cheque bounce notice – proforma ?=hough, no form of notice is prescribed in the above Clause (b) 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. The object of 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. 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 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 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. 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 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 or directly to the appellant bank. By not doing so the provision of Section 138 is clearly attracted.

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CASE NO.:
Appeal (crl.) 1056-57 of 1999

PETITIONER:
CENTRAL BANK OF INDIA AND ANR.

RESPONDENT:
SAXONS FARMS AND ORS.

DATE OF JUDGMENT: 07/10/1999

BENCH:
G.T. NANAVATI & S.N. PHUKAN

JUDGMENT:
JUDGMENT

1999 Supp(3) SCR 534

The Judgment of the Court was delivered by PHUKAN, J. Leave granted.

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. Crl. 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 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 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
received 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
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
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 notice as
required under Section 138 of the Act.

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 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 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 appropriate criminal action against you all. My client further
reserves the right to file criminal case against all of you for the non-
payment 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 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 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 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
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 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 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 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.

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 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 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
for initiating appropriate criminal action against the respondents. Drawing
our attention to the above statement in the notices it is urged on behalf
of 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 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
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 proper
notice for payment as required under Section 138 of the 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.

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