1881. Hence
the present appeal.
Dismissing the appeal, the Court
HELD: 1. S.138 of Negotiable Instruments Act, 1881 does not
B speak of 15 days notice. It contemplates service of notice and
payment of amount of cheque within 15 days from the date of
receipt. When the statute prescribes for service of notice specifying
r\
a particular period, it should be expressly stated. In absence of any
such stipulation, it is difficult to hold that 15 days' notice was thereby
c contemplated. The High Court, therefore, was not correct in arriving
at the aforementioned finding. [Para 8] [956-C, D]
2. In the notice dated 31.10.2000 issued by the appellant to
Respondent No.1, information was only given that the cheque when
presented was returned "unpassed" by the bank authorities on the
D
plea that the account had been closed. By the operative portion of
the said notice, the respondent was called upon to remit the payment -~
r:..
of his pending bills, otherwise suitable action shall be taken.
[Para 9] [956-E, F]
E Suman Sethi v. Ajay K. Churiwal and Anr., [2000] 2 SCC 380
and KR. Indira v. Dr. G. Adinarayana, [2003] 8 SCC 300, referred
to.
3.1. Service of a notice is imperative in character for
maintaining a complaint. It creates a legal fiction. Operation of s.
F 138 of the Act is limited by the proviso. When the proviso applies,
the main Section would not. Unless a notice is served in conformity -~
with Proviso (b) appended to Section 138 of the Act, the complaint
petition would not be maintainable. The Parliament while enacting
the said provision consciously imposed certain conditions. One of
G the conditions was service of a notice making demand of the payment
of the amount of cheque as is evident from the use of the phraseology
"payment of the said amount of money". Such a notice has to be r-
issued within a period of 30 days from the date of receipt of
information from the bank in regard to the return of the cheque as
H unpaid. {Para 10) [956-G; 957-A, B)
I

t
M/S. RAHUL BUILDERS v. MIS. ARIHANT FERTILIZERS 953
AND CHEMICAL [SINHA, J.]
-'r-·
3.2. The statute envisages application of the penal provisions. A
A penal provision should be construed strictly; the condition
precedent wherefor is service of notice. It is one thing to say that
the demand may not only represent the paid amount under cheque
but also other incidental expenses like costs and interests, but the
same would not mean that the notice would be vague and capable of B
"\ two interpretations. An omnibus notice without specifying as to what
! was the amount due under the dishonoured cheque would not
subserve the requirement oflaw. Respondent No. 1 was not called
upon to pay the amount which was payable under the cheque issued 1

by it The amount which it was called upon to pay was the outstanding c
amounts of bills, i.e., Rs. 8. 72 lacs. The noticee was to respond to
the said demand. No demand was made upon it to pay the sum of
Rs. 1 lac which was tendered to the complainant by cheque.
Therefore, ~ntire sum was demanded and not a part of it. As no
demand was made for payment of the cheque amount, the impugned D
't-- judgment cannot be faulted. [Paras 10 and 13] [957-B, C, D; 959-B]
CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No.
525of2005.
From the final Judgment and Order dated 22.11.2004 of the High E
Court of Madhya Pradesh, Bench at Indore, in Misc. Criminal Case No.
2924 of 2004.
Sushil Kumar Jain, Puneet Jain, Pratibha Jain and H.D. Thanvi for
the Appellant.
F
Sanjeev Sachdeva and Chetan Chopra (for C.D. Singh) for the
Respondents.
The Judgment of the Court was delivered by
S.B. SINHA, J. 1. Failure on the part of the appellant to serve a (i
proper notice strictly in terms of proviso appended to Section 138 of the
Negotiable Instruments Act (for short "the Act") whether would lead to
quashing of a criminal proceedings initiated by II Additional Sessions
Judge, Neemuch on a complaint made by the appellant herein is the
question involved in this appeal which arises out of a judgment and order H
~
;

F
954 SUPREME COURT REPORTS [2007] 11 S.C.R.

