Friday, 19 May 2017

Whether it can be inferred that first notice was not served in case of dishonour of cheque if reminder notice is sent?

This Court in catena of cases has held that when a
notice is sent by registered post and is returned with
postal endorsement “refused” or “not available in
the house” or “house locked” or “shop closed” or
“addressee not in station”, due service has to be
presumed Jagdish Singh v. Natthu Singh, (1992) 1 SCC 647; State of M.P. v. Hiralal, (1996) 7 SCC 523
and V. Raja Kumari v. P. Subbarama Naidu, (2004) 8 SCC 774.
 Though in process of interpretation right
of an honest lender cannot be defeated as has
happened in this case. From the perusal of relevant
sections it is clear that generally there is no bar
under the N.I. Act to send a reminder notice to the
drawer of the cheque and usually such notice cannot
be construed as an admission of non-service of the
first notice by the appellant as has happened in this
case.
16. Moreover the first notice sent by appellant on
12-04-1991 was effective and notice was deemed to
have been served on the first respondent. Further, it
is clear that the second notice has no relevance at


all in this case at hand. Second notice could be
construed as a reminder of respondent’s obligation
to discharge his liability. As the complaint, was filed
within the stipulated time contemplated under
Clause (b) of Section 142 of the N.I. Act, therefore
Section 138 r/w 142 of N.I. Act is attracted. In the
view of the matter, we set aside the impugned
judgment of the High Court.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO 455 OF 2006
N PARAESWARAN UNNI  G KANNAN 
DATED: 1st March, 2017.
Citation: AIR 2017 SC 1681


1. This appeal arises out of the judgment and order
dated 06-10-2003 passed by the High Court of
Kerala at Ernakulam in Criminal Revision Petition No.
644 of 1995 whereby the High Court allowed the
criminal revision of the first respondent by setting
aside the concurrent judgments of Trial Court and
Appellate Court, that first respondent cannot be
convicted under Section 138 of the Negotiable
Instruments Act, 1881 (in short “N.I. Act”) as the
procedure prescribed under this section was not
satisfied in the instant case.
2. Brief facts leading to this criminal appeal, as per the
prosecution case, are that the first
respondent/accused borrowed Rs. 64,000/- on
13-10-1990 from the appellant/complainant. In lieu
of the borrowed amount, first respondent issued two
cheques dated 13-10-1990 for Rs. 10,000/- and Rs.
25,000/- respectively both drawn on State Bank of
India, Alappuzha Branch. Another cheque for Rs.
29,000/- dated 08-10-1990 was also given to the
appellant by first respondent, which was issued by
one K Rajesh, Development Officer, LIC drawn on
State Bank of Travancore, Vadai Canal branch,
Alappuzha.
3. Appellant presented first-two cheques dated
13-10-1990 on 04-04-1991 to his bank, State Bank
of Travancore, Main branch, Alappuzha. First
respondent’s bank returned the said two cheques on
05-04-1991 with an endorsement “Refer to drawer.”
Appellant received intimation memo dated
05-04-1991 from his bank on 08-04-1991.
4. Appellant got issued a legal notice on 12-04-1991 to
the first respondent, which was returned with postal
endorsement “intimation served, addressee absent”
on 20-04-1991. The same was received by the
appellant’s advocate on 25-04-1991. Appellant again
sent the legal notice on 04-05-1991. The second
notice sent to first respondent’s address was
returned with postal endorsement “Refused,
returned to sender.” Thus, according to the
appellant, first respondent failed to return the
borrowed amount Rs. 64,000/- for which statutory
notice under proviso (b) of Section 138 of N.I. Act
was issued to him to make good the dishonoured
cheques due to insufficiency of funds in his bank
account. 
