Notices for cheque repayment under S.138 of the Negotiable Instruments Act must contain a clear demand for payment within the stipulated time. The intention to inform the police does not negate the demand for payment.

1. Leave granted

2. These two appeals are by the complainants against the judgment and order of the learned Single Judge of the High Court of Madhya Pradesh, Gwalior Bench passed in Misc. Crl. Case Nos. 636 and 637 of 1997. By the impugned judgment and order the High Court allowed the petitions filed under S.482 Crl. P.C. and quashed the criminal proceedings namely case Nos. 172 and 1156 of 1995 pending before the judicial Magistrate, First Class, Gwalior.

3. Respondent No.1 a partnership firm, took a loan of over a crore of rupees from the appellant-bank and towards part repayment of the above loan, issued three cheques dated 29.03.1994, for Rs.1 lakh, Rs.2 lakhs and Rs.39,50,000/-. All three cheques were presented to the bank for collection but received back by the appellant unpaid on 25.4.1994 and 19.06.1994 with the remarks "funds insufficient". The appellant bank sent two registered notices dated 2.5.1994 and 27.6.1994 through the advocate and there was no dispute that the notices were received. All the cheques were again presented to the bank but returned with the same remarks namely "funds insufficient". Thereafter, the appellant bank approached the judicial Magistrate First Class by filing two complaints under S.138 of the Negotiable Instruments Act, 1881 (for short the Act). The Magistrate took cognizance in respect to both the complaints but the High Court quashed the criminal proceedings only on the ground that there was no proper notice as required under S.138 of the Act.

4. We have heard the learned counsel for the parties and the short question to be decided is whether there were valid notices as required under Clause (b) of the proviso to S.138 of the Act.

5. We extract below the relevant portion of the notices which is same in both the notices:

"The bouncing of the two cheques is a most serious matter. The said act of issuance of cheques knowing fully well that the same shall not be paid statutes an offence under S.138 of the Negotiable Instruments Act. As per the provisions of this Act my client through this notice informs you that my client shall represent the two cheques again and if the same are returned unpaid, my client shall report the matter to the Police for initiating appropriate criminal action against you all. My client further reserves the right to file criminal case against all of you for the non-payment of the cheques in question and details given above. Kindly arrange to make the payment of the cheques if you intend to avoid the unpleasant action of my client."

6. S.138 of the Act, inter alia, provides that 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 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 form that account, such person shall be deemed to have committed an offence under the above Section. According to the proviso to the said Section unless the three clauses mentioned therein are fulfilled the provisions of the Section shall not apply. In these appeals we are concerned with Clause (b) which is quoted below:

"(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 fifteen days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and"

7. Though, no form of notice is prescribed in the above Clause (b) the requirement is that notice shall be given in writing within fifteen days of receipt of information from the bank regarding return of the cheque as unpaid and in the notice a demand for payment of the amount of the cheque had to be made.

8. The object of notice is to give a chance to the drawer of the cheque to rectify his omission and also to protect honest drawer.