Dishonour of Cheque - Notice Returned Unversed / Unclaimed - When Notice said to have been Served on Accused ? [Case Law]

Negotiable Instruments Act, 1881 - S.138 - Where the statutory demand notice under Sec.138 proviso (b) is returned unversed/unclaimed, then the date on which the notice said to have been served on the accused as contemplated in Sec.138 proviso (c), is the date when the complainant received the returned postal cover or was so informed by the postal authority regarding the service of notice and it is not the date when the postman made the endorsement that the addressee refused or return the post article unclaimed.


Reckoning of the date of deemed receipt as the date of return of notice as in the instant case, where the notice has been returned unserved/unclaimed is unlikely to result in any prejudice to even the accused, as the accused would only get further time from the date of deemed service to discharge the liability due under the cheque. Whereas if hyper technical approach is taken to reckon the said date from the date when the postman made the endorsement that the addressee refused or returned the postal article, then it would cause serious prejudice to the complainant, as in many a case he might get intimation regarding the return of the notice quite late, which might even be after the period of 15 days from the date on which the postman had actually made the endorsement while attempting to serve notice in the address of the accused. This would result in the complaint that may be so filed later, as barred by limitation. In this context, it is noteworthy to mention that prior to the amendment introduced by Sec.9 of the Central Amendment Act 55 of 2002, made effective from 6.2.2003, there was no power conferred on the criminal court to condone the delay in filing a complaint for offence punishable under Sec. 138 of the Negotiable Instruments Act in view of the mandatory provisions contained clause (b) of Sec. 142 of the N.I. Act, as it stood then, which mandated that complaint is to be filed within one month of the date, on which the cause of action arises under clause (c) of proviso to Sec. 138, etc. It was only later as per the said Amendment Act, 55 of 2002 made effective from 6.2.2003 that the Parliament had engrafted proviso to clause (b) of Sec.142(1) providing that cognizance of the complaint could be taken by the court after the prescribed period, if the complainant satisfies the court that he had sufficient cause for not making a complaint within such stipulated period. So in a situation as in the instant case, which is covered by the provisions that existed prior to the Act 55 of 2002 (made effective prospectively only from 6.2.2003) such a complaint as mentioned herein above would have been totally time barred, with no provision for condoning the delay. This would have led to drastic and undesirable consequence on complainants, who could not be blamed for the time taken by the Postal Department in returning such unserved registered postal articles. [Para 13]

IN THE HIGH COURT OF KERALA AT ERNAKULAM

ALEXANDER THOMAS, J.

