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.

Headnote

Negotiable Instruments Act, 1881 — Section 138 Proviso (b) read with Section 27, General Clauses Act, 1897 and Section 114, Indian Evidence Act, 1872 — Statutory Demand Notice sent by registered post to the correct address of the drawer — Receipt of notice by mother of the drawer — Rebuttable presumption of valid service — Burden of proof - The requirement of "giving of notice" under Proviso (b) to Section 138 of the Negotiable Instruments Act, 1881 stands complied with once the statutory demand notice is dispatched by registered post to the correct address of the drawer - It is not incumbent upon the complainant to prove that the notice was personally served upon or received by the drawer, nor is the complainant required to plead or prove that the drawer had actual knowledge or deliberately avoided service - The dispatch of notice to the correct address gives rise to a statutory presumption of due service under Section 27 of the General Clauses Act, 1897 and Section 114 of the Indian Evidence Act, 1872 - The burden shifts squarely onto the drawer to rebut this presumption by proving that the address was incorrect, that the letter was never tendered, that the postal endorsement was false, or that they had no knowledge of its arrival - Where the notice was delivered at the drawer's admitted residential address and received by the drawer's mother who resided with them, and the drawer failed to dispute the correctness of the address (having entered appearance pursuant to summons issued at the identical address), the presumption of due service remained unrebutted - The High Court erred in reversing concurrent findings of conviction by shifting the burden onto the complainant to show that the drawer was personally aware of the receipt of notice by his mother. [Relied on C.C. Alavi Haji v. Palapetty Muhammed, (2007) 6 SCC 555; D. Vinod Shivappa v. Nanda Belliappa, (2006) 6 SCC 456; K. Bhaskaran v. Sankaran Vaidhyan Balan & Anr., (1999) 7 SCC 510; Paras 10–13, 18–24, 31–35]

Code of Criminal Procedure, 1973 — Section 397 — Scope of revisional jurisdiction — Interference with concurrent findings of fact - A revisional court exercising jurisdiction under Section 397 of the CrPC does not sit as a second court of appeal - It is not entitled to re-appreciate the entire evidence and substitute its own subjective view for concurrent findings of fact meticulously arrived at by the Trial Court and confirmed by the Sessions Court, unless such findings are perverse, based on no evidence, or suffer from patent illegality - The High Court's interference with concurrent findings of guilt under Section 138 on the erroneous assumption that service on the mother did not constitute service on the accused was wholly impermissible in law. [Paras 9, 15, 33–36]

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.