Vinod Shivappa Vs. Nanda Belliappa  Insc 344 (25 May 2006)
P. SINGH & R.V. RAVEENDAN
seven appeals arise out of seven separate orders passed by a learned Single
Judge of the Karnataka High Court on July 19, 2004 dismissing seven criminal
petitions filed under Section 482 of the Code of Criminal Procedure for setting
aside the orders of the JMFC Medikeri issuing process against the appellant on
the complaints filed by the respondent under Section 138 of the Negotiable
Instruments Act, 1881 (for short 'Act').
facts of the cases are similar and the same question arises for consideration
in each of the appeals. The only distinction is that whereas in Criminal Appeal
Nos. 1256 and 1257 of 2004 the notices sent to the appellant were returned with
the endorsement "addressee always absent during delivery time.
returned to sender", in the remaining five cases the notices were returned
with the endorsement "party not in station. Arrival not known." The
representative facts are taken from Criminal Appeal No.
case of the complainant-respondent is that the appellant had issued a cheque in
his favour for a sum of Rs.1,25,000/- on November 7, 2003. The cheque was presented to the
bank for encashment but the same was returned on March 6, 2004 with the endorsement "funds insufficient". The
respondent issued a legal notice to the appellant calling upon him to make the
payment. The said notice was sent on March 17, 2004 by registered post but the same was
returned unserved on March
25, 2004 with an
endorsement "party not in station arrival not known". The respondent
thereafter filed a complaint under Section 138 of the Act on May 4, 2004. By order dated June 2, 2004 the learned Magistrate passed
orders under Section 204 of the Code of Criminal Procedure registering a
criminal case and issuing process against the appellant.
appellant filed an application under Section 482 of the Code of Criminal
Procedure before the High Court which has been dismissed by the impugned order.
From the judgment of the High Court it appears that the only point argued
before the High Court was the question of limitation. However, before us other
legal submissions have been advanced but not the question of limitation.
counsel for the appellant submitted that in the instant case there was no
service of notice. It is pointed out that the respondent himself admitted in
his complaint that the notice had been returned unserved. It is contended that
the cause of action arises only after service of notice on the drawer of a cheque,
and in the absence of service of notice, no cause of action arose and,
therefore, the Magistrate was not justified in taking cognizance and issuing
process. Reliance was placed on the statements contained in the complaint, the
relevant part whereof is as follows :- "6. The Complainant got issued a
legal notice on 17.3.2004 asking the accused to pay the cheque amount of Rs.1,25,000/-
within 15 days from the date of receipt of notice failing which he would take
legal action against the accused.
The legal notice was issued to address of the accused at No.4, Lavalle Road, Bangalore 560001.
But the legal notice has been returned unserved on 25.3.2004 with the following
endorsement "Party not in station arrival not known".
The legal notice has been issued to the same address of the accused as the
notices which were issued to the accused in CC No.2173/2003, 2174/2003,
2175/2003 and 2208/2003 filed before this Court. On those occasions the accused
has received the notices. Hence the complainant states that the address of the
accused is correct and the notice has been sent to the last known place of
residence of accused.
