Strict Compliance with Section 138(b): Delhi High Court Re-asserts the Necessity of a Specific Demand Notice in Cheque Dishonour Cases

Introduction

In Barun Bhanot v. M/s Annie Impexpo Marketing Pvt. Ltd. & Anr. (2025 DHC 4934), the Delhi High Court revisited the foundational prerequisite under Section 138(b) of the Negotiable Instruments Act, 1881 (NI Act) – the issuance of a valid and specific demand notice claiming “the said amount of money” mentioned in the dishonoured cheque(s).

The petitioner, a freight-forwarding consultant, supplied services to the respondent-company and allegedly received two cheques of ₹50,000 each towards partial discharge of outstanding dues. Upon dishonour, a complaint under Section 138 NI Act was filed after sending a legal notice demanding payment of all outstanding dues (₹2,64,689/-) but without expressly demanding the cheque amount (₹1,00,000/-).

The Metropolitan Magistrate (MM) acquitted the respondents. Challenging the acquittal via leave to appeal, the petitioner argued that the statutory presumption under Sections 118 and 139 NI Act was ignored. Justice Amit Mahajan, however, upheld the acquittal, crystallising two guiding principles:

A vague or omnibus demand notice that does not isolate the cheque amount is fatal to the prosecution.
Once the accused raises a probable defence sufficient to rebut the presumption, the burden decisively shifts back to the complainant.

Summary of the Judgment

The Court affirmed that an acquittal under Section 138 NI Act will stand unless the appellate court finds the lower-court view “perverse or wholly unsustainable.”
Section 138(b) imposes a mandatory obligation to demand “the said amount of money” (i.e., the cheque amount). The petitioner demanded the entire outstanding instead, making the notice invalid.
The respondents produced discrepancies in invoices (double billing, unmatched statements) creating a probable defence that no definite debt existed.
Because the notice was defective and the defence plausible, the statutory presumption under Section 139 was rebutted; the complainant failed to prove debt as a matter of fact; hence, the High Court refused leave to appeal and dismissed the petition.

Analysis

A. Precedents Cited and Their Influence

Rohitbhai Jivanlal Patel v. State Of Gujarat (2019) 18 SCC 106
• Clarified that appellate restraint in overturning acquittals eases in NI Act cases due to the statutory presumption.
• Used to show the High Court can revisit evidence, yet still needs “perversity” to interfere. Here, no perversity was found.
Rangappa v. Sri Mohan (2010) 11 SCC 441
• Established that once execution of cheque is admitted, presumptions under Sections 118 & 139 arise.
• The Court re-affirmed Rangappa but highlighted how the presumption is rebuttable.
Rajesh Jain v. Ajay Singh (2023) 10 SCC 148
• Elaborated the two-step burden-shifting mechanism: activation of presumption, followed by the accused’s duty to create doubt.
• Quoted extensively in paras 10–11 of the judgment to frame the “probable defence” threshold.
Rahul Builders v. Arihant Fertilizers & Chemicals (2008) 2 SCC 321
• Held that vigilantly precise notices are indispensable; an omnibus demand renders the complaint non-maintainable.
• Formed the backbone for holding the notice defective.
Suman Sethi v. Ajay K. Churiwal (2000) 2 SCC 380
• Distinguished permissible clubbing of demands in a notice while insisting that the cheque amount remain clearly severable.

B. Legal Reasoning

1. Statutory Interpretation of Section 138(b)
The phrase “the said amount of money” was given a literal (strict) interpretation. Because Section 138 is penal, mens rea is replaced by procedural safeguards; any lapse in those safeguards collapses the prosecution. The notice failed to isolate the cheque amount; therefore, condition precedent unmet → complaint invalid.

2. Presumption and Rebuttal Framework
a) Activation: Signature admitted, cheques produced → presumption in favour of debt.
b) Rebuttal: Accused showed mismatched invoice figures (₹2,64,689/- vs ₹2,43,982/-) and duplicate billing—sufficient for “preponderance of probabilities.”
c) Collapse: Onus shifted back; complainant offered no reconciliation; presumption dissolved; prosecution failed.

3. Appellate Restraint
Guided by Arulvelu principles as read in Rohitbhai, the High Court checked whether the MM’s view was “possible.” Finding evidence-based rationale, it declined interference.

C. Impact on Future Litigation and Commercial Practice

Tighter Drafting of Demand Notices: Lawyers must now ensure that the cheque amount is expressly demanded, preferably in a separate paragraph or a line item, to avoid dismissal.
Enhanced Defence Strategy: Accused can focus on invoice inconsistencies, double-billing, or accounting gaps to build a “probable defence,” thereby neutralising the presumption without direct evidence of payment.
Appellate Gatekeeping: The ruling illustrates that leave to appeal will be refused if the trial court’s view aligns with evidence—even in NI cases—curbing frivolous appellate challenges.
Transactional Clarity: Businesses issuing post-dated or security cheques should maintain meticulous statements, as any mismatch could be exploited in litigation.

Complex Concepts Simplified

Section 138 NI Act: A criminal provision punishing dishonour of cheques if (i) cheque presented within 3 months (now 90 days), (ii) cheque returned unpaid, (iii) payee issues notice within 30 days demanding payment of cheque amount, and (iv) drawer fails to pay within 15 days.
“Demand Notice” vs “Legal Notice”: A “legal notice” becomes a “demand notice” for Section 138 only when it specifically requests payment of the dishonoured cheque sum.
Presumption under Sections 118 & 139: Courts automatically assume (a) consideration for a cheque and (b) existence of debt. This saves complainants from initially proving the debt, but the defence may rebut.
Probable Defence (Preponderance of Probabilities): Unlike criminal trials demanding proof “beyond reasonable doubt,” the accused in NI cases only needs to show that their version is more likely than not.
Perverse Finding: In appellate review, a decision is “perverse” when it ignores vital evidence, misdirects law, or is wholly unreasonable. Absent perversity, an acquittal stands.

Conclusion

The Delhi High Court’s decision is a powerful reminder that Section 138 NI Act, though intended to promote commercial certainty, operates within a rigid procedural framework. Two lessons stand out:

Precision over Expediency: Drafting of demand notices must be meticulous; any tendency to inflate or bundle claims jeopardises the prosecution.
Defence through Documentation: Accused persons can effectively rebut the presumption by exposing accounting discrepancies without necessarily proving full repayment.

By reaffirming these principles, the Court has fortified procedural safeguards against misuse of criminal process for debt recovery while simultaneously directing payees toward greater diligence. The judgment’s ripple effect is likely to be felt in every cheque-bounce prosecution emanating from India’s commercial capital, ensuring that the “cheque amount” remains the focal point of demand notices hereafter.