MANU/DE/0031/2010
Equivalent Citation: II(2010)BC203, 2010(2)Crimes672
IN THE HIGH COURT OF DELHI
Crl. M.C. No. 2224/2009

Decided On: 18.01.2010

Appellants: Alliance Infrastructure Project Pvt. Ltd. and Ors.

Vs.
Respondent: Vinay Mittal
[Alongwith Crl. M.C. No. 2225/2009]
Hon'ble Judges: 
V.K. Jain, J.
Counsels: 
For Appellant/Petitioner/plaintiff: M. John and Shivam Sharma, Advs
For Respondents/Defendant: H. Hariharan, Adv.
Subject: Criminal
Catch Words
Mentioned IN
Acts/Rules/Orders: 
Negotiable Instruments Act - Section 56, Negotiable Instruments Act - Section 1
38, Negotiable Instruments Act - Section 141; Indian Penal Code - Section 420
Cases Referred: 
Joseph Sartho v. Gopinathan Nair 2009 (2) Crimes 463 (Kerala); Rahul Builders v.
Arihant Fertilizers & Chemicals and Anr. (2008) 2 SCC 321; Satya Narain Singh v.
Janardan AIR 1980 Patna 277; Kochayippa v. Suprasidhan 2002 (2) ALT (Crl.)
251; Central Bank of India and Anr. v. Saxons Farms and Ors. 1999 (8) SCC 221; Suman
Sethi v. Ajay K. Churiwala 2000 (2) SCC 380; K.R. Indira v. Dr. G. Adinarayana, 2003 (3)
JCC (NI) 273
Case Note:
Negotiable Instruments Act, 1881 - Section 138 - Cheque returned with remarks
"funds insufficient" - Cheque of Rs. 49,47,600/- was presented to the bank after
the receipt of the part payment of Rs. 16,50,000/ - -Amount due and payable to
the complainant was much less than the amount represented by the cheque, on
the date these cheques were presented for enchashment
- Section 56 specifically provides for an endorsement on a Negotiable
Instrument, in case of part-payment and the instrument can thereafter be
negotiated for the balance amount - Open to the payee of the cheque to present
the cheque for payment of only that much amount which is due to him after
giving credit for the part-payment made after issuance of cheque - Expression
"amount of money" would mean the amount actually payable by the drawer of
the cheque to the payee of the cheque - Complaint held liable to be quashed
because the complainant presented the cheque for encashment of the whole
amount and that he also demanded the whole of the amount without even
referring to the part-payment - Criminal complaint quashed.
JUDGMENT
V.K. Jain, J.
1. This order will dispose of the above referred petitions. Petitioner No. 1 Alliance
Infrastructure Project Private Ltd., issued a cheque dated 2nd May, 2008 for a sum of Rs.
30,86,000/- and another cheque of the same date for Rs. 12 lakhs in favour of the
complainant/respondent. The cheques, when presented for encashment, were returned
unpaid with the remarks signature different. When the complainant/respondent
approached the petitioners in this regard, they issued three other cheques, one for Rs. 12
lakhs, second for Rs. 3,29,000/- and the third for Rs. 31,91,650/- in lieu of the previously
dishonoured cheques. The cheques for Rs. 12 lakhs and Rs. 3,29,000/- were encashed
when presented to the bank, but the cheque for Rs. 31,91,650/- was returned unpaid
with the remarks stop payment by the drawer. A legal notice dated 23rd January, 2009
was sent to the petitioners calling upon them to make payment within 15 days from the
receipt of notice. The petitioners, however, did not make the payment whereupon a
complaint under Section 138/141 of Negotiable Instruments Actread with 141 thereof
and also under Section 420 of IPC was filed against them. The petitioners, however,
have been summoned only under the provisions of Negotiable InstrumentsAct. Being
aggrieved, the petitioners have filed Criminal Misc. Case 2225/2009 assailing the
summoning order.
2. Petitioner No. 1 had also issued two other cheques both dated 5th May, 2008; one of
Rs. 47,84,000/- and the other for Rs. 18,60,000/- to the respondent. The cheque for Rs.
18,60,000/- was honoured, but the cheque for Rs. 47,84,000/-was returned unpaid.
When the complainant/respondent approached the petitioners in this regard, they
promised to pay the cheque amount within two- three days and thereafter issued another
cheque for Rs. 49,47,600/- in lieu of the previous cheques. The cheque of Rs.
49,47,600/-, when presented to the bank, was returned with remarks funds insufficient.
Consequently, the complaint subject matter of criminal case No. 2224/2009 was filed by
the respondent against the petitioners, who were summoned under the provisions
of Negotiable Instruments Act.
3. It is an admitted case that after issue but before presentation of cheque of Rs.
49,47,600/-, petitioner No. 1 paid a sum of Rs. 16,50,000/- to the
complainant/respondent on 7th of October, 2008 by way of RTGS transfer. Though the
receipt of the aforesaid amount of Rs. 16,50,000/- has not been acknowledged in the
legal notice dated 19.12.2008 issued by the respondent through his counsel Mr. Vijay
Kumar, when the complainant came in the witness box before the trial court on 11th of
September, 2009, he admitted receipt of this payment and also stated that after the
receipt of the aforesaid amount on 7th of October, 2008 a sum of Rs. 32,97,600/-
remained due to him. Admittedly, cheque of Rs. 49,47,600/- was presented to the bank
much after the receipt of the aforesaid sum of Rs. 16,50,000/-, the cheque having been
returned vide memo dated 22.12.2008. As is evident from the legal notice itself, the
complainant required the petitioner to make payment of Rs. 49,47,600/-, though the
amount due to him on that date, as per his own showing, was only Rs. 32,97,600/-.
Thus, not only the complainant presented the cheque of Rs. 49,47,600/- for encashment
but he also made a demand for the said amount despite the fact that the amount payable
to him even on the date of presentation of the cheque was only Rs. 32,97,600/-.

