Disputed Questions On Enforceable Debt & Endorsements Post Part-Payments Cannot Be Conclusively Adjudicated At Revisional Stage: Delhi High Court
The Bench said Sessions Court cannot quash a magistrate's summoning order by pre-emptively deciding whether a statutory notice demanding a reduced amount after admitted part-payments satisfies the Negotiable Instruments Act.
Justice Madhu Jain, Delhi High Court
The Delhi High Court has held that whether a statutory demand notice complies with Sections 138 and 56 of the Negotiable Instruments Act, 1881, and whether dishonoured cheques continued to represent a legally enforceable debt after admitted part-payments, are matters requiring evidence at trial.
While setting aside a Sessions Court order that quashed a magistrate's summoning order, the Court held that such disputed questions of fact and law cannot be decided at the summoning or revisional stage. It further observed that a statutory notice containing a clear break-up of invoices, transactions, and payments cannot be treated as an invalid omnibus demand.
A single-judge Bench comprising Justice Madhu Jain observed, “…Whether, in view of the admitted part payments, the statutory requirement under Section 138 read with Section 56 of the NI Act stood satisfied, and whether the dishonoured cheques continued to represent a legally enforceable debt, are issues which depend upon the evidence led by the parties and the factual foundation established during trial. Such disputed questions could not have been conclusively determined while exercising revisional jurisdiction against a summoning order”.
“At the stage of issuance of process, the Court is only required to examine whether a prima facie case is disclosed from the complaint and the material placed on record. It is not expected to adjudicate disputed questions of fact or return findings on issues which require evidence”, the Bench said.
Advocate Vipin Nandwani appeared for the petitioner and Advocate Shweta Garg appeared for the respondent.
In the matter, the dispute arose from a business transaction where the petitioner, MS Pharmaceuticals, supplied pharmaceutical goods to the respondent, Nityam Pharma, under an invoice totalling Rs. 10,02,410.
The respondent initially issued three cheques that were returned with 'payment stopped' instructions.
Pursuant to threats of legal action, the respondent made initial part payments of Rs. 2,00,000 via NEFT and issued 8 fresh cheques to cover the balance invoice value of Rs. 8,02,410. In the interregnum, the respondent made further part payments of Rs. 1,50,000 via NEFT, reducing the actual outstanding balance to Rs. 6,52,410.
When the 8 new cheques were presented, they were dishonoured due to insufficient funds. The petitioner then issued a statutory demand notice detailing the breakdown of the cheques, acknowledging the exact NEFT transactions, and demanding the actual outstanding balance of Rs. 6,52,410. Upon non-payment, a complaint under Section 138 was instituted.
The Metropolitan Magistrate, Dwarka Courts, issued a summoning order against the respondent on March 15, 2021. Aggrieved by this, the respondent filed a criminal revision petition before the Sessions Court, contending that demanding an amount less than the cumulative face value of the cheques invalidated the statutory notice.
On October 7, 2024, the Sessions Court allowed the revision and set aside the summoning order, holding that the legal notice was an invalid "omnibus" demand that failed to reflect the exact cheque amount. The petitioner challenged this revisional order before the High Court under Section 528 BNSS.
The Court observed that the statutory notice distinctly recorded the invoice value, the dishonoured cheques, the part payments received through NEFT, and the clear mathematical derivation of the outstanding amount.
Thus, it could not be characterized as an omnibus notice or an arbitrary or inflated demand. Justice Jain distinguished the Supreme Court's precedent in Kaveri Plastics, noting that it involved an inflated notice demanding double the cheque amount due to an unclarified typographical error.
“On a plain reading of the statutory notice, it cannot be said that the notice is omnibus in nature. It specifically records the invoice value, the dishonoured cheques, the part payments received through NEFT on different dates and the manner in which the outstanding amount of Rs.6,52,410/- was arrived at before calling upon the respondent to make payment thereof…”, the Bench noted.
The Court allowed the petition and set aside the impugned judgment of the Sessions Court dated October 7, 2024. The summoning order dated March 15, 2021, passed by the Metropolitan Magistrate was formally restored. The High Court directed both parties to appear before the Trial Court on August 8, 2026, ordering the Trial Court to proceed with the complaint in accordance with law and decide the same on its own merits, completely uninfluenced by any prior observations.
Cause Title: MS Pharmaceuticals v. Nityam Pharma (Neutral Citation: 2026:DHC:5511)
Appearances:
Petitioner: Vipin Nandwani and Ajay Chaudhary, Advocates.
Respondent: Shweta Garg, Advocate.