Crl.Appeal No. 1339 of 2016

Dated this the 15th day of March, 2018

CRL.A.NO.450/2003 OF ADDL.SESSIONS COURT,KOTTAYAM CC.NO.287/1991 OF CHIEF JUDICIAL MAGISTRATE COURT, KOTTAYAM

APPELLANT/2ND RESPONDENT/COMPLAINANT

K. CHERIAN KURIAN

BY ADV.SRI.M.J.THOMAS 

RESPONDENT(S)/APPELLANT/ACCUSED AND STATE

1. P.K. RADHAKRISHNAN

2. THE STATE OF KERALA, REPRESENTED BY THE PUBLIC PROSECUTOR, HIGH COURT OF KERALA, ERNAKULAM.

R1 BY ADV. SRI.V.N.SASIDHARAN R2 BY SR PUBLIC PROSECUTOR SRI.SAIGI JACOB PALATTY

J U D G M E N T 

The appellant is the complainant in C.C.No.287/1991 on the file of the Court of Chief Judicial Magistrate, Kottayam, wherein the 1st respondent herein has been indicted for offence punishable under Sec.138 of the Negotiable Instruments Act. Ext.P-1 dishonoured cheque dated 30.10.1990 is for Rs.50,000/-. The trial court as per the judgment rendered on 25.8.2003 has convicted the 1st respondent-accused for the above said offence and has sentenced him to undergo simple imprisonment for 3 months and to pay fine of Rs.50,500/- and in default thereof, to undergo simple imprisonment for one month. On realisation of the above said fine amount of Rs.50,500/-, it is ordered that an amount of Rs.50,000/- shall be paid to the complainant as compensation in terms of Sec.357(1)(b) of the Cr.P.C. Aggrieved by the said conviction and sentence, the accused had preferred Crl.A.No.450/2003 before the appellate Sessions Court, Kottayam. The appellate court concerned (Court of Additional Sessions Judge, Kottayam), as per the impugned judgment rendered on 18.6.2004 has allowed the said Criminal Appeal filed by the accused and has set aside the conviction and sentence imposed on him as per the impugned judgment and has set him at liberty. Being aggrieved by the said impugned judgment of acquittal rendered by the appellate Sessions Court, the complainant had preferred Criminal Leave Petition No.631/2004 before this Court seeking special leave of this Court under Sec.378(4) of the Cr.P.C so as to impugn the said judgment. This Court as per order dated 18.10.2004 had allowed the said plea and had granted special leave to the complainant. It is on this basis that the instant Criminal Appeal has been filed.

2. Heard Sri.M.J.Thomas, learned counsel appearing for the appellant/complainant, Sri.V.N.Sasidharan, learned counsel appearing for R-1 (accused) and Sri.Saigi Jacob Palatty, learned Prosecutor appearing for R-2 State.

3. The gist of the allegations in the complaint is to the effect that the complainant and the accused were colleagues in the service of the Kerala State Road Transport Corporation (KSRTC) and that they were known to each other and that the accused had requested the complainant to advance a personal loan of Rs.50,000/- and the said amount was advanced by the complainant to the accused in July, 1990 with the assurance that the said loan amount would be repaid on demand. In discharge of the said liability, the accused has issued the instant Ext.P-1 cheque dated 30.10.1990 for Rs.50,000/- drawn from his account and payable in favour of the complainant and the cheque when presented resulted in dishonour as per dishonour memo dated 2.11.1990, pursuant to which, the complainant issued statutory demand notice dated 3.11.1990 calling upon the accused to pay the amount covered by the cheque within 15 days of the receipt of the said notice. The said notice sent by registered post was evaded by the accused and that the postal authorities had later returned the said registered notice on the ground that the house of the accused/ addressee was found locked during the period in question. Since the amount was not paid, the complainant has filed the instant complaint on 29.11.1990.

4. During trial, the complainant has examined himself as PW-1 and marked Exts.P-1 to P-6 documents. The defence has adduced evidence through DWs 1 & 2, who are officials of the Postal Department. The defence also marked Ext.D-1 document.

5. Both the courts below have found that the complainant has given the credible evidence to show the borrowal transaction of Rs.50,000/- in the month of July, 1990 and that Ext.P-1 cheque dated 30.10.1990 for Rs.50,000/- from the account of the accused was duly issued and executed by him, in favour of the complainant. The accused had taken up the defence during the cross-examination of PW-1 that no such borrowal transaction as alleged by the complainant has taken place in July, 1990 and that he has never voluntary executed Ext.P-1 cheque as alleged in the complaint. Whereas the specific case of the accused is to the effect that some time in the year 1985, he had borrowed an amount of Rs.5,000/- from the complainant, at which point of time, he had given a blank cheque as security and he had discharged the liability, but the blank cheque was not returned by him even on repeated demand and the relationship between the complainant and accused has been strained and the complainant has misused the above said blank cheque and utilised the same for instituting the above complaint, etc. Both the courts below have found that except the above suggestion, the defence has not been able to bring in any clinching factual circumstance in the evidence tendered so as to fortify the basis of such a suggestion. Therefore, the said defence taken up by the accused has stood only in the realm of defence suggestion and nothing more.