4. As regards the cheque of Rs. 31,91,650/- which is the subject matter of

Crl.M.C.2225/09, admittedly, after this cheque was returned, for the first time, vide
memo dated 4.10.2008, the petitioner made a payment of Rs. 10,50,000/- to the
complainant/respondent on 20th of October, 2008. The receipt of this payment has been
acknowledged in para 7 of the legal notice dated 23.1.2009 sent by the
complainant/respondent to the petitioner. After receipt of aforesaid payment of Rs.
10,50,000/-, admittedly, the complainant/respondent again presented the cheque of Rs.
3191,650/- to the bank for encashment though the amount due to him on that date was
only Rs. 21,41,650/- However, in the legal notice the complainant demanded only the
sum of Rs. 21,41,650/- which was the amount due to him, after giving credit for the
payment of Rs. 10,50,000/-, received by him on 20th of October, 2008.

5. The first contention raised by the learned Counsel for the petitioners is that since the
amount due and payable to the complainant was much less than the amount represented
by the cheque, on the date these cheques were presented for encashment, the
petitioners were not legally required to honour these cheques and, consequently, no
offence under Section 138of the Negotiable Instruments Act is made out against
them. It has been further contended by the learned Counsel for the petitioners that in the
criminal complaint which is subject matter of Crl.M.C.2225/09 and even in the legal
notice dated 19.12.2008, the complainant called upon the petitioners to pay a sum of Rs.
49,47,000/- despite the fact that the amount due on that date was only Rs. 32,97,600/-
and the notice calling upon the petitioners to pay more than the amount due from them
being illegal and invalid, no offence under Section 138of
the Negotiable Instruments Act is made out against them.
6. Section 138 of Negotiable Instruments Act reads as under:
138. Dishonour of cheque for insufficiency, etc., of funds in the accounts

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
from out of that account for the discharge, in whole or in part, of any debt
or other liability, 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 from
that account by an agreement made with that bank, such person shall be
deemed to have committed an offence and shall without prejudice to any
other provisions of this Act, be punished with imprisonment for [a term
which may extend to two years], or with fine which may extend to twice
the amount of the cheque, or with both:

Provided that nothing contained in this section shall apply unless-

(a) The cheque has been presented to the bank within a period of
six months from the date on which it is drawn or within the period
of its validity, whichever is earlier.

(b) The payee or the holder induce 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 thirty days of the receipt of information by him from the bank
regarding the return of the cheques as unpaid, and

(c) The drawer of such cheque fails to make the payment of the
said amount of money to the payee or, as the case may be, to the
holder in due course of the cheque, within fifteen days of the receipt
of the said notice.

