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CASE NO.: Appeal (crl.)  1255-1261 of 2004

PETITIONER: D. Vinod Shivappa                                                

RESPONDENT: Nanda Belliappa                                           

DATE OF JUDGMENT: 25/05/2006

BENCH: B. P. SINGH & R.V. RAVEENDAN

JUDGMENT: J U D G M E N T  

B.P. SINGH, J.

       These 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’).   

       The 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.   Hence 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.  1255 of 2004.            

       The 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.  

       The 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.  

       Learned 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

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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.

7.      The legal notice was issued to address of the  accused at No.4, Lavalle Road, Bangalore \026 560001.

8.      But the legal notice has been returned unserved  on 25.3.2004 with the following endorsement "Party  not in station arrival not known".

9.      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.

10.     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 Procedure.  

Under 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

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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.   

It 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.

Mr. 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 notice".   According 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.   He 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 matter.  

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.  

It 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.  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, 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

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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.   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.  

If 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.   

We 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

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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 Procedure.           We may now consider some of the authorities cited at the Bar.

       In (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.   On 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 : "If 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

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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.   The 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 his  address.   

       In (2001) 6 SCC 463 : Dalmia Cement (Bharat) Ltd.  vs.   Galaxy 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.   The 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

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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.  

       Counsel 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 notice.  Similarly 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 notice.   

       In (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.  Bhaskaran  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.   Yashpal 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.   vs.  Galaxy Traders & Agencies Ltd. and others  (supra).

       None 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.  

       Learned counsel for the appellant submitted that there may

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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.   Alternatively, he may pay the amount due and compound the  matter.  Be that it may.

These 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.