6. Another specific contention taken up by the accused was to the effect that he has never been served with Ext.P-3 statutory demand notice dated 3.11.1990. To establish the contention in that regard, he had examined DWs 1 & 2. DW-1 is the Sub Divisional Inspector of the Postal Sub Division concerned at the relevant time and DW-2 is the postman. Evidence of these defence witnesses are clearly to the effect that the postman concerned had made hectic efforts for the period from 5.11.1990 to 15.11.1990 to serve the registered notice in the residence of the accused and it was constantly found that the house of the accused was found “locked”. That accordingly the postman had returned back the said registered article to the complainant on 16.11.1990. This aspect is clearly evident from the stamp affixed to Ext.P-5 cover, through which the registered notice was returned to the complainant. The accused has no case whatsoever that Ext.P-3 registered statutory demand notice was not sent in the correct address of the accused. Therefore, both the courts below are well justified to come to the considered conclusion that the said notice has been duly served on the accused by virtue of the mandatory provisions under Sec.27 of the General Clauses Act. That apart, a Three-Judge Bench of the Apex Court in the celebrated case in C.C.Alavi Haji v. Muhammed, reported in (2007) 6 SCC 555 = (2007) 3 SCC (Cri) 236, has held that where the registered statutory demand notice is sent in the correct address of the accused by registered post, then by virtue of the statutory presumption emanating from Sec.27 of the General Clause Act, service of notice is deemed to have been effected at the time at which the letter would have been delivered in the ordinary course of business, unless and until the contrary is proved by the addressee-accused and that in such case. That so long as the complainant could prove that he had sent statutory demand notice under Sec.138 proviso (b) of the N.I. Act in the correct address of the accused and the return of such registered article with postal endorsement “refused” or “not available in the house” or “house locked” or “shop closed” or “addressee not in station” or “unclaimed” will give rise to the position that it will only have to be treated as due service of notice in view of the above statutory presumption emanating from Sec.27 of the General Clauses Act. In view of the well settled position, it is only to be held that both the courts below are perfectly right in holding that registered statutory demand notice is only to be treated as having been duly served on the addresseeaccused. So, the above said plea of the accused regarding the alleged nonservice of the notice is only to be repelled.

7. The last contention raised by the accused was to the effect that the complaint has been prematurely filed inasmuch as it has come out in evidence that Ext.P-3 demand notice was returned back to the complainant on 16.11.1990, whereas the instant complaint has been filed on 29.11.1990 without waiting for the 15 days from the date of deemed receipt of the notice. The trial court has found that the said argument is also bereft of any merit inasmuch as it has come out in evidence of DWs 1 & 2 that the date of tendering of notice by postman to the accused can be taken as 5.11.1990, which is the first date, on which it was sought to be served in the address of the accused. If that be so, the complaint filed on 29.11.1990 cannot be said to have been prematurely filed. It has been duly filed after 15 days as mandated in proviso (c) of Sec.138 of the N.I. Act. On this limited point, the appellate court has differed from the view of the trial court and has held that the reckoning of the 15 days time limit as envisaged in Sec.138 proviso (c) could be taken in a case where registered notice has been returned by the sender as unclaimed only from the date of return of such notice. That only in such a case registered notice was returned to the complainant only on 16.11.1990 and that therefore, the complaint filed on 29.11.1990 has been instituted prematurely inasmuch as the complainant has not waited for the expiry of the 15 days time limit for the cause of action. On this ground, the appellate court has acquitted the accused. So the only point to be decided in this appeal is as to whether the complaint has been filed prematurely as contended by the accused.

8. The main controversy in this regard could be safely set at rest by the judgment of the Apex Court in K. Bhaskaran v. Sankaran Vaidhyan Balan, reported in (1999) 7 SCC 510, para 25 = 1999 (3) KLT 440 (SC), para 25, wherein it has been categorically held that when a statutory notice under Sec. 138 proviso (b) of the Negotiable Instruments Act is returned by the sendee as “unclaimed”, such date of return would be the commencing date for reckoning the statutory period of 15 days contemplated in Clause (c) to the proviso (b) of Sec.138 of the Act. It would be profitable to refer to para 25 of the abovesaid judgment in K.Bhaskaran's case supra, which reads as follows: 

“25. Thus, when a notice is returned by the sendee as unclaimed such date would be the commencing date in reckoning the period of 15 days contemplated in clause (c) to the proviso of Section 138 of the Act. Of course such reckoning would be without prejudice to the right of the drawer of the cheque to show that he had no knowledge that the notice was brought to his address. In the present case the accused did not even attempt to discharge the burden to rebut the aforesaid presumption.” 

