You May Lose Your Cheque Bounce Case If Your Legal Notice Is Defective: Supreme Court’s Clear Warning

Supreme Court’s Landmark Ruling on Omnibus Demand Notices Under Section 138 NI Act: What Cheque Dishonour Victims Must Know

In a significant judgment dated December 12, 2023, the Supreme Court of India in Upasana Mishra v. Trek Technology India Pvt. Ltd. (Criminal Appeal No. 3786 of 2023) has clarified the legal requirements for demand notices under Section 138 of the Negotiable Instruments Act, 1881. This ruling is a crucial development for anyone who has faced the frustration and financial loss caused by cheque dishonour.

Facts of the Case

The appellant, Ms. Upasana Mishra, issued a legal demand notice to the respondent company after a cheque was dishonoured. The notice demanded a lump sum amount of ₹6,50,000 which included:

- The cheque amount (not specifically stated),

- Interest at 12% per annum from the date of dishonour,

- Damages of ₹50,000 per month,

- Notice charges of ₹5,500.

The notice did not clearly specify the exact cheque amount separately but made an omnibus demand combining all these amounts.

When the respondent failed to pay, criminal proceedings were initiated under Section 138 of the NI Act. The respondent challenged the validity of the notice, arguing that it did not comply with the statutory requirement of specifically demanding the cheque amount.

The Delhi High Court dismissed the challenge, but the Supreme Court granted leave to appeal.

Issue for Consideration

Whether a demand notice under Section 138 of the Negotiable Instruments Act is valid if it makes an omnibus (lump sum) demand without specifically demanding the cheque amount?

Supreme Court’s Judgment

The Supreme Court allowed the appeal and quashed the criminal proceedings against the respondent. The Court held that:

- A demand notice under Section 138 must specifically demand the cheque amount.

- An omnibus demand that lumps together the cheque amount with interest, damages, and other charges without clear specification of the cheque amount is invalid.

- The notice in this case failed to comply with this requirement, making it legally defective.

- Consequently, the summoning order based on such a defective notice was quashed.

Reasoning Behind the Judgment

The Court relied heavily on its earlier ruling in Suman Sethi v. Ajay K. Churiwal (2002) 2 SCC 380, which laid down the principle that:

- The demand notice must be read as a whole.

- The notice must clearly demand the “said amount” i.e., the cheque amount.

- Additional claims such as interest, damages, or costs can be included only if they are separately specified and severable.

- An omnibus demand without clear breakup fails the legal requirement and invalidates the notice.

The Supreme Court reiterated that the purpose of the demand notice is to give the drawer of the cheque a clear opportunity to pay the cheque amount within 15 days to avoid prosecution. If the notice is ambiguous or lumps all amounts together, it defeats this purpose.

What This Means for Cheque Dishonour Victims

This judgment is a wake-up call for all cheque holders seeking to recover dishonoured cheque amounts:

- Ensure your legal demand notice specifically states the cheque amount separately.

- Interest, damages, and other charges must be clearly itemized and not clubbed into a single lump sum.

- A defective omnibus demand notice can lead to dismissal of your case at the very outset.

- Properly drafted notices increase the chances of successful recovery and prosecution.

Need Help Recovering Money from Dishonoured Cheques?

If you or your business has suffered due to cheque dishonour, don't let technical defects in your demand notice jeopardize your claim. Expert legal guidance is crucial to navigate these complexities and enforce your rights effectively.

Contact Me for Expert Legal Assistance

Ganesh Mishra

Advocate, Supreme Court of India & Delhi High Court  

Email: advocateganeshmishra@gmail.com  

Phone: 011-47543026 | Mobile: 9136273395  

Website: [www.mishraandassociates.com](http://www.mishraandassociates.com)

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