The Supreme Court of India, in its decision in Kaveri Plastics v. Mahdoom Bawa Bahrudeen Noorul decided on September 19, 2025, dismissed the appeal affirming that a statutory demand notice under Section 138 of the Negotiable Instruments Act, 1881, is invalid if the amount demanded differs from the actual cheque amount, even if the discrepancy is a "typographical error." This judgment reinforces the principle of strict compliance with the provisions of a penal statute.
The brief facts of the cases go as follows:
The appellant, Kaveri Plastics, received a cheque for ₹1 crore from the respondent, dated May 12, 2012, which was subsequently dishonoured due to "insufficient funds." The appellant, through its lawyer, issued a statutory demand notice to the respondent in June 2012, following due process of law, as required by Section 138 of the NI Act. However, the notice erroneously demanded a payment of ₹2 crore, which was double the actual cheque amount of ₹1 crore. The appellant later claimed this was a "typographical error." This error was repeated in a subsequent notice sent in September 2012 again demanding a payment of ₹2 crore from the Respondent, instead of ₹1 crore. The appellant filed a criminal complaint bearing no. 523804 of 2016 before the Delhi District Courts, under Section 138 of the NI Act. The Metropolitan Magistrate rejected the respondent's plea to discharge the case. However, the Delhi High Court later vide Crl. M.C. No. 2164 of 2022 and Crl. M.A. No. 9155 of 2022, on February 26, 2024, quashed the criminal complaint, ruling that the demand notice was invalid because it did not comply with the statutory requirement of demanding the "said amount of money," which refers to the exact cheque amount. The appellant then appealed to the Supreme Court, arguing that the discrepancy was a typographical error, and this should not invalidate the case.
Hence, the Hon’ble Supreme Court was posed with the crucial question of law - Does a demand notice under Section 138 of the Negotiable Instruments Act remain valid if the amount demanded is different from the actual cheque amount?
The Supreme Court bench, led by Chief Justice B.R. Gavai and Justice N.V . Anjaria, upheld the High Court's decision and dismissed the appeal. The Court reasoned that the demand notice was invalid for the following reasons:
a. Mandatory Compliance: The Court emphasized that a demand notice is a mandatory and essential condition for prosecuting an offense under Section 138 of the NI Act. The notice must demand the "said amount of money," which means the exact cheque amount. This is a strict legal requirement that must be fulfilled precisely.
b. Strict Interpretation of Penal Statutes: Since Section 138 is a penal provision, it must be interpreted strictly. Any ambiguity in the demand notice, such as demanding an amount different from the cheque, undermines the very purpose of the notice, which is to give the drawer a clear opportunity to pay the exact amount owed.
c. "Typographical Error" Defence Rejected: The Court explicitly rejected the appellant's argument that the discrepancy was merely a typographical error. It held that even an inadvertent error is fatal to the validity of the notice. The fact that the same error was repeated in two different notices further weakened the appellant's claim of an innocent mistake.
d. Clarity and Ambiguity: A notice demanding a higher or different amount creates ambiguity and fails to clearly inform the accused about the exact liability arising from the dishonoured cheque. The Court clarified that while additional claims like interest or legal costs can be included, they must be specified separately, and the cheque amount itself must be correctly stated.
The Supreme Court extensively relied on its findings to support the aforesaid, in the following precedents:
1. Suman Sethi vs Ajay K. Churiwal (2000) 2 SCC 380
2. Central Bank of India vs Saxons Farms (1999) 8 SCC 221
3. Rahul Builders vs Arihant Fertilizers (2008) 2 SCC 321
4. Dashrathbhai Trikambhai Patel vs Hitesh Mahendrabhai Patel (2023) 1 SCC 578
In conclusion, this judgment is a significant reaffirmation of the principle that meticulous adherence to statutory requirements is non-negotiable in cases under the Negotiable Instruments Act. It serves as a crucial reminder for complainants and legal practitioners to exercise extreme care in drafting demand notices, as even seemingly minor errors can lead to the dismissal of an otherwise valid complaint.
