Supreme Court invalidates omnibus demand notice under section 138 of Negotiable Instruments Act, 1881

Background of the Case

In the present matter, a lump sum demand for INR 6,50,000/- was made in the legal notice, inclusive of the demand for interest @12 % per annum since 12.11.2013 (the date of returning of the cheque), INR 50,000/- towards damages and INR 5,500/- as notice charge, without explicitly reflecting the actual details of the cheque amount.

Consequently, the appellant-notice holder had approached the Delhi High Court seeking the quashing of the summoning order passed by the Metropolitan Magistrate, South East, Saket Court, New Delhi, after the institution of suit under section 138 Negotiable Instrument Act and in furtherance to legal notice, arguing that the notice failed to specify the amount due under the dishonoured cheque, as mandated by the precedent set in the case of Suman Sethi vs. Ajay K. Churiwal and Anr.

The Delhi High Court, however, dismissed the petition, emphasizing that while the notice did not explicitly ask for the total amount due, it separately demanded the amount of the cheque, compensation for its value, and an additional sum of INR 50,000 for mental harassment. The High Court found these demands to be severable and concluded that they did not invalidate the notice vide order dated: 13.04.2024

A question of law was raised by the Appellant before the Hon’ble Supreme Court, seeking condemnation on the legality of omnibus Demand Notice under section 138 of Negotiable Instrument Act and annulment of Order affirming the same, of the High Court of Delhi at New Delhi, dated: 13.04.2023.

Appellant – Ms. Upasana Mishra

Respondent – M/s Trek Technology India Pvt. Ltd.

Judicial Opinion in the Landmark Cases

1. Suman Sethi Vs. Ajay K. Churiwal and Anr. - In the notice, demand has to be made for the "said amount" i.e. cheque amount. If no such demand is made the notice no doubt would fall short of its legal requirement.

2. Central Bank of India & Anr. v. M/s. Saxons Farms & Ors. - the object 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 drawer will be absolved from his liability under Section if he makes the payment of the amount covered by the cheque of which he was aware within 15 days from the date of receipt of the notice or before complaint is filed. 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 dispute might be existing in respect of the entire outstanding amount.

Judgement

Upon scrutinizing the demand notice in question, the Supreme Court found that an omnibus/ lump sum demand for INR 6,50,000 was requested alongside demands for interest, damages, and notice charges. Notably, the demanded amount of INR 6,50,000 wasn’t the actual cheque value, leading the Court to conclude that the notice was invalid as per the principles established in the Suman Sethi case.

Consequently, the Supreme Court allowed the criminal appeal filed by the appellant, setting aside the summoning order passed by the Metropolitan Magistrate, Negotiable Instruments Act, Saket Court, New Delhi.

The verdict reaffirms that demands in a notice under the Negotiable Instruments Act must specifically include the ‘cheque amount,’ and any additional claims should be clearly distinct from it. The failure to make a clear demand for the cheque amount renders the notice invalid.

This judgment by the Supreme Court acts as a pivotal clarification on the legal requirements for demand notices under the Negotiable Instruments Act, setting a precedent for future cases involving dishonoured cheques. The Court’s emphasis on the necessity of clarity and specificity in demanding the cheque amount upholds the sanctity of legal notices under the Act.

Source

“Suman Sethi Vs. Ajay K. Churiwal & Another [(2002) 2 SCC 380)]”

“Central Bank of India & Anr. v. M/s. Saxons Farms & Ors., JT (1999) 8 SC 58”