S. 138 NI Act | Cheque Dishonour Sent To Drawer's Address Is Validly Served Though Received By Family Member : Supreme Court

The Supreme Court on Wednesday (September 30) held that a statutory demand notice under the Negotiable Instruments Act, 1881 cannot be treated as invalid merely because it was received by a family member of the drawer, when the notice was dispatched by registered post to the drawer's correct address.

A bench of Justice Ahsanuddin Amanullah and Justice Manmohan set aside the Kerala High Court's judgment, which had overturned the drawer's conviction solely on the ground that the statutory demand notice was not received by him personally but by his mother, who resided at the address provided by the drawer.

The Court said that once a demand notice is dispatched by registered post to the correct address, a rebuttable presumption of service arises shifting the burden upon the drawer to rebut the presumption by establishing, for instance, that the address was incorrect, that he had no knowledge of the notice, or that the postal endorsement was incorrect.

“…the requirement of 'giving of notice' stands complied with once the notice is dispatched to the correct address. It is thereafter incumbent upon the drawer to rebut the presumption by establishing either that he had no knowledge of the notice having been brought to his address or that the notice was not sent to the correct address or that the postal endorsement is incorrect.”, the Court observed.

The case arose from a complaint under Section 138 of the NI Act concerning a Rs.3 lakh loan advanced by the appellant to respondent No.2. The cheque issued by the respondent was dishonoured.

The complainant thereafter issued a statutory demand notice dated August 31, 2016, by registered post to the respondent's correct address. The notice was received by his mother, Amina.

No payment was made and the respondent did not reply to the notice.

The Trial Court convicted him on July 10, 2019, sentencing him to six months' simple imprisonment and a fine of Rs.3 lakh. The appellate court upheld the conviction on February 16, 2023.

However, the Kerala High Court, exercising revisional jurisdiction under Section 397 Cr.P.C., set aside the conviction. It held that the statutory requirement under proviso (b) to Section 138 had not been complied with because the notice had been received by the respondent's mother rather than by the respondent himself.

Aggrieved, the complainant moved to the Supreme Court.

Allowing the appeal, the judgment authored by Justice Manmohan reiterated that the complainant is not required to establish that the drawer actually received or consciously evaded the notice once the statutory presumption is attracted.

According to the Court, the law requires the complainant to dispatch the notice to the correct address of the drawer, and the presumption of service cannot be defeated by circumstances beyond the complainant's control.

Also, the Court found the High Court's reliance on its earlier decision in M.D. Thomas v. P.S. Jaleel (2009) to be bad in law, as the same was passed in disregard to its three-judge decision of C.C. Alavi Haji vs. Palapetty Muhammed (2007).

Alike the present case, in MD Thomas also, the two-judge bench had set aside a conviction after finding that the statutory notice had been served on the drawer's wife rather than on the drawer himself. However, MD Thomas failed to consider the proposition laid down in CC Alavi Haji where it was held that when a notice is sent by registered post to the correct address, the requirement of "giving of notice" under proviso (b) to Section 138 stands complied with, subject to the drawer's right to rebut the presumption.

“…once the notice was dispatched to the correct address, the presumption in terms of the judgment in C.C. Alavi Haji (supra) arose and it was incumbent upon the drawer/accused to establish either that the address was incorrect or that he had no knowledge of the notice having been brought to his address.”, the Court observed, holding the MD Thomas judgment to be per incuriam.

Applying the said principles, the Court found that there was substantial material demonstrating that the statutory notice had been sent to the respondent's correct address.

The respondent subsequently entered appearance pursuant to summons delivered at the same address. His vakalatnama, appeal and revision petitions also contained the identical address. Moreover, the respondent had never disputed the correctness of the address in his statement under Section 313 Cr.P.C.

Importantly, there was also no case that the respondent and his mother were living separately or that their relationship was such that receipt of the notice by the mother could not reasonably bring the notice to the respondent's knowledge.

Taking all these factors into account, the Court said that the Respondent failed to rebut the presumption carried with the statutory demand notice, once it was sent to a correct address of the drawer.

As a result, the appeal was allowed, thereby restoring the conviction of the Respondent.

Appearance:

For Petitioner(s) Mr. Tom Joseph, AoR Mr. Kumar Gaurav, Adv. Ms. Kristen Sleeth, Adv. Mr. Prashant Bhardwaj, Adv.

For Respondent(s) Mr. Nishe Rajen Shonker, AoR Mr. Zulfiker Ali P.S., AoR Ms. Lebina, Adv.