Crl. A. No.1230 of 1997

25th March, 2004

Petitioner Counsel: Mr. S. NIRANJAN REDDY
Respondent Counsel: Mr. J. SURYA SATISH

Cases Cited:
Andhra Engineering Corporation, Secunderabad Vs. TCI Finance Ltd. Secunderabad, 1999 ALL MR (Cri) JOURNAL 51=1999(3) ALD 393 [Para 11]
M/s. Yankay Drugs and Pharmaceuticals Ltd. Vs. M/s. Citi Bank, 2001(3) ALL MR (JOURNAL) 25=2001(2) LS 71 [Para 15]
Suman Sethi Vs. Ajay K. Churiwal, 2000 ALL MR (Cri) 645 (S.C.)=JT 2000(1) SC 493 : (2000)2 SCC 380 [Para 15]
K. R. Indira Vs. Dr. G. Adinarayana, 2003 ALL MR (Cri) 2706 (S.C.)=2003 SCC (Crl.) 2002 [Para 16,18]

JUDGMENT

-This appeal is preferred by the complainant in C.C. No.783 of 1995 on the file of the XI Metropolitan Magistrate, Secunderabad taken on file for the offence under Section 138 of the Negotiable Instruments Act, 1881 (for short 'the Act').

2. The factual matrix leading to the filing of this appeal is briefly as under :

3. The accused approached the complainant with a proposal for bill discounting facility for which the complainant accepted. The bills were discounted on 23-12-1994 and after deducting the commission the balance amount was paid to the accused. The facility was given for 90 days. The accused has given post-dated cheque bearing No.880944 dated 23-3-1995 for Rs.26,12,742/- drawn on United Western Bank Limited, Hyderabad. Subsequent to the date of issuing the cheque, the accused paid Rs.12,50,000/- on 25-4-1995 and promised to settle the account by the end of May, 1995. On 9-6-1995 the complainant company wrote a letter to the accused requesting to settle the account before 15-6-1995, otherwise it will present the cheque on 16-6-1995. Since there was no effort from the accused to settle the account, on 16-6-1995 the complainant presented the cheque in Canara Bank, M. G. Road, Secunderabad. The same was dishonoured on 20-6-1995 with an endorsement "Funds Insufficient". On 24-6-1995 the complainant wrote a letter to the accused and requested to pay the balance amount of Rs.15,16,329=17 ps. from the date of receipt of the notice. The accused received the notice and gave a reply on 10-7-1995 admitting the issuing of cheque. The legal debt due to the complainant was Rs.15,16,329=17 ps. Subsequently, the complainant filed a complaint before the lower Court for the offence under Section 138 of the Act.

4. The complainant in order to prove the guilt of the accused examined its representative as P.W.1 and marked Exs.P.1 to P.11.

5. No oral or documentary evidence was adduced by the accused.

6. The lower Court after considering the material available on record acquitted the accused under Section 255(1), Cr.P.C. for the offence under Section 138 of the Act observing that the bank people might have returned the cheque on the ground that the funds available in the Bank are insufficient to honour the cheque for Rs.26,12,742/-. The lower Court further observed that there is no evidence to show as to what is the amount available in the account of the accused as on the date of presentation of the cheque. The non-examination of the bank official is fatal to the complainant's case. The lower Court also observed that the complainant instead of getting the cheque for balance amount after deducting the part-payment made by the accused, presented the cheque as it is. Since the endorsement of the bank is not for the amount legally due to the complainant, the complaint is liable to be dismissed.

7. The complainant being aggrieved by the judgment of the lower Court dated 1-9-1997 preferred this appeal questioning its validity and legality.

8. Section 138 of the Negotiable Instruments Act, 1881 reads as follows :

"138. Dishonour of cheque for insufficiency, etc., of funds in the accounts:- 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, 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 to have committed an offence and shall without prejudice to any other provisions of this Act, be punished with imprisonment for a term which may be extended to two years, or with fine which may extend to twice the amount of the cheque, or with both :

Provided that nothing contained in this section shall apply unless-

(a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier.

(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 thirty 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 holder in due course of the cheque, within fifteen days of the receipt of the said notice.

Explanation :- For the purpose of this section, "debt or other liability" means a legally enforceable debt or other liability."

9. The learned Counsel for the appellant-complainant submitted that the accused did not dispute the issuance of cheque for Rs.26,12,742/- and after adjusting the amount of Rs.12,50,000/- paid by the respondent-accused, the amount due to the complainant is Rs.15,16,329=17 ps. Since the accused did not respond to the notice given by the complainant, the cheque for the entire amount was presented to the bank and the bank returned the cheque with an endorsement "Funds Insufficient". The learned Counsel further submitted that the statutory notice required to be issued under the Act was issued only for the actual amount due from the accused, therefore, the notice is valid and as the accused failed to pay the amount covered by the notice, he is liable for conviction for the offence under Section 138 of the Act.