'""'I·-
A dated 22.11.2004 passed by the High Court of Madhya Pradesh in Misc.
Criminal Case No. 2924of2004.
2. Appellant is a partnership firm. Respondent No. 1 entered into a
contract with it for construction of a building and factory premises.
Appellant executed the said contract. It submitted bills for execution of
B
contractual work for a sum of Rs. 26,46,647/-. Respondent No. 1 had
made payments of Rs. 17,74,238/- and a balance of Rs. 8,72,409/-was
r
\
said to be outstanding. A cheque for a sum of Rs. 1,00,000/- drawn on
Federal Bank Limited, Indore was issued by Respondent No. 1 in favour
of the appellant. Upon presentation of the said cheque, it was not
c honoured on the ground that Respondent No. 1 had closed its account
with the bank. A notice dated 31. l 0.2000 was sent by it to Respondent
No. 1 stating:
"... Your cheque No. 693336 dated 30/4/2000 for Rs. 1,00,000/
D - has also been returned unpassed by the bank authorities with the
plea that A/C No. 1461 has already been closed. Hence the --.\
1.:..
undersigned is now free to take up any legal step against you to
get the amount of my pending bills.
In view of the above, you are requested to remit the payment
E
of my pending bills within 10 days from the date of receipt of this
letter otherwise suitable action as deemed fit will be taken against
you."

3. As despite receipt of the said notice, Respondent No. 1 did not
F make any payment, a complaint petition was filed on 11.12.2000. An
application was filed by Respondent No. 1 for rejection of the said
complaint inter alia on the ground that the notice issued by the appellant
was not a valid one. The said application was rejected. A revision
application filed thereagainst before the District and Sessions Judge,
G Neemuch was also dismissed.

4. The High Court, however, by reason of its impugned order, in . r-
exercise of its jurisdiction under Section 482 of the Code of Criminal
Procedure (Code), has quashed the criminal proceedings pending against
it holding:
H
M/S.RAHULBUILDERSv. M/S.ARIHANTFERTILIZERS 955
_,___ ANDCHEMICAL[SINHA,J.]
(i) 15 days' notice having not been served upon Respondent No. A
1, the same was not valid in law.
(ii) The complainant by reason of the said notice having demanded
a sum of Rs. 8,72,409/- as against the cheque which was for
a sum of Rs. 1,00,000/- only, the notice was vague and did
not serve the statutory requirements of Provisos (b) and (c) B
of Section 138 of the Act.
5. Mr. Sushi} Kumar Jain, learned counsel appearing on behalf of
the appellant submitted that the High Court committed a serious error in
passing the impugned judgment so far as it failed to consider: C
(i) Section 138 of the Act does not postulate a 15 days' notice;
(ii) Non-payment of the amount of cheque being Rs. 1,00,000/-
being a part of the demand sum of Rs. 8, 72,409/-, no
exception thereto could be taken. D
6. Mr. Sanjeev Sachdeva, learned counsel appearing on behalf of
Respondent No. 1, on the other hand, supported the judgment contending
that the notice in question does not sub-serve the requirements of Section
138 of the Act.
E
7. Relevant portion of Section 138 of the Act reads as under:
"138. Dishonour of cheque for insufficiency, etc., of funds in the
account .-Where any cheque drawn by a person on an account
maintained by him with a banker for payment of any amount of
money to another person from out of that account for the discharge, F
in whole or in part, of any debt or other liability, 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
by an agreement made with that bank, such person shall be deemed G
to have committed an offence and shall, without prejudice to any
other provision of this Act, be punished with imprisonment for a
term which may e:>..1end to one year, or with fine which may extend
to twice the amount of the cheque, or with both: Provided that
H
956 SUPREME COURT REPORTS [2007] 11 S.C.R.

