Supreme Court Rules: Notice Under Section 138 of NI Act Nullified for Ambiguous Demand

In a recent verdict, the Supreme Court nullified a criminal case pertaining to the dishonoring of a cheque, declaring a notice issued under Section 138 of the Negotiable Instruments Act, 1881 invalid. The court deemed the demand in the notice to be overly general, prompting the dismissal of the case.

The petitioner, holding the notice, approached the Delhi High Court seeking the annulment of the summoning order issued by a Magistrate. The argument presented was that the notice contained a generic demand without specifying the exact amount owed under the dishonored cheque. This, it was contended, failed to meet the legal requirements set forth by the Supreme Court in the precedent of Suman Sethi vs. Ajay K. Churiwal and Anr.

The Delhi High Court, however, rejected the plea, stating in its order that the notice, in question, did not seek the total outstanding amount but only the cheque amount and an additional compensation of the same value, along with Rs. 50,000 for mental distress. The court held that the compensation and harassment claims were distinguishable and did not invalidate the notice.

Dissatisfied with the High Court’s ruling, the petitioner pursued a Criminal Appeal before the Supreme Court. The bench, comprising Justices CT Ravikumar and PV Sanjay Kumar, referenced the Suman Sethi case and emphasized that a demand notice must explicitly state the ‘cheque amount’ to be considered valid. The court clarified that while additional claims in the notice, such as interest, damages, etc., are admissible if separately specified, an omnibus demand for the cheque amount renders the notice invalid.

Upon scrutinizing the notice served to the appellant, the Supreme Court found an all-encompassing demand of Rs. 6,50,000, apart from interest, damages, and notice charges. The court concluded that this demand was indeed omnibus, as the stated amount of Rs. 6,50,000 did not align with the actual cheque amount.

In adherence to the legal principles laid down in the Suman Sethi case, the Supreme Court ruled the demand notice invalid and consequently quashed the summoning order issued by the Metropolitan Magistrate. The decision was reached in the case of Upasana Mishra v. Trek Technology India Pvt. Ltd.