10. The learned Counsel for the respondent-accused submitted that though the cheque was issued for Rs.26,12,742/-, the accused made payment of Rs.12,50,000/- subsequent to that date, therefore, the complainant after adjusting the amount ought to have returned the cheque demanding the accused to issue another cheque. Instead of resorting to that, the complainant presented the cheque for the entire amount. He further submitted that the statutory notice is supposed to be issued for the amount covered by the cheque, but in view of the subsequent payment made by the accused, the notice was issued only for the balance amount, therefore, it cannot be treated as a valid notice. When once the notice is not valid, the prosecution cannot be maintained and the respondent is not liable for any punishment under Section 138 of the Act.

11. The learned Counsel for the appellant-complainant relied on a decision rendered by Justice K. B. Siddappa, a learned Single Judge of this Court, as he then was, in Andhra Engineering Corporation, Secunderabad Vs. TCI Finance Ltd., Secunderabad, 1999(3) ALD 393, in support of his contention that the complaint is maintainable and that the accused is liable for conviction.

12. In the case covered by the above decision, a cheque was issued for an amount of Rs.10,76,000/- and a sum of Rs.3,50,000/- was paid subsequent to the issuance of the cheque. When the cheque was subsequently presented after issuing of notice for the balance amount due under the cheque after deducting the amount paid, the learned Judge held that the notice is valid and the failure of the accused to pay the said amount renders him punishable for the offence under Section 138 of the Act.

13. The learned Judge laid down the above principle taking into consideration the circumstances referred to in the said decision. The learned Judge while dealing with the said matter and while referring to certain other decisions rendered by Calcutta and Kerala High Courts observed that when excess amount was claimed than the amount covered by the debt, the difference will create difficulty to the drawee to know how much he has to pay and that makes the notice insufficient and vague and the notice will become illegal.

14. In the case on hand, the learned Counsel for the respondent-accused submitted that the complainant included the interest at 24% without furnishing the details in the legal notice and unless the details regarding the principal amount and the rate of interest claimed therein are separately mentioned, it becomes difficult for the accused to know as to how much amount he paid and in the light of the above circumstances the notice becomes illegal.

15. The learned Counsel for the respondent-accused relied on a decision of R. Ramanujam, J., a learned Single Judge of this Court, as he then was, in M/s. Yankay Drugs and Pharmaceuticals Ltd. Vs. M/s. Citi Bank and another, 2001(2) LS 71 : [2001(3) ALL MR (JOURNAL) 25], wherein the learned Judge while referring the case of Suman Sethi Vs. Ajay K. Churiwal, JT 2000(1) SC 493 : (2000)2 SCC 380, (decision rendered by the Hon'ble Supreme Court) held that while demanding payment by issuing a notice under Section 138 proviso (b) of the Act, the payee or the holder in due course must demand payment of the amount covered by the cheque. If the demand is for a lesser amount or for a higher amount not covered by the cheque, which was dishonoured, then the prosecution must fail as the statutory requirement of Section 138 proviso (b) is not fulfilled.

16. In K. R. Indira Vs. Dr. G. Adinarayana, 2003 SCC (Crl.) 2002, the Supreme Court while considering the scope of Section 138 proviso (b) of the Act held that in the notice issued under Section 138 proviso (b), specific demand for payment of the sum covered by the cheque dishonoured has to be made. If the notice provides sufficient information envisaged by the statutory provisions and contains the specific demand, the mere fact that it was a consolidated notice, and/or that further demands in addition to the statutorily envisaged demand were also found to have been made may not invalidate the same. In the absence of specific demand for the cheque amount, the notice was held to be invalid.

17. In the case covered by the above decision, the Supreme Court observed as follows :

"Significantly, not only the cheque 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 and in addition thereto made further demands as well. What is necessary is making a demand for the amount covered by the bounced cheque, which is conspicuously absent in the notice issued. The notice in question is imperfect in this case, not because it had any further or additional claims as well but it did not specifically contain any demand for 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."

18. The decision rendered by Ramanujam, J., makes the position clear that if the notice is either for lesser amount or for more amount than the amount covered by the cheque, it amounts to failure to fulfill all the technical formalities contemplated under Section 138 of the Act, therefore, the respondent-accused herein cannot be prosecuted. The judgment of the Supreme Court in K. R. Indira (supra), is also making the position clear that unless there is a specific demand in the legal notice in respect of the amount covered by the cheque, the appellant-complainant cannot proceed against the accused under Section 138 of the Act.

19. In the case on hand, it is an undisputed fact that the notice under Section 138 proviso (b) was not issued for the amount covered by the cheque, therefore, it falls short of the fulfillment of the requirements under Section 138 of the Act and it cannot be treated as a valid notice. In the absence of a valid notice, the prosecution under Section 138 of the Act cannot be maintained. In the light of the above circumstances, the lower Court was right in coming to the conclusion that the accused is entitled for acquittal.

20. In the light of the foregoing discussion, I do not find any grounds to interfere with the judgment of the lower Court. The appeal is accordingly dismissed.

Appeal dismissed.