7. The following are the components of the offence punishable under Section 138 of

Negotiable Instrument Act:
(1) drawing of the cheque by a person on an account maintained by him with a
banker, for payment to another person from out of that account for discharge in
whole/part any debt or liability, (2) presentation of the cheque by the payee or the
holder in due course to the bank, (3) returning the cheque unpaid by the drawee
bank for want of sufficient funds to the credit of the drawer or any arrangement
with the banker to pay the sum covered by the cheque, (4) giving notice in writing
to the drawer of the cheque within 15 days of the receipt of information by the
payee from the bank regarding the return of the cheque as unpaid demanding
payment of the cheque amount, (5) failure of the drawer to make payment to the
payee or the holder in due course of the cheque, of the amount covered by the
cheque within 15 days of the receipt of the notice.
8. The question which comes up for consideration is as to what the expression amount of
money. means in a case where the admitted liability of the drawer of the cheque gets
reduced, on account of part payment made by him, after issuing but before presentation
of cheque in question. No doubt, the expression amount of money. would mean the
amount of the cheque alone in case the amount payable by the drawer, on the date of
presentation of the cheque, is more than the amount of the cheque. But, can it be said
the expression amount of money. would always mean the amount of the cheque, even if
the actual liability of the drawer of the cheque has got reduced on account of some
payment made by him towards discharge of the debt or liability in consideration of which
cheque in question was issued. If it is held that the expression amount of money. would
necessarily mean the amount of cheque in every case, the drawer of the cheque would be
required to make arrangement for more than the admitted amount payable by him to the
payee of the cheque. In case he is not able to make arrangement for the whole of the
amount of the cheque, he would be guilty of the offence punishable
under Section 138 of Negotiable Instruments Act. Obviously this could not have been
the intention of the legislature to make a person liable to punishment even if he has
made arrangements necessary for payment of the amount which is actually payable by
him. If the drawer of the cheque is made to pay more than the amount actually payable
by him, the inevitable result would be that he will have to chase the payee of the cheque
to recover the excess amount paid by him. Therefore, I find it difficult to take the view
that even if the admitted liability of the drawer of the cheque has got reduced, on
account of certain payments made after issue of cheque, the payee would nevertheless
be entitled to present the cheque for the whole of the amount, to the banker of the
drawer, for encashment and in case such a cheque is dishonoured for wants of funds, he
will be guilty of offence punishable under Section 138 of Negotiable Instrument Act.
9. I am conscious of the implication that the drawer of a cheque may make payment of a
part of the amount of the cheque only with a view to circumvent and get out of his
liability under Section 138 of Negotiable Instrument Act. But, this can easily be avoided,
by payee of the cheque, either by taking the cheque of the reduced amount from the
drawer or by making an endorsement on the cheque acknowledging the part payment
received by him and then presenting the cheque for encashment of only the balance
amount due and payable to him. In fact, Section 56 of Negotiable Instrument Act
specifically provides for an endorsement on a Negotiable Instrument, in case of part-
payment and the instrument can thereafter be negotiated for the balance amount. It
would, therefore, be open to the payee of the cheque to present the cheque for payment
of only that much amount which is due to him after giving credit for the part-payment
made after issuance of cheque. The view being taken by me was also taken by a Division
Bench of Kerala High Court in Joseph Sartho v. Gopinathan Nair 2009 (2) Crimes
463 (Kerala). As noted by the Hon'ble Supreme Court in Rahul Builders v. Arihant
Fertilizers & Chemicals and Anr. MANU/SC/4139/2007 : (2008) 2 SCC
321,Negotiable Instruments Act envisages application of the penal provisions which
needs to be construed strictly. Therefore, even if two views in the matter are possible,
the Court should lean in favour of the view which is beneficial to the accused. This is
more so, when such a view will also advance the legislative intent, behind enactment of
this criminal liability.
10. The learned Counsel for the respondent has referred to the decision of Satya Narain
Singh v. Janardan MANU/BH/0064/1980 : AIR 1980 Patna 277, where it was held that
the consideration for a Negotiable Instrument need not necessarily be consideration
mentioned in the instrument and it is permissible to prove existence of another
consideration. This judgment has no application to the matter in controversy and this is
not the case of the respondent that the petitioner was liable to pay some other debt to
him on account of which its liability towards him was equal to or more than the amount of
the cheques, on the date these cheques were presented for encashment. It is an
admitted case that on the date cheques in question were presented by the respondent for
encashment the amount due to him was much less than the amount represented by
these cheques.
11. The learned Counsel for the respondent has referred to the decision of a Single Judge
of Kerala High Court in Kochayippa v. Suprasidhan 2002 (2) ALT (Crl.) 251. In that case,
the transaction between the parties took place on 15.1.1995 when a sum of Rs. 80,000/-
was given to the accused. However, the amount of the cheque was a post- dated cheque
dated 15.1.1997 was Rs. 1 lakh. The cheque, when presented, was dishonoured for want
of funds. The case of the complainant was that the post-dated cheque was issued to
cover the liability arising from the transaction inclusive of interest for two years and,
therefore, the balance amount of Rs. 20,000/- forming part of the cheque represented
the interest on the principal amount of Rs. 80,000/- for two years. It was observed by the
High Court that viewed from this perspective the debt due to the complainant had
become Rs. 1 lakh on the date of the cheque and, therefore, the principal debt being
different from the cheque amount was not of any consequence and the accused was not
entitled to acquittal on account of difference between the amount of the cheque and the
actual amount received by him from the creditor. In the present case, this is not the case
of the complainant that on account of liability towards interest or some other liability, the
petitioner was liable to pay the whole of the amount of the cheques on the date they
were presented for encashment. Therefore, this judgment is of no help to the
respondent/complainant.