(Emphasis supplied) 

9. This Court in the judgment in Chacko v. Joseph reported in 2003 (2) KLT 1, has held that in a case where the notice sent by pre paid post in the correct address is returned unserved, there can be no doubt that the presumption of due service can be made in order to make the scheme under S.138 of the Negotiable Instruments Act work effectively and in identifying the date on which presumption of due service ought to be drawn, it is the date of knowledge of the complainant that the notice has not been served, which is crucial and that other interpretation is only bound to bring in unnecessary confusion and vagueness (see paras 13, 16, 29, 30 and 33 of the Chacko's case supra).

10. After placing reliance on the abovesaid judgment of the Apex Court in K.Bhaskaran's case supra, this Court has held in Chacko's case supra that the reckoning of date of deemed receipt as the date of return of notice is unlikely to result in any prejudice to any one as even the accused would only get further time from such date of deemed service to discharge the liability due under the cheque.

11. This Court in yet another judgment in Kailasanathan.K.G. v. Sajish Babu & Kuttan & Anr. reported in 2012 (2) KHC 529 = ILR 2012 (3) Ker.557 = 2012 (2) KLJ 704, has held that the date on which the notice is said to have been served on the accused, is the date when the complainant received the returned postal cover or so informed by the postal authority, regarding the service of notice and it is not the date when the postman made endorsement, that the addressee refused or returned the postal article unclaimed. In the said a case, the contention raised by the accused was that the date of deemed service should be taken as the date when the postman made the endorsement that the addressee refused or returned unclaimed and if that view is taken, some times if the postal cover is not returned to the sender within a reasonable time, it creates confusion and unnecessary hardship to the payee. Therefore, it was held that there is merit in the submission of the complainant that the expression “date of receipt of the said notice” in proviso (c) of Sec. 138 of the Act should receive very reasonable, practical and realistic interpretation and not an interpretation, which would create confusion, which is likely to defeat the very object of the provision. The presumption of 'deemed service' was held to be drawn reckoning the date, on which the sender of the notice was notified that the notice has not been served and hence the limitation for filing complaint should commence from the date of deemed service, namely, the date when the complainant received the returned postal cover or was so informed by the postal authority in case the postal cover was lost. It would also be relevant to refer to para 11 of the abovesaid decision of this Court in Kailasanathan's case supra, which reads as follows: 

“11. Here, it is not a case where the sender slept over his remedy for an unreasonably long period. Notice was sent on 12/04/2004. The complainant got it back on 27/04/2004. It is not an unreasonably long period so as to contend that the complainant was not diligent. It is pointed out by the complainant that notice must have reached the post office on 13/04/2004 or 14/04/2004. 14/04/2004 must be a public holiday. So in the normal course the intimation could have been given by the postman only on 15/04/2004. The postal articles were to be retained for 7 days and it can be returned only thereafter. Since on the 7th day the addressee did not approach to receive the postal articles, it must have been returned on 22/04/2004. It was thereafter delivered to the sender on 27/04/2004. Therefore, it cannot be said that there was unreasonable delay in delivering the returned postal cover. Had it been a case where the sender did not get postal acknowledgement or the letter sent by registered post returned to him within a reasonable time, when it should have been delivered to the sender, then it could have been said that there is a duty cast on the sender to address the postal authorities to ascertain whether notice was served and if so, the date of service of the notice or whether the notice was returned refused / unclaimed and, if so, what happened to the returned postal articles. Such a situation did not arise in this case. There may be cases where the refused or unclaimed postal articles were not delivered to the sender after one or two months. In such cases if the sender did not take steps to ascertain what actually transpired then perhaps the position may be different. But that is not the case here. In the light of what has been stated above, the contention that 27/04/2004 should be reckoned as the date of deemed service is well merited. Since the complaint was filed on 03/06/2004 it is found to be well within the time and as such the order of acquittal on the ground of delay in filing the complaint is unsustainable.” 

