Allahabad High Court: Notice cannot be faulted under Negotiable Instruments Act

Allahabad High Court: Notice cannot be faulted under Negotiable Instruments Act

The matter arose due to ‘insufficient funds’ in the bank, following the after-effects of the Covid-19 pandemic

While setting aside the summoning order, the Lucknow Bench of the Allahabad High Court has ruled that in a demand notice, if the other amount is mentioned with the cheque amount (in a separate portion in detail), the notice cannot be faulted under Section 138 (b) of the Negotiable Instruments Act, 1881.

A single-judge bench of Justice Suresh Kumar Gupta passed the order while hearing an application under Section 482 filed by an individual, Prashant Chandra.

The application was filed to quash the 25 April 2023 order passed by the Additional Court, Lucknow U/s 203 CrPC in a complaint under Section 138 of the NI Act, in the Police Station Hazratganj, District Lucknow.

It sought a direction to be issued to the concerned court to treat the August 2022 demand notice as a valid notice of the cheque amount of Rs.50 lakhs. And also summon the accused persons in accordance with the law and conclude the trial at the earliest.

The counsel for the applicant submitted that the applicant presented the cheque of Rs. 50 lakhs on 10 May 2022 drawn on Axis Bank Limited, Mahanagar, with his banker, the Bank of Baroda, Branch-Jopling Road, Lucknow. This was after the opposite parties gave the clearance. However, the cheque was dishonoured vide bank return memo of 3 August 2022 due to ‘Insufficient Funds.’

The applicant submitted that the trial court dismissed the complaint under Section 203 Cr. P.C with a perverse finding that the demand notice served to the accused persons was bad in law, whereas the 4 August 2022 demand notice was wholly legal and as per the provisions of Section 138 (b) of the NI Act, and as the law laid down by the Supreme Court in the 2000 Suman Sethi vs Ajay K Churiwal and Ans case.

He further mentioned that in the 4 August 2022 demand notice, there was a break-up of the cheque amount of Rs. 50 lakhs and another amount of Rs. 50 lakhs was mentioned, as per the provisions contained in the Act, along with 21 percent interest, with quarterly interests from 5 October 2022. Thus, the demand notice cannot be termed as bad in the eye of the law.

The counsel stated that the opposite parties gave two cheques - 28 March 2022 for a sum of Rs. 11 lakh drawn on Axis Bank and another cheque of 10 May 2022, drawn on Axis Bank for a sum of Rs.50 lakhs from the account of the opposite party No. 2 duly signed by the opposite party No. 3.

The petitioner deposited the cheque for Rs. 11 lakhs on 28 June 2022, but it was dishonoured. The petitioner apprised the opposite parties about it and expressed displeasure on how the opposite parties deceitfully exacted a huge amount of Rs.56 lakhs from the petitioner.

Importantly, the opposite parties maintained that things were delayed due to the after-effects of the Covid-19 pandemic, and the funds would soon be arranged for clearance of the cheques.

The counsel also submitted that the applicant had filed the complaint under the NI Act read with Section 142 of the Act, well within time before the court of the Additional Chief Judicial Magistrate-VI, Lucknow on 19 September 2022. It was admitted and transferred to the Additional Court, the next day.

He maintained that the 4 August 2022 notice issued under Section 138(b) upon the cheque having been dishonoured categorically mentioned the amount and a demand for payment of a sum of Rs.50 lakhs was made. Since the offence was deemed to have been committed upon the dishonour of the cheque, the notice sent on behalf of the petitioner (complainant) also apprised the drawer about the non-payment and mentioned the maximum amount payable by the drawer on account of the offence under Section 138.

The counsel contended that in the 25 April 2023 impugned order, the magistrate did not take note of the fact that upon perusal of the notice of demand sent on behalf of the complainant by his lawyer, it was apparent that a demand had been made to pay a sum of Rs.50 lakhs within 15 days of the receipt of the notice.

He added that another Rs. 50 lakhs were mentioned by virtue of the provisions contained in Section 138 of the Act, along with 21 percent quarterly interest.