http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 8  

CASE NO.: Appeal (crl.)  767 of 2007

PETITIONER: C.C. ALAVI HAJI

RESPONDENT: PALAPETTY MUHAMMED & ANR.

DATE OF JUDGMENT: 18/05/2007

BENCH: CJI K.G. BALAKRISHNAN,R.V. RAVEENDRAN & D.K. JAIN

JUDGMENT: J U D G M E N T [Arising out of S.L.P. (Criminal) No. 3910 of 2006)

D.K. JAIN, J.:

       Leave granted. 2.              The matter has been placed before the three Judge Bench  in view of a Reference made by a two-Judge Bench of this  Court, pertaining to the question of service of notice in terms  of Clause (b) of proviso to Section 138 of the Negotiable  Instruments Act, 1881 (in short \021The Act\022).  Observing that  while rendering the decision in D. Vinod Shivappa Vs.   Nanda Belliappa , this Court has not taken into  consideration the presumption in respect of an official act as  provided under Section 114 of the Indian Evidence Act, 1872,  the following question has been referred for consideration of  the larger Bench:         \023Whether in absence of any averments in the complaint  to the effect that the accused had a role to play in the matter  of non-receipt of legal notice; or that the accused deliberately  avoided service of notice, the same could have been  entertained keeping in view the decision of this Court in Vinod  Shivappa\022s case (supra)?\024 3.              As it hardly needs emphasis that necessary averments in  regard to the mode and the manner of compliance with the  mandatory requirements of Section 138 of the Act are required  to be made in the complaint, from the format of the question,  the scope of controversy appears to lie in a narrow compass  but bearing in mind the fact that the issue raised has wider  implication with regard to the very maintainability of the  complaint itself, we deem it necessary to deal with the issue in   little more detail. 4.              Chapter XVII of the Act originally containing Sections 138  to 142 was inserted in the Act by the Banking, Public  Financial Institutions and Negotiable Instruments Laws  (Amendment) Act, 1988 with the object of promoting and  inculcating faith in the efficacy of banking system and its  operations and giving credibility to negotiable instruments in  business transaction.  The introduction of the said Chapter  was intended to create an atmosphere of faith and reliance on  banking system by discouraging people from not honouring  their commitments by way of payment through cheques.   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.  To make the provisions contained in the said Chapter more

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 8  

effective, some more Sections were inserted in the Chapter and  some amendments in the existing provisions were made.   Though, in this reference, we are not directly concerned with  these amendments but they do indicate the anxiety of the  Legislature to make the provisions more result oriented.   Therefore, while construing the provision, the object of the  legislation has to be borne in mind. 5.              As noted above, the controversy arises in the context of  service of notice in terms of Section 138 of the Act.  The  conditions pertaining to the notice to be given to the drawer,  have been formulated and incorporated in Clauses (b) and (c)  of the proviso to Section 138 of the Act, which read as follows: \023Provided that nothing contained in this  section shall apply unless \026  (a)     \005    \005    \005 (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, 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.\024       6.              As noted hereinbefore, Section 138 of the Act was  enacted to punish unscrupulous drawers of cheques who,  though purport to discharge their liability by issuing cheque,  have no intention of really doing so.  Apart from civil liability,  criminal liability is sought to be imposed by the said provision  on such unscrupulous drawers of cheques.  However, with a  view to avert unnecessary prosecution of an honest drawer of  the cheque and with a view to give an opportunity to him to  make amends, the prosecution under Section 138 of the Act  has been made subject to certain conditions.  These conditions  are stipulated in the proviso to Section 138 of the Act,  extracted above.  Under Clause (b) of the proviso, the payee or  the holder of the cheque in due course is required to give a  written notice to the drawer of the cheque within a period of  thirty days from the date of receipt of information from the  bank regarding the return of the cheque as unpaid.  Under  Clause (c), the drawer is given fifteen days time from the date  of receipt of the notice to make the payment and only if he  fails to make the payment, a complaint may be filed against  him.  As noted above, the object of the proviso is to avoid  unnecessary hardship to an honest drawer.  Therefore, the  observance of stipulations in quoted Clause (b) and its  aftermath in Clause (c) being a pre-condition for invoking  Section 138 of the Act, giving a notice to the drawer before  filing complaint under Section 138 of the Act is a mandatory  requirement. 7.              The issue with regard to interpretation of the expression  \021giving of notice\022 used in Clause (b) of the proviso is no more  res integra.  In K. Bhaskaran Vs. Sankaran Vaidhyan  Balan & Anr. , the said expression came up for  interpretation. Considering the question with particular  reference to scheme of Section 138 of the Act, it was held that  failure on the part of the drawer to pay the amount should be