12. The Apex Court in the judgment in D.Vinod Shivappa v. Nanda Belliappa, (2006) 6 SCC 456 has categorically held that going by the provisions contained in Sec. 138 proviso (c) and Sec. 142 of the N.I. Act, the cause of action to prosecute the drawer of the cheque arises when the drawer fails to make payment within 15 days of “receipt of notice”. It was held that the said section shall not apply unless the drawer of the cheque fails to make the payment within 15 days of receipt of the said notice. That the said proviso is meant to protect honest drawers whose cheques may have been dishonoured for the fault of others or who may have genuinely wanted to fulfill their promise, but on account of inadvertence or negligence failed to make necessary arrangements for the payment of the cheque. It will be profitable to refer paras 13 and 14 of the abovesaid decision in D.Vinod's case supra, which read as follows: 

“13. Section 138 of the Act was enacted to punish those unscrupulous persons who purported to discharge their liability by issuing cheques without really intending to do so, which was demonstrated by the fact that there was no sufficient balance in the account to discharge the liability. Apart from civil liability, a criminal liability was imposed on such unscrupulous drawers of cheques. The prosecution, however, was made subject to certain conditions. With a view to avoid unnecessary prosecution of an honest drawer of a cheque, or to give an opportunity to the drawer to make amends, the proviso to Section 138 provides that after dishonour of the cheque, the payee or the holder of the cheque in due course must give a written notice to the drawer to make good the payment. The drawer is given 15 days’ time from date of receipt of notice to make the payment, and only if he fails to make the payment he may be prosecuted. The object which the proviso seeks to achieve is quite obvious. It may be that on account of mistake of the bank, a cheque may be returned despite the fact that there is sufficient balance in the account from which the amount is to be paid. In such a case if the drawer of the cheque is prosecuted without notice, it would result in great injustice and hardship to an honest drawer. One can also conceive of cases where a well-intentioned drawer may have inadvertently missed to make necessary arrangements for reasons beyond his control, even though he genuinely intended to honour the cheque drawn by him. The law treats such lapses induced by inadvertence or negligence to be pardonable, provided the drawer after notice makes amends and pays the amount within the prescribed period. It is for this reason that clause (c) of proviso to Section 138 provides that the section shall not apply unless the drawer of the cheque fails to make the payment within 15 days of the receipt of the said notice. To repeat, the proviso is meant to protect honest drawers whose cheques may have been dishonoured for the fault of others, or who may have genuinely wanted to fulfil their promise but on account of inadvertence or negligence failed to make necessary arrangements for the payment of the cheque. The proviso is not meant to protect unscrupulous drawers who never intended to honour the cheques issued by them, it being a part of their modus operandi to cheat unsuspecting persons.

14. If a notice is issued and served upon the drawer of the cheque, no controversy arises. Similarly if the notice is refused by the addressee, it may be presumed to have been served. This is also not disputed. This leaves us with the third situation where the notice could not be served on the addressee for one or the other reason, such as his non-availability at the time of delivery, or premises remaining locked on account of his having gone elsewhere, etc. etc. If in each such case the law is understood to mean that there has been no service of notice, it would completely defeat the very purpose of the Act. It would then be very easy for an unscrupulous and dishonest drawer of a cheque to make himself scarce for some time after issuing the cheque so that the requisite statutory notice can never be served upon him and consequently he can never be prosecuted. There is good authority to support the proposition that once the complainant, the payee of the cheque, issues notice to the drawer of the cheque, the cause of action to file a complaint arises on the expiry of the period prescribed for payment by the drawer of the cheque. If he does not file a complaint within one month of the date on which the cause of action arises under clause (c) of the proviso to Section 138 of the Act, his complaint gets barred by time. Thus, a person who can dodge the postman for about a month or two, or a person who can get a fake endorsement made regarding his nonavailability can successfully avoid his prosecution because the payee is bound to issue notice to him within a period of 30 days from the date of receipt of information from the bank regarding the return of the cheque as unpaid. He is, therefore, bound to issue the legal notice which may be returned with an endorsement that the addressee is not available on the given address.” 

