Word 'Demand' Not Mandatory In Cheque Dishonour Notice, 'Advice' Can Suffice: Gauhati High Court

The Gauhati High Court has held that a statutory notice under Section 138 of the Negotiable Instruments Act, 1881 (which deals with cheque dishonour) need not expressly use the word “demand” if the notice, read as a whole, clearly communicates the requirement to pay the dishonoured cheque amount.

Justice Sanjeev Kumar Sharma dismissed the criminal revision petition filed by Protima Dutta Kalita and upheld her conviction, holding that a notice using the word “advice” instead of “demand” can still satisfy the statutory requirement if it clearly communicates the requirement to pay the dishonoured cheque amount. The Bench observed:

“The requirement imposed by Proviso (b) to Section 138 of the N.I. Act is that, upon dishonor of a cheque, the payee or holder in due course is required to clearly communicate the necessity to make good the cheque amount to the drawer, and the said requirement to pay must be discernible after considering the notice as a whole. The word 'advice' is merely a polite use of language, just like 'request', but the same must legally be treated as a demand for the purpose of Section 138 of the N.I. Act if the notice as a whole conveys the requirement on the part of the drawer to make good the cheque amount.”

The case arose from a financial transaction between Protima Dutta Kalita and Rina Borgohain, where Kalita had borrowed Rs. 1,30,000 from Borgohain to meet expenses for her son's marriage. To discharge the liability, Kalita issued a cheque dated 16 December 2016 drawn on State Bank of India, Dergaon Branch. She also executed a handwritten note acknowledging the debt, bearing her signature and revenue stamps.

After the cheque was dishonoured, Borgohain initiated proceedings under Section 138 of the NI Act. The Chief Judicial Magistrate, Golaghat, convicted Kalita on 21 February 2017, sentencing her to one year's simple imprisonment and directing her to pay Rs. 3,00,000 as compensation. The Sessions Judge, Golaghat, in appeal, modified the sentence to six months' imprisonment and reduced the compensation to Rs. 2,60,000. Kalita thereafter approached the High Court challenging the conviction.

Before the High Court, Kalita argued that Borgohain had not disclosed the exact date on which the loan was advanced, which affected the credibility of the claim. She also contended that the statutory notice issued after dishonour of the cheque did not contain a clear “demand” for payment and merely “advised” repayment, failing to satisfy Proviso (b) to Section 138 of the NI Act.

Rejecting the first contention, the Court held that once the cheque and signature are admitted, the presumption under Section 139 of the NI Act (which presumes that the cheque was issued towards a legally enforceable debt or liability) applies. The burden then shifts to the accused to rebut the presumption by cross-examining witnesses or leading evidence. It held that Kalita failed to discharge this burden and that the absence of the exact date of the loan did not affect the presumption.

On the second contention, the Bench examined the statutory notice dated 9 January 2017 and held that the use of the word “advice” was only a polite expression and did not affect the validity of the notice. It relied on the Supreme Court's judgment in Central Bank of India v. Saxons Farma (1999), and reiterated that the form of language used in the notice is not material if the notice conveys the requirement to make payment. It observed:

“As can be seen from the above, in the aforesaid case as well, the word 'demand' was not used. Instead, a polite expression was used to seek payment of the cheque amount, and the consequence was also spelled out as in the present case, wherein it has been specifically stated in the said notice that failure to make the payment would lead the payee to approach the Court of law under the N.I. Act.”

Accordingly, the High Court dismissed the criminal revision petition and upheld Protima Dutta Kalita's conviction under Section 138 of the NI Act.

For Petitioners: Advocates B SINHA and H ISLAM

For Respondents: Advocates C KALITA, L K BORAH and D K BORAH