Under the circumstances it is prayed that this Hon'ble Court be pleased to consider that the notice issued by the
complainant as sufficient and it be deemed served." We do not agree with
the counsel for the appellant that the complainant has admitted in the
complaint that notice had not been served within the meaning of Section 138 of
the Act. What has been stated in paragraph 8 of the complaint is the factum of
the legal notice having been returned unserved on March 25, 2004 with an endorsement. This was a fact the complainant could
not deny. But in paragraph 10 of the complaint the complainant has stated that
notice may be deemed to have been served. The reasons for deeming service, are
stated in the earlier paragraphs of the complaint. The question which,
therefore, arises is whether in these circumstances the appellant could pray
for quashing of the proceedings under Section 482 of the Code of Criminal
Section 138 of the Act, where a cheque issued by the drawer in the discharge of
any debt or any other liability is returned by the bank unpaid, because the
amount standing to the credit of that account is insufficient to honour the cheque,
the said person is deemed to have committed an offence. The is subject to
proviso to Section 138 which provides that the cheque should have been
presented to the bank within the period of six months from the date of which it
is drawn or within the period of its validity, whichever is earlier. The payee
must also make a demand for the payment of the said amount by giving a notice
in writing to the drawer of the cheque within 30 days of the receipt of the
information by him from the bank regarding the return of the cheque unpaid. If
despite this demand, the drawer fails to make the payment within fifteen days
of the receipt of the notice, a cause of action arises for prosecuting him for
the offence punishable under Section 138 of the Act. Section 142 provides that
the court shall take cognizance of an offence punishable under Section 138 of
the Act upon receipt of a complaint in writing made by the payee or, as the
case may be, the holder in due course of the cheque. Such complaint must be
made within one month of the date on which the cause of action arises under
clause (c) of the proviso to Section 138. However, discretion is given to the
court to take cognizance of the complaint even after the prescribed period, if
the complainant satisfies the court that he had sufficient cause for not making
the complaint within such period.
is not disputed that the drawer of the cheque makes himself liable for
prosecution under Section 138 of the Act if he fails to make the payment within
fifteen days of the receipt of the notice given by the drawee. His failure to
make the payment within the stipulated period gives rise to a cause of action
to the complainant to prosecute the drawer under Section 138 of the Act.
Kailash Vasdev, learned senior counsel appearing for the appellant, vehemently
contended before us that proviso (c) of Section 138 of the Act leaves no room
for doubt that the cause of action arises only if the drawer of the cheque
fails to make the payment within 15 days "of the receipt of the said
to him, therefore, it must be established on record that notice issued by the
payee was in fact received by him. He conceded that if the drawer of the cheque
refuses to accept the notice, the court may presume service of notice, but in a
case where the notice is not served for any other reason, it cannot be said to
be deemed service of notice giving rise to a cause of action.
submitted, that apart from the seven notices in these seven cases, several
other notices were issued to the appellant on the same address which he
accepted, and where due, paid the amount also. He, therefore, submitted that
the appellant has settled all those disputes where the claim of the respondent
was justified, but he is not willing to pay the amount claimed by the
respondent unjustifiably. It is a queer co-incidence that the appellant
received all those notices where the demand was justified, and all the notices
which could not be served upon him on account of his absence from his residence
are those where the demand of the respondent is, according to the appellant,
not justified. We need not make any further comment on this aspect of the
question is whether in a case of this nature, where the postal endorsement
shows that the notice could not be served on account of the non availability of
the addressee, a cause of action may still arise for prosecution of the drawer
of the cheque on the basis of deemed service of notice under clause (c) of
proviso to Section 138 of the Act. In our view this question has to be answered
by reference to the facts of each case and no rule of universal application can
be laid down that in all cases where notice is not served on account of
non-availability of the addressee, the court must presume service of notice.
is well settled that in interpreting a statute the court must adopt that
construction which suppresses the mischief and advances the remedy. This is a
rule laid down in Heydon's case (76 ER 637) also known as the rule of purposive
construction or mischief rule.
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 dis- honour 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 in-justice 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.
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.
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.
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 sometime 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 non
availability 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.
cannot also lose sight of the fact that the drawer may by dubious means manage
to get an incorrect endorsement made on the envelope that the premises has been
found locked or that the addressee was not available at the time when postman
went for delivery of the letter. It may be that the address is correct and even
the addressee is available but a wrong endorsement is manipulated by the
addressee. In such a case, if the facts are proved, it may amount to refusal of
the notice. If the complainant is able to prove that the drawer of the cheque
knew about the notice and deliberately evaded service and got a false
endorsement made only to defeat the process of law, the Court shall presume
service of notice. This, however, is a matter of evidence and proof. Thus even
in a case where the notice is returned with the endorsement that the premises
has always been found locked or the addressee was not available at the time of
postal delivery, it will be open to the complainant to prove at the trial by
evidence that the endorsement is not correct and that the addressee, namely the
drawer of the cheque, with knowledge of the notice had deliberately avoided to
receive notice. Therefore, it would be pre- mature at the stage of issuance of
process, to move the High Court for quashing of the proceeding under Section
482 of the Code of Criminal Procedure. The question as to whether the service
of notice has been fraudulently refused by unscrupulous means is a question of
fact to be decided on the basis of evidence. In such a case the High Court ought
not to exercise its jurisdiction under Section 482 of the Code of Criminal
may now consider some of the authorities cited at the Bar.