13. The upshot the light of abovesaid discussion is that in a case like the instant one, where the statutory demand notice under Sec.138 proviso (b) is returned unversed/unclaimed, then the date on which the notice said to have been served on the accused as contemplated in Sec.138 proviso (c), is the date when the complainant received the returned postal cover or was so informed by the postal authority regarding the service of notice and it is not the date when the postman made the endorsement that the addressee refused or return the post article unclaimed. As held by this Court in the aforesaid judgments, reckoning of the date of deemed receipt as the date of return of notice as in the instant case, where the notice has been returned unserved/unclaimed is unlikely to result in any prejudice to even the accused, as the accused would only get further time from the date of deemed service to discharge the liability due under the cheque. Whereas if hyper technical approach is taken to reckon the said date from the date when the postman made the endorsement that the addressee refused or returned the postal article, then it would cause serious prejudice to the complainant, as in many a case he might get intimation regarding the return of the notice quite late, which might even be after the period of 15 days from the date on which the postman had actually made the endorsement while attempting to serve notice in the address of the accused. This would result in the complaint that may be so filed later, as barred by limitation. In this context, it is noteworthy to mention that prior to the amendment introduced by Sec.9 of the Central Amendment Act 55 of 2002, made effective from 6.2.2003, there was no power conferred on the criminal court to condone the delay in filing a complaint for offence punishable under Sec. 138 of the Negotiable Instruments Act in view of the mandatory provisions contained clause (b) of Sec. 142 of the N.I. Act, as it stood then, which mandated that complaint is to be filed within one month of the date, on which the cause of action arises under clause (c) of proviso to Sec. 138, etc. It was only later as per the said Amendment Act, 55 of 2002 made effective from 6.2.2003 that the Parliament had engrafted proviso to clause (b) of Sec.142(1) providing that cognizance of the complaint could be taken by the court after the prescribed period, if the complainant satisfies the court that he had sufficient cause for not making a complaint within such stipulated period. So in a situation as in the instant case, which is covered by the provisions that existed prior to the Act 55 of 2002 (made effective prospectively only from 6.2.2003) such a complaint as mentioned herein above would have been totally time barred, with no provision for condoning the delay. This would have led to drastic and undesirable consequence on complainants, who could not be blamed for the time taken by the Postal Department in returning such unserved registered postal articles. The proviso to Sec. 138 (as it stood at the relevant time in 1990) of the Negotiable Instruments Act provides as follows: 

“Sec.138: Dishonour of cheque for insufficiency, etc., of funds in the account.-- 

xxx xxx xxx 

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.” 

Sec. 142 of the N.I. Act, as it stood at the relevant time in 1990 provided as follows: 

“Sec.142. Cognizance of offences.- Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974),- (a) no court shall take cognizance of any offence punishable under Section 138 except upon a complaint, in writing, made by the payee or, as the case may be, the holder in due course of the cheque; 

(b) such complaint is made within one month of the date on which the cause-of-action arises under clause (c) of the proviso to Section 138: (c) no court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the first class shall try any offence punishable under Section 138.” 

In the light of abovesaid aspects, it is only to be held that the date of reckoning of 15 days from the date of receipt of the notice as contemplated in proviso (c) of Sec. 138, in the instant case, should be taken as 16.11.1990 (the date on which demand notice was returned to the complainant). It is not in dispute that the complaint has been filed on 19.11.1990. Therefore, it is crystal clear that the complaint has been filed without waiting for the expiry of the 15 days from the date of due receipt of notice as aforestated. Hence it is only to be held that the complaint has been filed in the instant case at a time even prior to the occurrence of the cause of action as envisaged in clause (b) of Sec. 142 (1) of the Negotiable Instruments Act. Hence it is only to be held that in the instant case, the complaint which has been filed on 16.11.1990, is not maintainable as it has been instituted even prior to the occurrence of the cause of action as envisaged in clause (b) of Sec. 142(1) of the N.I. Act. The cause of action as envisaged in clause (b) of Sec. 142 (as it stood then) read with proviso (c) of Sec. 138 of the N.I. Act would arise only on expiry of 15 days from the date of receipt of the demand notice under proviso (b), on the accused and if the complaint is filed before date of occurrence of the cause of action as aforestated, then such a premature complaint is not maintainable as the minimum waiting grace period of 15 days has not been complied with by the complainant before instituting the complaint.

14. In the light of these aspects, it is only to be held that the view taken by the learned appellate sessions Judge in setting aside the conviction imposed on the accused by the trial court is right and proper. Accordingly, the impugned judgment of the appellate Sessions Judge in this case will stand confirmed and the present appeal is only to be dismissed. Accordingly, this appeal is dismissed.