Answering a reference made to it, Kerala High Court has ruled that a demand notice u/s 138 of Negotiable Instruments Act need not mention the nature of the transaction that leads to the issuance of the cheque.
The bench comprising Hon’ble Justice K Vinod Chandran and Hon’ble MR Anitha held that the Negotiable Instruments Act did not mandate a particular demand notice format.
While referring to the case at hand (K Basheer vs C Usman Koya), the Bench observed that the Court could not legislate by prescribing a format, and it can’t require that nature of the transaction that leads to cheque issuance, should be disclosed in notice when the statute does not provide for it.
A Single Bench referred the question to a Division Bench after hearing an appeal filed against Sessions Court’s judgement as there was a divergence in Kerala High Court’s treatment of such cases. The Single Bench had acquitted the accused in that case. The Bench held that an accused in a complaint u/s 142 of the Act was entitled to know the accusations’ material particulars before the court tries him. If such material information is suppressed, then the accused would be acquitted, ruled the Bench.
However, in another case(Surendra Das vs the State of Kerala), the High Court held that an omission or error in stating the liability or debt would not make the demand notice invalid.
Hon’ble High Court of Kerala stated that a complaint u/s 138 requires the following factual allegations:
- The cheque was drawn on a valid account by the holder.
- The presentation was within the validity period or within six months, whichever is earlier.
- The cheque in question was dishonoured.
- Demand was made within thirty days of dishonour.
The Bench summarized the law on dishonour of cheque as follows:-
The legislative intent was to overcome the difficult procedure of filing a complaint or police case in 138 matters. It also seeks to avoid filing a civil suit and realize the decretal amount. Therefore, according to the act, once a cheque is dishonoured, the holder can demand the money within 30 days.
Lastly, the Court held that there is no need to disclose the transaction’s nature to demand the amount.