(1999) 7 SCC 510 : K. Bhaskaran vs. Sankaran Vaidhyan Balan and another, the drawee
had presented a cheque issued by the drawer but the same was dishonoured. A
notice was sent by registered post but the same was returned with the
endorsement that the addressee was found absent on 3rd , 4th and 5th February,
1993 and intimation was served on addressee's house on 6th February, 2003. Thereafter the postal article
remained unclaimed till 15th
February, 1993 and it
was returned to the sender with a further endorsement "unclaimed".
The complaint filed by the drawee was dismissed on the ground of territorial
jurisdiction as also on the ground that since the notice had not been received
by the drawer, there was no cause of action for filing the complaint.
appeal, the High Court reversed the order of acquittal. The appellant
approached this Court by special leave. This Court held in favour of the
respondent on the question of territorial jurisdiction. On the question of
notice this Court considered the scheme of Section 138 of the Act by particular
reference to clauses (b) and (c) of the proviso thereof. In view of the
legislative scheme it was held, the failure on the part of the drawer to pay
the amount should be within 15 days "of the receipt" of the said
notice. It was clear that the "giving of notice" in the context was
not the same as the receipt of notice. "Giving" was the process of
which the "receipt" was the accomplishment. This Court then observed
a strict interpretation is given that the drawer should have actually received
the notice for the period of 15 days to start running no matter that the payee
sent the notice on the correct address, a trickster cheque drawer would get the
premium to avoid receiving the notice by different strategies and he could
escape from the legal consequences of Section 138 of the Act. It must be borne
in mind that Court should not adopt in interpretation which helps a dishonest
evader and clips an honest payee as that would defeat the very legislative
measure." This Court noticed the position well settled in law that the
notice refused to be accepted by the drawer can be presumed to have been served
on him. In that case the notice was returned as "unclaimed" and not
as refused. The Court posed the question "Will there be any significant
difference between the two so far as the presumption of service is concerned?"
Their Lordships referred to Section 27 of the General Clauses Act and observed
that the principle incorporated therein could profitably be imported in a case
where the sender had despatched the notice by post with the correct address
written on it. Then it can be deemed to have been served on the sendee, unless
he proves that it was not really served and that he was not responsible for
such non-service. This Court dismissed the appeal preferred by the drawer
holding that where the notice is returned by the addressee as unclaimed such
date of return to the sender 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. This 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.
Since the appellant did not attempt to discharge the burden to rebut the
aforesaid presumption, the appeal was dismissed by this Court.
aforesaid decision is significant for two reasons. Firstly it was held that the
principle incorporated in Section 27 of the General Clauses Act would apply in
a case where the sender despatched the notice by post with the correct address
written on it, but that 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
(2001) 6 SCC 463 : Dalmia Cement (Bharat) Ltd. vs.
Traders & Agencies Ltd. and others, the facts were that a cheque given by
the respondent to the appellant was dishonoured on May 28, 1998 of which intimation was received by the appellant on June 2, 1998. On June 13, 1998 the appellant issued to the respondent and one of its
partners the statutory notice under Section 138 of Act and received the postal
acknowledgement of the notice on June 15, 1998 which was the last date of limitation on the basis of the
said notice. However, the appellant again presented the cheque on July 1, 1998 which was again dishonoured on July 2, 1998. The appellant sent a second notice
of dishonour of the cheque but the respondent having received the notice on July 27, 1998 did not make the payment. On September 9, 1998 the appellant filed a complaint.
The respondent moved a petition before the High Court for quashing of the
complaint under Section 482 of the Code of Criminal Procedure on the ground
that it was time barred since acknowledgement of the first notice was received
by the complainant on June
15, 1998 and the
complaint was filed after July 15, 1998. The
appellant on the other hand contended that the respondent's having denied
receipt of the first notice, the only course open to the appellant was to
present the cheque again.