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 8  

within fifteen days \021of the receipt\022 of the said notice.  \021Giving  notice\022 in the context is not the same as \021receipt of notice\022.   Giving is a process of which receipt is the accomplishment.  It  is for the payee to perform the former process by sending the  notice to the drawer at the correct address and for the drawer  to comply with Clause (c) of the proviso.  Emphasizing that the  provisions contained in Section 138 of the Act required to be  construed liberally, it was observed thus: \023If 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 an  interpretation which helps a dishonest  evader and clips an honest payee as that  would defeat the very legislative measure. In Maxwell’s Interpretation of Statues the  learned author has emphasized that  "provisions relating to giving of notice  often receive liberal interpretation," (vide  page 99 of the 12th Edn.) The context  envisaged in Section 138 of the Act  invites a liberal interpretation for the  person who has the statutory obligation  to give notice because he is presumed to  be the loser in the transaction and it is  for his interest the very provision is made  by the legislature. The words in Clause  (b) of the proviso to Section 138 of the Act  show that payee has the statutory  obligation to \023make a demand\024 by giving  notice. The thrust in the clause is on the  need to \023make a demand\024. It is only the  mode for making such demand which the  legislature has prescribed. A payee can  send the notice for doing his part for  giving the notice. Once it is dispatched  his part is over and the next depends on  what the sendee does.\024

8.      Since in Bhaskaran\022s case (supra), the notice issued in  terms of Clause (b) had been returned unclaimed and not as  refused, the Court posed the question: \023Will there be any  significant difference between the two so far as the  presumption of service is concerned?\024  It was observed that  though Section 138 of the Act does not require that the notice  should be given only by \023post\024, yet in a case where the sender  has dispatched the notice by post with correct address written  on it, the principle incorporated in Section 27 of the General  Clauses Act, 1897 (for short \021G.C. Act\022) could profitably be  imported in such a case.  It was held that in this situation  service of notice is deemed to have been effected on the sendee  unless he proves that it was not really served and that he was  not responsible for such non-service.  9.      All these aspects have been highlighted and reiterated by  this Court recently in Vinod Shivappa\022s case (supra).   Elaborately dealing with the 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 8  

remaining locked on account of his having gone elsewhere etc;  it was observed that 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.  It was further observed that once 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 notice, which  may be returned with an endorsement that the addressee is  not available on the given address.  This Court held: \023We 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 8  

482 of the Code of Criminal Procedure\024

10.     It is, thus, trite to say that where the payee dispatches  the notice by registered post with correct address of the  drawer of the cheque, the principle incorporated in Section 27  of the G.C. Act would be attracted; the requirement of Clause  (b) of proviso to Section 138 of the Act stands complied with  and cause of action to file a complaint arises on the expiry of  the period prescribed in Clause (c) of the said proviso for  payment by the drawer of the cheque.  Nevertheless, it would  be without prejudice to the right of the drawer to show that he  had no knowledge that the notice was brought to his address. 11.     However, the Referring Bench was of the view that this  Court in Vinod Shivappa\022s case (supra) did not take note of  Section 114 of Evidence Act in its proper perspective.  It felt  that the presumption under Section 114 of the Evidence Act  being a rebuttable presumption, the complaint should contain  necessary averments to raise the presumption of service of  notice; that it was not sufficient for a complainant to state that  a notice was sent by registered post and that the notice was  returned with the endorsement \023out of station\024; and that there  should be a further averment that the addressee-drawer had  deliberately avoided receiving the notice or that the addressee  had knowledge of the notice, for raising a presumption under  Section 114 of Evidence Act. 12.     Therefore, the moot question requiring consideration is in  regard to the implication of Section 114 of the Indian Evidence  Act, 1872 insofar as the service of notice under the said  proviso is concerned.  Section 114 of the Indian Evidence Act,  1872 reads as follows: \023Section 114 - Court may presume  existence of certain facts.- The Court  may presume the existence of any fact  which it thinks likely to have happened.  regard being had to the common course  of natural events human conduct and  public and private business, in their  relation to the facts of the particular case. Illustrations      The Court may presume\027 \005    \005    \005   (f) That the common course of business  has been followed in particular cases; \005    \005    \005\024

13.     According to Section 114 of the Act, read with illustration  (f) thereunder, when it appears to the Court that the common  course of business renders it probable that a thing would  happen, the Court may draw presumption that the thing  would have happened, unless there are circumstances in a  particular case to show that the common course of business  was not followed.  Thus, Section 114 enables the Court to  presume the existence of any fact which it thinks likely to have  happened, regard being had to the common course of natural  events, human conduct and public and private business in  their relation to the facts of the particular case.  Consequently,  the court can presume that the common course of business  has been followed in particular cases.  When applied to  communications sent by post, Section 114 enables the Court  to presume that in the common course of natural events, the  communication would have been delivered at the address of  the addressee.  But the presumption that is raised under  Section 27 of the G.C. Act is a far stronger presumption.   Further, while Section 114 of Evidence Act refers to a general  presumption, Section 27 refers to a specific presumption.  For

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 8  

the sake of ready reference, Section 27 of G.C. Act is extracted  below: \02327. Meaning of service by post. -  Where any Central Act or Regulation  made after the commencement of this Act  authorizes or requires any document to  be served by post, whether the expression  \023serve\024 or either of the expressions \023give\024  or \023send\024 or any other expression is used,  then, unless a different intention  appears, the service shall be deemed to  be effected by properly addressing, pre- paying and posting by registered post, a  letter containing the document, and,  unless the contrary is proved, to have  been effected at the time at which the  letter would be delivered in the ordinary  course of post\024.

