MS PHARMACEUTICALS v. NITYAM PHARMA

What happened

MS Pharmaceuticals supplied Cefixime Trihydrate under an invoice dated 21 August 2019 for Rs.10,02,410, payable in 60 days with 24 per cent interest on default. Three Yes Bank cheques were dishonoured as 'payment stopped by drawer', after which Nityam Pharma made part payments of Rs.2,00,000 and issued eight fresh HDFC Bank cheques for the balance of Rs.8,02,410. A further Rs.1,50,000 was paid by NEFT, leaving Rs.6,52,410, and the eight cheques were dishonoured for insufficient funds. The demand notice of 21 March 2020 listed the invoice, the cheques and the part payments and demanded Rs.6,52,410. After the Metropolitan Magistrate, Dwarka summoned the respondent on 15 March 2021 in CC No. 198/2021, the Sessions Court in Criminal Revision No. 2003/2024 set the summons aside on 7 October 2024, holding the notice invalid because the demand was lower than the cheque total. The respondent also raised section 56 of the Negotiable Instruments Act, joinder of eight cheques and Kaveri Plastics.

Questions before the court

• Is a section 138 notice invalid because it demands less than the face value of the dishonoured cheques after admitted part payments, and can that be decided in revision against the summoning order?

Why the court ruled this way

Under Suman Sethi v. Ajay K. Churiwal the demand must be for the cheque amount, the notice is read as a whole and separately stated extra claims are severable, and only an omnibus demand that does not say what is due under the cheque may fail (paragraph 28). Kaveri Plastics concerned a notice demanding double the cheque amount on a claim of typing error, while here the demand was reduced because of admitted part payments, not inflated (paragraphs 30, 33 and 36). The notice was specific and was not omnibus; whether the part payments went towards these cheques, whether section 56 of the Act was attracted for want of endorsement and whether the cheques still represented a legally enforceable debt depend on evidence (paragraphs 35 to 37). Dashrathbhai Trikambhai Patel was an appeal against acquittal after trial on proved facts and does not decide the point at the summoning stage (paragraphs 38 and 39). At the stage of issuing process the court only asks whether a prima facie case is made out (paragraph 41).

Controlling point

The Sessions Court erred in treating the notice as invalid merely because it demanded less than the aggregate of the cheques; the disputed questions are for trial.

Order and next steps

The judgment of 7 October 2024 was set aside and the petition allowed. The summoning order of 15 March 2021 was restored; the trial court is to proceed on the complaint on its own merits, uninfluenced by observations in the revisional order or this judgment, and the parties are to appear on 8 August 2026.

Practical implications

A complainant who has received part payments can show in the demand notice the invoice, the cheques and the credits and demand the true balance, and defend a lower figure at trial; the drawer cannot get the summons quashed in revision on that ground alone.

Limits of this ruling

• The Court did not decide whether the part payments were made towards the dishonoured cheques, whether section 56 required endorsements, or the objection to trying eight cheques in one complaint; it left all of these to the trial court.