Cheque bouncing: Proper notice must before action
The Supreme Court said a notice in accordance with the law is required for initiation of proceedings in cases related to dishonoured cheques.
By Sanjay K Singh, TNN |
NEW DELHI: The Supreme Court on Friday said a notice in accordance with the law is required for initiation of proceedings in cases related to dishonoured cheques. A bench comprising justice SB Sinha and justice HS Bedi said: “Unless a notice is served in conformity with proviso (b) appended to Section 138 of the Negotiable Instruments Act, the complaint petition would not be maintainable.
The Parliament, while enacting the provision, consciously imposed certain conditions. One of the conditions was service of a notice making demand of the payment of the cheque as is evident from the use of the phraseology payment of the said amount of money.”
An omnibus notice, without specifying as to what the amount due through the dishonoured cheque was, would not subserve the requirement of law, the court said. Such a notice has to be issued within 30 days from the date of receipt of information from the bank in regard to the return of the cheque, the court said. It said for initiation of criminal proceedings against the defaulter, the service of a notice is imperative.
The apex court dismissed an appeal, which had sought initiation of criminal proceedings against the defaulter, on the ground of failure to serve a proper notice in terms of proviso appended to Section 138.
The party filing the appeal, Rahul Builders, had entered into a contract with Arihant Fertilizers & Chemicals for construction of a building and factory premises. The appellant executed the contract. It submitted bills for execution of contractual work for Rs 26,46,647. Arihant Fertilizers paid Rs 17,74,238 and Rs 8,72,409 was outstanding.
A cheque for Rs 1,00,000 drawn on Federal Bank, Indore, was issued by Arihant. But upon presentation of the cheque, it was not honoured. Subsequently, a notice was sent saying that the cheque for Rs 1,00,000 was returned. The notice asked the company to pay the dues.
The court said Arihant Fertilizer was not called upon to pay the amount which was payable under the cheque issued by it. The amount which it was called upon to pay was the outstanding amount of Rs 8,72,409. No demand was made upon it to pay the sum of Rs 1,00,000 tendered to the complainant through the issued cheque. It was not proper, the court said.
The Parliament, while enacting the provision, consciously imposed certain conditions. One of the conditions was service of a notice making demand of the payment of the cheque as is evident from the use of the phraseology payment of the said amount of money.”
An omnibus notice, without specifying as to what the amount due through the dishonoured cheque was, would not subserve the requirement of law, the court said. Such a notice has to be issued within 30 days from the date of receipt of information from the bank in regard to the return of the cheque, the court said. It said for initiation of criminal proceedings against the defaulter, the service of a notice is imperative.
The apex court dismissed an appeal, which had sought initiation of criminal proceedings against the defaulter, on the ground of failure to serve a proper notice in terms of proviso appended to Section 138.
The party filing the appeal, Rahul Builders, had entered into a contract with Arihant Fertilizers & Chemicals for construction of a building and factory premises. The appellant executed the contract. It submitted bills for execution of contractual work for Rs 26,46,647. Arihant Fertilizers paid Rs 17,74,238 and Rs 8,72,409 was outstanding.
A cheque for Rs 1,00,000 drawn on Federal Bank, Indore, was issued by Arihant. But upon presentation of the cheque, it was not honoured. Subsequently, a notice was sent saying that the cheque for Rs 1,00,000 was returned. The notice asked the company to pay the dues.
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The court said Arihant Fertilizer was not called upon to pay the amount which was payable under the cheque issued by it. The amount which it was called upon to pay was the outstanding amount of Rs 8,72,409. No demand was made upon it to pay the sum of Rs 1,00,000 tendered to the complainant through the issued cheque. It was not proper, the court said.
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