Precision in Peril: The Imperative of Exactitude in Demand Notices under Section 138 of the Negotiable Instruments Act – A Commentary on Kaveri Plastics v. Mahdoom Bawa Bahrudeen Noorul

Introduction

In the labyrinth of financial transactions, the cheque remains a cornerstone of commercial trust in India. Yet, when dishonoured, it triggers the penal machinery of Section 138 of the Negotiable Instruments Act, 1881 (NI Act), a provision designed to deter casual issuance of cheques and enforce accountability.

The recent Supreme Court judgment in Kaveri Plastics v. Mahdoom Bawa Bahrudeen Noorul, 2025 INSC 1133 (decided on 19 September 2025), serves as a stark reminder of the provision’s technical rigour. At its core, the decision underscores that a demand notice under proviso (b) to Section 138 must demand precisely the cheque amount – neither more, nor less. Even a “typographical error” rendering the demanded sum divergent is fatal, elevating form over substance in this penal domain. This ruling not only consolidates a line of precedents but also amplifies the stakes for payees, drafters, and courts, mandating meticulous compliance to sustain prosecutions.

This article dissects the judgment’s factual matrix, statutory underpinnings, and precedential edifice, while weaving in additional Supreme Court authorities to illuminate the doctrinal evolution. It argues that while Section 138 ostensibly remedies civil defaults through criminal sanctions, its strict construction – rooted in penal hermeneutics – prioritises legislative exactitude over equitable leniency, potentially frustrating genuine claims marred by clerical slips.

Factual Matrix and Procedural Odyssey

The dispute traces to a Memorandum of Understanding (MoU) for land acquisition, wherein the accused company, Nafto Gaz India Pvt. Ltd., issued Cheque No. 876229 dated 12 May 2012 for ₹1,00,00,000 in favour of the complainant, Kaveri Plastics. Presented for encashment, the cheque was dishonoured on 31 May 2012 for “insufficient funds”. Promptly, the complainant dispatched two statutory notices – dated 8 June 2012 and 14 September 2012 – accurately reciting the cheque’s particulars (number, date, bank, and amount of ₹1,00,00,000). However, the demand clauses in both notices erroneously called for payment of ₹2,00,00,000, ostensibly due to a “cut-paste” error from a prior notice involving a ₹2 crore instrument.

The complainant invoked Sections 138, 141, and 142 of the NI Act, filing a complaint before the Metropolitan Magistrate, Saket, Delhi. The accused contested, highlighting the discrepancy as vitiating the notice’s validity. The trial court proceeded, but the Delhi High Court, in exercise of inherent powers under Section 482 CrPC, quashed the proceedings on 15 December 2023, deeming the notice non-compliant with proviso (b) to Section 138. The High Court emphasised that demanding double the cheque amount created ambiguity, defeating the notice’s statutory purpose.

Aggrieved, the complainant appealed to the Supreme Court via Special Leave Petition. A Division Bench comprising Chief Justice B.R. Gavai and Justice N.V. Anjaria dismissed the appeal, affirming the quashment. The core issue framed was twofold:

• (i) whether a notice demanding an amount divergent from the cheque value satisfies proviso (b); and
• (ii) whether a plea of typographical error salvages such a notice in a penal, technical provision.

The Court’s resounding answer: No, on both counts.

Statutory Framework: The Anatomy of Section 138

Section 138 NI Act criminalises cheque dishonour for insufficiency of funds or exceeding arrangements, provided a concatenation of acts materialises:

1. issuance of a cheque for discharge of a legally enforceable debt or liability;
2. its presentation within validity;
3. dishonour by the drawee bank;
4. a written demand notice under proviso (b) within 30 days of dishonour intimation; and
5. non-payment within 15 days of notice receipt (now extended via proviso (c) amendments).

Proviso (b) is pivotal: “the payee or the holder in due course of such cheque… 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 cheque as unpaid”. The phrase “said amount of money” is the linchpin, unequivocally tethering the demand to the cheque’s face value – the “any amount of money” in the section’s main limb.

As the Court in Kaveri Plastics reiterated, this notice is no perfunctory formality but a sine qua non for offence consummation. Its object, per Central Bank of India v. Saxons Farms (1999) 8 SCC 221, is to afford the drawer an opportunity to rectify the lapse and pay the “amount covered by the cheque”, averting criminality. Deviation undermines this rehabilitative intent, rendering the complaint non-maintainable ab initio under Section 142.

Judicial Precedents: A Tapestry of Strict Construction

Ratio Decidendi: Crystallised Propositions

• Exact Demand Imperative: Proviso (b) demands replication of the cheque amount; “said amount” is inexorably the instrument’s value.
• Severability of Add-Ons: Post-core demand, interest/costs may append, provided cheque figure is distinctly flagged.
• Discrepancy’s Fatality: Higher/lower figures – even with correct ancillary details – nullify the notice.
• Error’s Inexorability: Typographical pleas falter; repeated lapses underscore non-inadvertence.
• Penal Technicality: Section 138 demands “meticulous compliance”.

Precedential Value and Practical Ramifications

Kaveri Plastics binds as clarificatory obiter, binding trial/High Courts to quash at inception where notices diverge. It harmonises the Suman Sethi-Rahul Builders continuum, slamming shut “substance” arguments.

• For payees/lawyers: Adopt templated drafting – e.g., “Demand payment of ₹X [cheque no./date/bank], plus severable interest”.
• Pending litigations face upheaval: Accused may leverage for discharge, especially pre-2025 filings with patent variances.

Conclusion

Kaveri Plastics elevates Section 138’s notice to a scalpel of precision, where a digit’s errancy dismembers prosecution. While safeguarding drawers from ambiguous demands, it risks ensnaring honest payees in technical snares, underscoring NI Act’s dual civil-penal tightrope. As commerce digitises, this judgment beckons a recalibration: stricter drafting, swifter amendments, or – ideally – parliamentary nuance to temper penal austerity without eroding cheque sanctity. Until then, exactitude is not mere prudence; it is the law’s unyielding fiat.

Written By: Inder Chand Jain
M: 8279945021
Email: [email protected]