Background of the case

The case involved a cheque issued by the accused, Mahdoom Bawa Bahrudeen Noorul, in favour of Kaveri Plastics for ₹1 crore. Upon presentation, the cheque was dishonoured. As required under Section 138 of the Negotiable Instruments Act, 1881 (NI Act), the complainant issued a statutory demand notice.

However, the notice mistakenly demanded ₹2 crores instead of the actual cheque amount of ₹1 crore. This discrepancy became the focal point of the dispute.

Issue Involved

The key issue before the Supreme Court was: – Whether a demand notice under Section 138 NI Act is valid if the amount demanded is different from the actual cheque amount?

Judgment

The Supreme Court ruled that: 1. Strict Compliance Required – Section 138 NI Act mandates exact compliance with notice requirements. The amount demanded in the notice must match the cheque amount precisely. 2. No Scope for Substantial Compliance – A mismatch, even if claimed to be a typographical or copy-paste error, invalidates the notice. 3. Criminal Proceedings Demand Precision – Since Section 138 proceedings are penal in nature, the statutory requirements must be followed strictly.

Given that the demand notice asked for ₹2 crores instead of ₹1 crore, the Court held the notice defective. As a result, the complaint under Section 138 was deemed not maintainable.

Decision

The Supreme Court dismissed the complaint filed by Kaveri Plastics, upholding the quashing of proceedings against the accused.

Implications for Businesses and Legal Practitioners

• Businesses must ensure accuracy while issuing demand notices under Section 138.
• Legal practitioners should exercise caution in drafting notices, as even clerical errors can nullify an entire case.