5. On 23.05.1991 appellant lodged a private complaint
before the Judicial First Class Magistrate-II,
Alappuzha for the alleged offence under Section 138
of the N.I. Act, which was numbered as Summary
Trial No. 34/92. After a full fledged trial and upon
appreciating the documentary evidence adduced on
behalf of the parties, the Trial Court allowed the
complaint as the appellant was successful in
proving, the case beyond reasonable doubt that first
respondent committed an offence punishable under
Section 138 of the N.I. Act. Accordingly, the Trial
Court by judgment dated 29-07-1993 convicted and
sentenced the first respondent to undergo simple
imprisonment of three months.
6. Aggrieved by the conviction and sentence, first
respondent preferred Criminal Appeal No 104 of
1993 before Addl. Sessions Judge at Alappuzha. The
Ld. Judge, after perusing the records and on
elaborate hearing, by its judgment dated
07-07-1995 dismissed the appeal by upholding and
confirming the judgment of the Trial Court.
7. Against the said order, respondent preferred
Criminal Revision no 644 of 1995 before the High
Court of Kerala. The only ground raised before the
High Court was that the provisions of Section 138 of
the N.I. Act cannot be invoked as the appellant had
not complied with the conditions in Clause (b) of the
proviso to the said section. Notice demanding
payment of the amount arising from the two
dishonoured cheques in question was on
04-05-1991, whereas the intimation regarding
dishonour of the said cheques was given by the
appellant’s bank on 08-04-1991. Therefore, the
notice was beyond 15 days. Hence, in such
circumstances Section 138 of the N.I. Act was not
attracted and no offence was made out.
8. The High Court by its judgment dated 06-10-2003
had allowed the revision by reversing the concurrent
findings of the two Courts below holding that the
statutory notice was beyond the prescribed
limitation period as mentioned under Section 138 of
the N.I. Act.
9. Now the issue before us is even though the first
notice was issued by the appellant within time to the
correct address of the first respondent, whether the
High Court was right in rejecting the case of the
appellant herein on the ground that second notice
was issued beyond the period of limitation i.e. 15
days from the date of receiving dishonour intimation
from the bank under Clause (b) of the proviso to
Section 138 of the N.I. Act.
10. Before delving into the issue, it would be
appropriate to reproduce Section 138 of the Act, as
it then stood.
138. Dishonour of cheque for
insufficiency, etc., of funds in the
account:
Where any cheque drawn by a person on an
account maintained by him with a banker for
payment of any amount of money to another
person from out of that account for the
discharge, in whole or in part, of any debt or
other liability, is returned by the bank unpaid,
either because of the amount of money
standing to the credit of that account is
insufficient to honour the cheque or that it
exceeds the amount arranged to be paid
from that account by an agreement made
with that bank, such person shall be deemed
to have committed an offence and shall,
without prejudice. to any other provision of
this Act, be punished with imprisonment for a
term which may extend to two years, or with
fine which may extend to twice the amount of
the cheque, or with both:
Provided that nothing contained in this
section shall apply unless-
(a) the cheque has been, presented to the
bank within a period of six months from
the date on which it is drawn or within
the period of its validity, whichever is
earlier;
(b) the payee or the holder in due course of
the cheque as the case may be, makes a
demand for the payment of the said
amount of money by giving a notice, in
writing, to the drawer of the cheque,
within fifteen days of the receipt of
information by him from the bank
regarding the return of the cheque as
unpaid; and
(c) the drawer of such cheque fails to make
the payment of the said amount of
money to the payee or, as the case may
be, to the holder in due course of the
cheque, within fifteen days of the
receipt of the said notice.
Explanation.-For the purposes of this section,
“debt or other liability” means a legally
enforceable debt or other liability.
11. A bare reading of Section 138 of the N.I. Act,
indicates that the purport of Section 138 is to
prevent and punish the dishonest drawers of
cheques who evade and avoid their liability. As
explained in Clause (b) of the proviso, the payee or
the holder of the cheque in due course is necessarily
required to serve a written notice on the drawer of
the cheque within fifteen days from the date of
intimation received from the bank about dishonour.
