C. C. Alavi Haji v. Palapetty Muhammed (2007)

The statutory notice is the commonest battleground in a cheque-dishonour prosecution, because the drawer's standard defence is that he never received it. If that defence worked, the section would be unworkable: a drawer could defeat every prosecution by declining to take delivery of a registered letter.

This case closes that escape. It holds that where notice is sent by registered post correctly addressed to the drawer, the mandatory requirement of proviso (b) stands complied with; the presumption of service arises; and it is for the drawer to rebut it. It also supplies a safety valve for the genuinely unaware drawer.

Section 138 does not apply unless three conditions in the proviso are satisfied:

• (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 makes a demand for payment by giving a notice in writing to the drawer within thirty days of the receipt of information from the bank regarding the return of the cheque as unpaid; and
• (c) the drawer fails to make the payment to the payee or holder in due course within fifteen days of the receipt of the notice.

The cause of action arises on the failure under clause (c), and s. 142(b) fixes the limitation for the complaint from that date.

The whole dispute concerns the words giving a notice in clause (b) and receipt of the said notice in clause (c).

The complaint averred that the complainant had issued a lawyer's notice intimating the dishonour of the cheque and demanding payment on 4 August 2001, and that the same was returned on 10 August 2001 saying that the accused was out of station.

The complaint did not aver in terms that the notice had been sent to the correct address of the drawer by registered post with acknowledgement due. But the returned envelope was annexed to the complaint and thus formed part of it, and it showed that the notice had been sent by registered post with acknowledgement due to the correct address and had been returned with an endorsement that the addressee was abroad.

Where a statutory notice sent by registered post is returned unserved, is the requirement of proviso (b) satisfied, and must the complaint aver that the accused evaded service?

The appeal was dismissed; the decision of the High Court did not call for interference.

The presumption of service

Section 27 of the General Clauses Act 1897 gives rise to a presumption that service of notice has been effected when it is sent to the correct address by registered post. In view of that presumption, when stating that a notice has been sent by registered post to the address of the drawer, it is unnecessary to aver further in the complaint that, in spite of the return of the notice unserved, it is deemed to have been served, or that the addressee is deemed to have knowledge of the notice. Unless and until the contrary is proved by the addressee, 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.

The Court reaffirmed that where a notice sent by registered post is returned with a 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.

It follows, and the Court said so in terms, that it is not necessary to aver in the complaint that service of notice was evaded by the accused or that the accused had a role to play in the return of the notice unserved.

Compliance with proviso (b)

On the disclosure of particulars needed to enable the court to draw a presumption under s. 27 of the General Clauses Act or under s. 114 of the Evidence Act, there is no material difference between the two provisions.

When the notice is sent by registered post by correctly addressing the drawer of the cheque, the mandatory requirement of issue of notice in terms of clause (b) of the proviso to s. 138 stands complied with.

The complaint must still contain the basic facts regarding the mode and manner of the issuance of notice to the drawer. At the stage of taking cognizance the court must be prima facie satisfied that a case under the section is made out and that the mandatory statutory procedural requirements have been complied with.

It is then for the drawer to rebut the presumption about service, and to show that he had no knowledge that the notice was brought to his address, or that the address mentioned on the cover was incorrect, or that the letter was never tendered, or that the report of the postman was incorrect.

That interpretation, the Court said, effectuates the object and purpose for which the proviso was enacted, namely to avoid unnecessary hardship to an honest drawer of a cheque and to provide him an opportunity to make amends.

The purpose of the notice, and who the proviso protects

The entire purpose of requiring a notice is to give the drawer an opportunity to pay the cheque amount within fifteen days of service and thereby free himself from the penal consequences of s. 138.

The Court adopted the explanation given earlier in Vinod Shivappa. One can conceive of cases where a well-intentioned drawer may have inadvertently missed making the necessary arrangements for reasons beyond his control, even though he genuinely intended to honour the cheque. The law treats such lapses induced by inadvertence or negligence as pardonable, provided the drawer, after notice, makes amends and pays within the prescribed period. It is for that reason that clause (c) provides that the section shall not apply unless the drawer fails to make payment within fifteen days of receipt of the notice. The proviso is meant to protect honest drawers whose cheques may have been dishonoured through the fault of others, or who genuinely wanted to fulfil their promise but through inadvertence or negligence failed to make the arrangements. 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.

The safety valve

The requirement of giving a notice is a clear departure from the rule of criminal law, where there is no stipulation of giving notice before filing a complaint. The Court therefore supplied a corresponding protection.

Any drawer who claims that he did not receive the notice sent by post can, within fifteen days of receipt of summons from the court in respect of the complaint, make payment of the cheque amount and submit to the court that he had made payment within fifteen days of receipt of the summons — receiving a copy of the complaint with the summons — and that therefore the complaint is liable to be rejected.

Conversely, a person who does not pay within fifteen days of receipt of the summons along with the copy of the complaint cannot then contend that there was no proper service of notice as required by s. 138, ignoring the statutory presumptions to the contrary. Any other interpretation would defeat the very object of the legislation.

The Court recalled the reasoning of K. Bhaskaran: if giving of notice in clause (b) were the same as receipt of notice, a trickster cheque drawer would get a premium to avoid receiving the notice by adopting different strategies and escape the legal consequences of s. 138.

In the final analysis, with that clarification, the Court reiterated the view expressed in K. Bhaskaran and Vinod Shivappa.

Where the statutory notice under proviso (b) to s. 138 is sent by registered post correctly addressed to the drawer, the mandatory requirement of giving notice is complied with, and the presumptions under s. 27 of the General Clauses Act and s. 114 of the Evidence Act arise; the complaint need not aver evasion of service or deemed knowledge, though it must state the mode and manner of issue. The presumption is rebuttable by the drawer. A drawer who genuinely did not receive the notice may pay the cheque amount within fifteen days of receipt of the summons and the complaint, and seek rejection of the complaint; one who does not pay within that period cannot plead want of service.