A nothing contained in this section shall apply unless
(a) * * *
(b) the payee or the holder in due course of the cheque, as the
case may be, makes a demand for the payment of the said amount
B 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
(c) the drawer of such cheque fails to make the payment of the
said amount of money to the payee or as the case may be, to the
c holder in due course of the cheque within fifteen days of the receipt
of the said notice."
8. Section 138 does not speak of a 15 days' notice. It contemplates
service of notice and payment of the amount of cheque within 15 days
D from the date of receipt thereof. When the statute prescribes for service
of notice specifying a particular period, it should be expressly stated. In
absence of any such stipulation, it is difficult to hold that 15 days' notice
was thereby contemplated. The High Court, therefore, was not correct
in arriving at the aforementioned finding.
E
9. We have noticed hereinbefore the notice dated 31.10.2000 issued
by the appellant to Respondent No. 1. An information thereby was only
given that the cheque when presented was returned "unpassed" by the
bank authorities on the plea that the account had been closed. It was
F averred that in such a situation the complainant was free to take any legal
steps against the accused to get the amount of his pending bills. By the
operative p01tion of the said notice, the respondent was called upon to
remit the payment of his pending bills, otherwise suitable action shall be
taken.
G 10. Service of a notice, it is trite, is imperative in character for
maintaining a complaint. It creates a legal fiction. Operation of Section ..,.....
138 of the Act is limited by the proviso. When the proviso applies, the
main Section would not. Unless a notice is served in conformity with
Proviso (b) appended to Section 138 of the Act, the complaint petition
H
MIS. RAHUL BUILDERS v. MIS. ARIHANT FERTILIZERS 957
-)--· AND CHEMICAL [SINHA, J.]
would not be maintainable. The Parliament while enacting the said A
provision consciously imposed certain conditions. One of the conditions
was service of a notice making demand of the payment of the amount of
cheque as is evident from the use of the phraseology "payment of the said
amount of money". Such a notice has to be issued within a period of 30
-; days from the date of receipt of information from the bank in regard to B
the return of the cheque as unpaid. The statute envisages application of
the penal provisions. A penal provision should be construed strictly; the
condition precedent wherefor is service of notice. It is one thing to say
that the demand may not only represent the unpaid amount under cheque
but also other incidental expenses like costs and interests, but the same c
would not mean that the notice would be vague and capable of two
interpretations. An omnibus notice without specifying as to what was the
amount due under the dishonoured cheque would not subserve the
requirement of law. Respondent No. 1 was not called upon to pay the
(>-- amount which was payable under the cheque issued by it. The amount D
~' which it was called upon to pay was the outstanding amounts of bills, i.e.,
Rs. 8,72,409/-. The noticee was to respond to the said demand. Pursuant
thereto, it was to offer the entire sum of Rs. 8,72,409/-. No demand was
made upon it to pay the said sum of Rs. 1,00,000/-which was tendered
to the complainant by cheque dated 30.04.2000. What was, therefore, E
demanded was the entire sum and not a part of it.
11. Mr. Jain relied upon a decision of this Court in Suman Sethi v.
Ajay K. Churiwal and Anr., [2000] 2 SCC 380 wherein it was stated:
"8. It is a well-settled principle of law that the notice has to be F
}
read as a whole. In the notice, demand has to be made for the
"said amount" i.e. the cheque amount. If no such demand is made
the notice no doubt would fall short of its legal requirement. Where
in addition to the "said amount" there is also a claim by way of
interest, cost etc. whether the notice is bad would depend on the G
language of the notice. 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 be severable and
will not invalidate the notice. If, however, in the notice an omnibus H
.t
r

958 SUPREME COURT REPORTS (2007] 11 S.C.R.

A demand is made without specifying what was due under the
dishonoured cheque, the notice might well fail to meet the legal
requirement and may be regarded as bad.
9. This Court had occasion to deal with Section 138 of the Act-in
Central Bank ofIndia v. Saxons Farms 3 and held that the object
B
of the notice is to give a chance to the drawer of the cheque to
rectify his omission. Though in the notice demand for compensation,
interest, cost etc. is also made the drawer will be absolved from
his liability under Section 138 if he makes the payment of the
amount covered by the cheque of which he was aware within 15
c days from the date of receipt of the notice or before the complaint
is filed."
(Underlining is ours for emphasis]
D As therein, some other sums were indicated in addition to the
~
amount of cheque, it was, therefore, not held to be a case where the I •
dispute might be existing in respect of the entire oub"tanding amount.
12. On this aspect of the matter, we may consider K.R. Indira v.
Dr. G. Adinarayana [2003] 8 SCC 300 wherein this Court upon noticing
E Suman Sethi (supra) stated the law, thus:
" ... However, according to the respondent, the notice in question
is not separable in that way and that there was no specific demand
made for payment of the amount covered by the cheque. We have
perused the contents of the notice. Significantly, not only the cheque
F
amounts were different from the alleged loan amounts but the
demand was made not of the cheque amounts but only the loan
amount as though it is a demand for the loan amount and not the
demand for payment of the cheque amount, nor could it be said
that it was a demand for payment of the cheque amount and in
G
addition thereto made further demands as well. What is necessary
is making of a demand for the amount covered by the bounced
cheque which is conspicuously absent in the notice issued in this
case. The notice in question is imperfect in this case not because
it had any further or additional claims as well but it did not
H
M/S.RAHULBUILDERSv. M/S.ARIHANTFERTILIZERS 959
AND CHEMICAL [SINHA,J.]
specifically contain any demand for the payment of the cheque !\.
amount, the non-compliance with such a demand only being the
incriminating circumstance which exposes the drawer for being
proceeded against under Section 138 of the Act..."
13. As in the instant case, no demand was made for payment of the Il
1; cheque amount, we are of the opinion that the impugned judgment cannot
be faulted.
14. For the reasons aforementioned, there is no merit in this appeal
which is dismissed accordingly.
D.G. Appeal dismissed.
c