12. It is explicitly made clear under Clause (c) of
Section 138 of N.I. Act, that this gives an opportunity
to a drawer of the cheque to make payment within
fifteen days of receipt of such notice sent by the
drawee. It is manifest that the object of providing
Clause (c) is to avoid unnecessary hardship. Even if
the drawer has failed to make payment within
fifteen days of receipt of such notice as provided
under Clause (c), the drawer shall be deemed to
have committed an offence under the Act and
thereafter the drawee would be competent to file
complaint against the drawer by following the
procedure prescribed under Section 142 of the Act.
13. It is clear from Section 27 of the General Clauses
Act, 1897 and Section 114 of the Indian Evidence
Act, 1972, that once notice is sent by registered post
by correctly addressing to the drawer of the cheque,
the service of notice is deemed to have been
effected. Then requirements under proviso (b) of
Section 138 stands complied, if notice is sent in the
prescribed manner. However, the drawer is at liberty
to rebut this presumption.
14. It is well settled that interpretation of a Statute
should be based on the object which the intended
legislation sought to achieve.
“It is a recognized rule of interpretation of
statutes that expressions used therein should
ordinarily be understood in a sense in which
they best harmonize with the object of the
statute, and which effectuate the object of the
Legislature. If an expression is susceptible of a
narrow or technical meaning, as well as a
popular meaning, the Court would be justified
in assuming that the Legislature used the
expression in the sense which would carry out
its object and reject that which renders the
exercise of its power invalid"1
.
15. This Court in catena of cases has held that when a
notice is sent by registered post and is returned with
postal endorsement “refused” or “not available in
the house” or “house locked” or “shop closed” or
“addressee not in station”, due service has to be
presumed2
. Though in process of interpretation right
of an honest lender cannot be defeated as has
happened in this case. From the perusal of relevant
sections it is clear that generally there is no bar
under the N.I. Act to send a reminder notice to the
drawer of the cheque and usually such notice cannot
be construed as an admission of non-service of the
first notice by the appellant as has happened in this
case.
16. Moreover the first notice sent by appellant on
12-04-1991 was effective and notice was deemed to
have been served on the first respondent. Further, it
is clear that the second notice has no relevance at
1 M/S New India Sugar Mills Ltd. v. Commissioner of Sales Tax, AIR 1963 SC 1207
2Jagdish Singh v. Natthu Singh, (1992) 1 SCC 647; State of M.P. v. Hiralal, (1996) 7 SCC 523
and V. Raja Kumari v. P. Subbarama Naidu, (2004) 8 SCC 774.
all in this case at hand. Second notice could be
construed as a reminder of respondent’s obligation
to discharge his liability. As the complaint, was filed
within the stipulated time contemplated under
Clause (b) of Section 142 of the N.I. Act, therefore
Section 138 r/w 142 of N.I. Act is attracted. In the
view of the matter, we set aside the impugned
judgment of the High Court.
17. However, during the course of hearing, learned
counsel for first respondent, as agreed by appellant
herein, submitted that first respondent was willing
to pay Rs. 2,00,000/- (Rupees two lakhs only) in lieu
of suffering simple imprisonment of three months as
imposed by the Trial Court, as confirmed by the first
Appellate Court, and endorsed by this Court.
18. In view of the undertaking given by the learned
counsel, we direct the first respondent to deposit the
said amount of Rs. 2,00,000/- (Rupees two lakhs
only) before the Judicial First Class Magistrate-II at
Alappuzha on or before 30.04.2017. Out of the said
amount of Rs. 2,00,000/- (two lakhs only) so
deposited, Rs.1,30,000/- (one lakh thirty thousand)
shall be paid to the appellant as compensation.
19. In the event, first respondent fails to deposit the
said amount of Rs.2,00,000/- within the stipulated
period as indicated above, the conviction and
sentence of three months awarded by the Ld. Trial
Court and affirmed by the Appellate Court shall
stand restored and bail granted to the first
respondent shall stand cancelled.
20. The appeal is accordingly disposed of in the
aforesaid terms.
..................................J
(N. V. RAMANA)
.................................J
(PRAFULLA C. PANT)
NEW DELHI
DATED: 1st March, 2017
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