14.     Section 27 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 the said presumption, when  stating that a notice has been sent by registered post to the  address of the drawer, it is unnecessary to further aver 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.  This Court has  already held that when a notice is sent by registered post and  is returned with a postal endorsement \023refused\024 or  \023not  available in the house\024 or \023house locked\024 or \023shop closed\024 or  \023addressee not in station\024, due service has to be presumed.   [Vide Jagdish Singh Vs. Natthu Singh ; State of M.P. Vs.  Hiralal & Ors.  and V.Raja Kumari Vs. P.Subbarama  Naidu & Anr. ]  It is, therefore, manifest that in view of the  presumption available under Section 27 of the Act, it is not  necessary to aver in the complaint under Section 138 of the  Act 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. 15.     Insofar as the question of disclosure of necessary  particulars with regard to the issue of notice in terms of  proviso (b) of Section 138 of the Act, in order to enable the  Court to draw presumption or inference either under Section  27 of the G.C. Act or Section 114 of the Evidence Act, is  concerned, there is no material difference between the two  provisions.  In our opinion, therefore, 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 proviso to Section 138 of the Act stands  complied with.  It is needless to emphasise that the complaint  must contain basic facts regarding the mode and manner of  the issuance of notice to the drawer of the cheque. It is well  settled that at the time of taking cognizance of the complaint  under Section 138 of the Act, the Court is required to be prima  facie satisfied that a case under the said Section is made out  and the aforenoted mandatory statutory procedural  requirements have been complied with.  It is then for the  drawer to rebut the presumption about the service of notice  and 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.  In our opinion,

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 8  

this interpretation of the provision would effectuate the object  and purpose for which proviso to Section 138 was enacted,  namely, to avoid unnecessary hardship to an honest drawer of  a cheque and to provide him an opportunity to make amends.   16.     As noticed above, the entire purpose of requiring a notice  is to give an opportunity to the drawer to pay the cheque  amount within 15 days of service of notice and thereby free  himself from the penal consequences of Section 138.  In Vinod  Shivappa (supra), this Court observed: \023One 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.\024

17.     It is also to be borne in mind that the requirement of  giving of notice is a clear departure from the rule of Criminal  Law, where there is no stipulation of giving of a notice before  filing a complaint.  Any drawer who claims that he did not  receive the notice sent by post, can, within 15 days of receipt  of summons from the court in respect of the complaint under  Section 138 of the Act, make payment of the cheque amount  and submit to the Court that he had made payment within 15  days of receipt of summons (by receiving a copy of complaint  with the summons) and, therefore, the complaint is liable to be  rejected.  A person who does not pay within 15 days of receipt  of the summons from the Court along with the copy of the  complaint under Section 138 of the Act, cannot obviously  contend that there was no proper service of notice as required  under Section 138, by ignoring statutory presumption to the  contrary under Section 27 of the G.C. Act and Section 114 of  the Evidence Act. In our view, any other interpretation of the  proviso would defeat the very object of the legislation.  As  observed in Bhaskaran\022s case (supra), if the \023giving of notice\024  in the context of Clause (b) of the proviso was the same as the  \023receipt of notice\024 a trickster cheque drawer would get the  premium to avoid receiving the notice by adopting different  strategies and escape from legal consequences of Section 138  of the Act.   18.     In the instant case, the averment made in the complaint  in this regard is: \023Though the complainant issued lawyer\022s  notice intimating the dishonour of cheque and demanded

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 8  

payment on 4.8.2001, the same was returned on 10.8.2001  saying that the accused was \021out of station\022.\024  True, there was  no averment to the effect that the notice was sent at the  correct address of the drawer of the cheque by \021registered post  acknowledgement due\022.  But the returned envelope was  annexed to the complaint and it thus, formed a part of the  complaint which showed that the notice was sent by registered  post acknowledgement due to the correct address and was  returned with an endorsement that \021the addressee was  abroad.\022  We are of the view that on facts in hand the  requirements of Section 138 of the Act had been sufficiently  complied with and the decision of the High Court does not call  for interference.  19.     In the final analysis, with the clarification indicated  hereinabove, we reiterate the view expressed by this Court in  K. Bhaskaran and Vinod Shivappa\022s cases (supra).   20.     For the reasons aforementioned, we do not find any merit  in this appeal.  It is dismissed accordingly but with no order  as to costs in the circumstances of the case.