Cheque dishonour cases need notice for amount due

Ruling in Brainobrain Kids Academy Ltd v Continental Advertising Ltd, Delhi High Court recently held that “an omnibus notice” that does not specify the amount due under a dishonoured cheque or call on a person to pay the amount of the cheque will not meet the requirements of section 138 of the Negotiable Instruments Act, 1881.

Clarifying that penal statutes are to be construed strictly, the court held that a “demand for return of the amount due is an essential ingredient” for an offence to be punishable under section 138 of the act. As a result, if the amount is not specified as detailed in section 138(b), the notice is not valid.

The dispute centred on a legal notice sent by Continental Advertising to Brainobrain Kids Academy in 2007, after a cheque issued by Brainobrain was not honoured. The notice stated: “Before we initiate further action on the matter with INS and file legal proceedings against you I shall request you to immediately send us your Draft for the amount within week from the date of receipt of this letter. This is clear case of cheating and as such all damages and legal charges shall be at your cost.”

The update of court judgments is compiled by Bhasin & Co, Advocates, a corporate law firm based in New Delhi. The authors can be contacted at lbhasin@bhasinco.in or lbhasin@gmail.com. Readers should not act on the basis of this information without seeking professional legal advice.