The Supreme Court bench of Justice L Nageswara Rao and Justice M.R. Shah held that merely stating ‘loan amount’ in the demand notice does not render it invalid if the amount is the same as the ‘cheque amount’. The facts are that the Respondent had paid an amount of Rs. 50,000/- as hand loan to the Appellant on the assurance that it would be duly paid within 6 months. The Appellant issued 2 cheques of Rs. 25,000/- each to the Respondent, which were dishonored as per the bank memo with the remark ‘Funds Insufficient’. Notices were issued but payment had not been made even then which resulted in the filing of the complaints under Section 138 NI Act.
The Trial Court dismissed the complaints stating that the notices were defective on the ground that they mentioned loan amount and cheque amount and therefore were contrary to the provisions of Section 138 NI Act. The High Court however, negated upon the judgment of the Trial Court stating that
- the cheques in question were issued for the discharge of a legally
- there was no failure on the part of the respondent/complainant in making a demand for the payment of the amount of the cheque by issuance of a notice.
- The High Court observed that the words “loan amount” should not have been mentioned in the notice.
The High Court held that the amounts mentioned in the notices were the same as that of the cheques issued and therefore reversed the judgment of the Trial Court thereby convicting the appellant.
In the present appeal, the Counsel for the Appellant argued that the demand notice under Section 138 NI Act should be only for the cheque amount and not the loan amount, which was the same in case of the present case. It further relied on the judgment of the Supreme Court in Suman Sethi vs. Ajay K. Churwal & Anr. (2000) 2 SCC 380, K.R. Indira vs. Dr. G. Adinarayana (2003) 8 SCC 301 and Rahul Builders vs. Arihant Fertilizers & Chemicals & Anr. (2008) 2 SCC 321 to support its arguments.
The Bench dismissed the appeal thereby upholding the decision of the High Court on the following grounds:
“There is no dispute regarding the proposition that the notice issued under Section 138 of the NI Act has to be only for the cheque amount and not for any other amount more than the cheque amount. In the judgments referred to above the notice issued under Section 138 of the NI Act referred to loan amounts which were much higher than the cheque amounts. Whereas, in the instant case, the loan amount and the cheque amount is the same i.e., Rs.50,000/-. Therefore, the above mentioned judgments cited by the learned counsel for the appellant are not applicable to this case.”
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