High Court quashed the complaint as time barred. This Court allowed the appeal
of the appellant after considering the authorities cited at the bar and observed
:- "Section 27 of the General Clauses Act deals with the presumption of
service of a letter sent by post. The despatcher of a notice has, therefore, a
right to insist upon and claim the benefit of such a presumption. But as the
presumption is rebuttable one, he has two options before him. One is to concede
to the stand of the sendee that as a matter of fact he did not receive the
notice, and the other is to contest the sendee's stand and take the risk for
proving that he in fact received the notice. It is open to the despatcher to
adopt either of the options. If he opts the former, he can afford to take
appropriate steps for the effective service of notice upon the addressee. Such
a course appears to have been adopted by the appellant- company in this case
and the complaint filed, admittedly, within limitation from the date of the
notice of service conceded to have been served upon the respondents." This
Court also held that though the payee may successively re-present a dischonoured
cheque but once a notice under Section 138 of the Act was received by the
drawer of the cheque, the payee or the holder of the cheque forfeits his right
to again present the cheque, since the cause of action had accrued when there
was failure to pay the amount within the prescribed period.
for the appellant relied on paragraph 6 of the report wherein it was observed
that it is not the "giving" of the notice but it is the failure to
pay after "receipt" of the notice by the drawer which gives the cause
of action to the complainant to file the complaint within the statutory period.
It is no doubt true that the receipt of the notice has to be proved, but as
held by this Court consistently, refusal of notice amounts to service of
in a case where notice is not claimed even though sent by registered post, with
the aid of Section 27 of the General Clauses Act, the drawer of the cheque may
be called upon to rebut the presumption which arises in favour of service of
(2004) 8 SCC 774 : V. Raja Kumari vs. P. Subbarama Naidu and another, dealing
with a case where the notice could not be served on account of the fact that
the door of the house of the drawer was found locked, this Court held that the
principle incorporated in Section 27 of the General Clauses Act will apply to a
notice sent by post, and it would be for the drawer to prove that it was not
really served and that he was not responsible for such non- service. This Court
reiterated the principle laid down in K.
vs. Sankaran Vaidhyan Balan and another case (supra). This Court while
dismissing the appeal concluded :- "Burden is on the complainant to show
that the accused has managed to get an incorrect postal endorsement made. What
is the effect of it has to be considered during trial, as the statutory scheme
unmistakably shows the burden is on the complainant to show the service of
notice. Therefore, where material is brought to show that there was false endorsement
about the non-availability of noticee, the inference that is to be drawn has to
be judged on the background facts of each case." In (2005) 4 SCC 417 : Prem
Chand Vijay Kuamr vs.
Singh and another, the Court relied upon the principle laid down in (1998) 6
SCC 514 : Sadanandan Bhadran vs. Madhavan Sunil Kumar which was followed in Dalmia
Cement (Bharat) Ltd.
Galaxy Traders & Agencies Ltd. and others (supra).
of the decisions considered above take a view different from the view we have
taken. The question as to whether there was deemed service of notice, in the
sense that the endorsement made on the returned envelope was a manipulated and
false endorsement, is essentially a question of fact, and that must be
considered in the light of the evidence on record. The High Court was thus
right in rejecting the petitions filed by the appellant under Section 482 of
the Code of Criminal Procedure.
counsel for the appellant submitted that there may be unscrupulous
complainants, who may manage to get a false postal endorsement of
"refusal" or "unclaimed" or "party not available"
and then prosecute an innocent or bona fide drawer. We do not think that the
drawer is without remedy. He can also establish by evidence that said
endorsement of "refusal" or "unclaimed" or "not
found" during delivery time to be false.
he may pay the amount due and compound the matter. Be that it may.
appeals are, therefore, dismissed. The trial court is directed to proceed with
the complaint cases in accordance with law. Nothing stated above shall be
construed as expression of an opinion on the merit of the matters.