12. In respect of the cheque, subject matter of Crl.M.C.2225/2009, the amount of the
cheque was Rs. 31,91,650/- and the respondent, after giving credit for the amount of Rs.
10,50,000/- paid to him on 20.10.2008 demanded only a sum of Rs. 21,41,650/- vide
notice dated 23.1.2009. Therefore, as far as the notice of demand issued in this case is
concerned, it was legal and valid as the amount demanded was the actual amount
payable by the petitioner to the respondent. But, in respect of the cheque, subject matter
of Crl.M.C.2224/2009, the amount demanded in the notice of demand dated 19.12.2008
was Rs. 49,47,600/-, though admittedly the amount due to the respondent at that time
was only Rs. 32,97,600/-, after giving credit of Rs. 10,50,000/- received by him by RTGS
on 7.10.2008. Thus, the respondent called upon the petitioner to pay much more than
the amount actually due and payable by it. In order to comply with the demand made in
the notice, the petitioner would have been required to pay the whole of the amount of Rs.
49,47,600/- to the complainant/respondent. A perusal of the notice would show that the
complainant did not at all refer to the payment of Rs. 16,50,000/- received through
RTGS, while issuing the notice of demand dated 19.12.2008. This is not as if the
complainant/respondent acknowledged the payment of Rs. 16,50,000/- and despite that
asked the petitioner to make payment of the whole of the amount of the cheque. The
complainant/respondent did not even refer to the substantial payment which he had
received by way of RTGS. To ask the drawer of the cheque to make payment of Rs.
49,47,600/- despite having earlier received a sum of Rs. 16,50,000/- against that very
cheque is nothing but a dishonest conduct. Had the petitioner complied with the demands
made in this notice, it would have been compelled to later on chase the complainant for
recovery of the excess amount paid by it and had the complainant not paid the excess
amount received by him, the petitioner would also have been compelled to initiate legal
proceedings against him. Therefore, a notice of demand which requires the drawer of the
cheque to make payment of the whole of the cheque amount, despite receiving a
substantial amount against that very cheque, much before issue of notice, cannot be said
to be a legal and valid notice envisaged in Section 138(b) of Negotiable Instrument Act.
The expression amount of money. used in Section 138(b) of Negotiable Instrument Act,
to my mind, in a case of this nature would mean the amount actually payable by the
drawer of the cheque to the payee of the cheque. Of course, if the payee of the cheque
makes some demands on account of interest, compensation, incidental expenses etc, that
would not invalidate the notice so long as the principal amount demanded by the payee
of the cheque is correct and is clearly identified in the notice. When the principal amount
claimed in the notice of demand is more than the principal amount actually payable to the
payee of the cheque and the notice also does not indicate the basis for demanding the
excess amount, such a notice cannot be said to be a legal and valid notice envisaged
in Section 138(b) of Negotiable Instrument Act. In such a case, it is not open to the
complainant to take the plea that the drawer of the cheque could have escaped liability
by paying the actual amount due from him to the payee of the cheque. In order to make
the notice legal and valid, it must necessarily specify the principal amount payable to the
payee of the cheque and the principal amount demanded from the drawer of the cheque
should not be more than the actual amount payable by him though addition of some
other demands in the notice by itself would not render such a notice illegal or invalid.
13. In Central Bank of India and Anr. v. Saxons Farms and Ors. MANU/SC/0644/1999 :
1999 (8) SCC 221, the Hon'ble Supreme Court observed that the object of the notice
underSection 138(b) of Negotiable Instrument Act is to give a chance to the drawer of
the cheque to rectify his omission and also to protect the honest drawer. If the drawer of
the cheque is asked to pay more than the principal amount due from him and that
amount is demanded as the principal sum payable by him, it is not possible for an honest
drawer of the cheque to meet such a requirement.
14. In Suman Sethi v. Ajay K. Churiwala MANU/SC/0062/2000 : 2000 (2) SCC 380, the
Hon'ble Supreme Court held that where the notice also contains a claim by way of cost,
interest etc. and gives breakup of the claim of the cheque amount, interest, damages
etc., which are separately specified, the claim for interest, cost etc. would be superfluous
and these additional claims being severable would not invalidate the notice. It was further
held that if an ominous demand is made in a notice as to what was due against a
dishonoured cheque, the notice might fail to meet the legal requirement and may be
regarded as bad. The same consequence, in my view, would follow where the principal
sum demanded in the notice is more than the actual amount payable to the payee of the
cheque as principal sum. In the present case, while demanding Rs. 49,47,600/- vide
notice dated 19.12.2008, the complainant did not even indicate that the actual amount
due to him was only Rs. 32,97,600/- and he called upon the complainant to pay the
whole of the amount of the cheque without even trying to justify the demand made by
him.
15. In K.R. Indira v. Dr. G. Adinarayana, 2003 (3) JCC (NI) 273, a consolidated notice
was sent in respect of four cheques. Two of which were issued to him in the name of the
husband and the two were in the name of the wife. It was noted by the Hon'ble Supreme
Court that the cheque amounts were different from the alleged loan and the demand
made was not of the cheque amount but was of the loan amount. It was held that the
complainant was required to make demand for the amount recovered by the cheque
which was conspicuously absent in the notice and, therefore, the notice was imperfect.
The same would be the legal effect when a part-payment against a cheque is made, after
its issue. The amount covered by the cheque would necessarily mean the principal
amount due to the payee after giving credit for the par-payment received by him and,
therefore, if the notice does not specifically demand that particular amount, it would not
be a valid notice and would not fasten criminal liability on account of its non-compliance.

16. In Rahul Builders (supra), the outstanding amount due to the appellant from
respondent No. 1 was Rs. 8,72,409/. Respondent No. 1 issued a cheque of Rs. 1 lakh in
favour of the appellant, which, on presentation was dishonoured. A notice was thereafter
sent by the appellant to respondent No. 1 informing him about dishonour of the cheque
and asking him to remit the amount of Rs. 8,72,409/-. It was noted that the amount
which respondent No. 1 was called upon to pay was the outstanding amount of the bills,
i.e. Rs. 8,72,409/- and the notice was to respond that demand by offering the entire sum
of Rs. 8,72,409/-. It was further noted that there was no demand to pay the sum of Rs. 1
lakh which was the amount of the cheque and what was demanded was the entire sum of
Rs. 8,72,409/- and not a part of it. In these circumstances, it was held that there was no
demand for payment of the cheque amount. The decision of the High Court holding that
the notice was invalid, was upheld by the Hon'ble Supreme Court.

17. For the reasons given in the preceding paragraphs, I hold that the complaint, subject
matter of Crl.M.C. No. 2225/2009 is liable to be quashed because the complainant
presented the cheque for encashment of the whole amount of Rs. 49,47,600/- though the
amount due to him on the date of the presentation of the cheque was Rs. 32,9600/- and
he also demanded the whole of the amount of Rs. 49,47,600/- as principal sum without
even indicating the principal amount due to him under the cheque was Rs. 32,97,600/-
and without even referring to the part- payment of Rs. 16,50,000/- which he had
received by RTGS on 7.10.2008. The criminal complaint, subject matter of
Crl.M.C.2224/2009 is liable to be quashed as the complainant presented the cheque for
encashment of whole of its amount of Rs. 31,91,650/- though he had already received a
sum of Rs. 10,50,000/- before presentation of the cheque and the principal amount due
to him on the date of presentation of the cheque was only Rs. 21,41,650/-.

Ordered accordingly.

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