N.PARAMESWARAN UNNI Vs. G.KANNAN & ANR
Section 114 - Court may presume existence of certain facts
Negotiable Instruments Act, 1881
Section 138 - Dishonour of cheque for insufficiency, etc., of funds in the account.
Supreme Court of India (Division Bench (DB)- Two Judge)
Appeal (Crl.), 455 of 2006, Judgment Date: Mar 01, 2017
REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO 455 OF 2006
N Paraeswaran Unni ... Appellant
Versus
G Kannan And Another ... Respondents
JUDGMENT
N.V. Ramana, j.
1. This appeal arises out of the judgment and order dated 06-10-2003
passed by the High Court of Kerala at Ernakulam in Criminal
Revision Petition No. 644 of 1995 whereby the High Court allowed
the criminal revision of the first respondent by setting aside the
concurrent judgments of Trial Court and Appellate Court, that
first respondent cannot be convicted under Section 138 of the
Negotiable Instruments Act, 1881 (in short “N.I. Act”) as the
procedure prescribed under this section was not satisfied in the
instant case.
2. Brief facts leading to this criminal appeal, as per the
prosecution case, are that the first respondent/accused borrowed
Rs. 64,000/- on 13-10-1990 from the appellant/complainant. In lieu
of the borrowed amount, first respondent issued two cheques dated
13-10-1990 for Rs. 10,000/- and Rs. 25,000/- respectively both
drawn on State Bank of India, Alappuzha Branch. Another cheque for
Rs. 29,000/- dated 08-10-1990 was also given to the appellant by
first respondent, which was issued by one K Rajesh, Development
Officer, LIC drawn on State Bank of Travancore, Vadai Canal
branch, Alappuzha.
3. Appellant presented first-two cheques dated 13-10-1990 on 04-04-
1991 to his bank, State Bank of Travancore, Main branch,
Alappuzha. First respondent’s bank returned the said two cheques
on 05-04-1991 with an endorsement “Refer to drawer.” Appellant
received intimation memo dated 05-04-1991 from his bank on 08-04-
1991.
4. Appellant got issued a legal notice on 12-04-1991 to the first
respondent, which was returned with postal endorsement “intimation
served, addressee absent” on 20-04-1991. The same was received by
the appellant’s advocate on 25-04-1991. Appellant again sent the
legal notice on 04-05-1991. The second notice sent to first
respondent’s address was returned with postal endorsement
“Refused, returned to sender.” Thus, according to the appellant,
first respondent failed to return the borrowed amount Rs. 64,000/-
for which statutory notice under proviso (b) of Section 138 of
N.I. Act was issued to him to make good the dishonoured cheques
due to insufficiency of funds in his bank account.
5. On 23.05.1991 appellant lodged a private complaint before the
Judicial First Class Magistrate-II, Alappuzha for the alleged
offence under Section 138 of the N.I. Act, which was numbered as
Summary Trial No. 34/92. After a full fledged trial and upon
appreciating the documentary evidence adduced on behalf of the
parties, the Trial Court allowed the complaint as the appellant
was successful in proving, the case beyond reasonable doubt that
first respondent committed an offence punishable under Section 138
of the N.I. Act. Accordingly, the Trial Court by judgment dated 29-
07-1993 convicted and sentenced the first respondent to undergo
simple imprisonment of three months.
6. Aggrieved by the conviction and sentence, first respondent
preferred Criminal Appeal No 104 of 1993 before Addl. Sessions
Judge at Alappuzha. The Ld. Judge, after perusing the records and
on elaborate hearing, by its judgment dated 07-07-1995 dismissed
the appeal by upholding and confirming the judgment of the Trial
Court.
7. Against the said order, respondent preferred Criminal Revision no
644 of 1995 before the High Court of Kerala. The only ground
raised before the High Court was that the provisions of Section
138 of the N.I. Act cannot be invoked as the appellant had not
complied with the conditions in Clause (b) of the proviso to the
said section. Notice demanding payment of the amount arising from
the two dishonoured cheques in question was on 04-05-1991, whereas
the intimation regarding dishonour of the said cheques was given
by the appellant’s bank on 08-04-1991. Therefore, the notice was
beyond 15 days. Hence, in such circumstances Section 138 of the
N.I. Act was not attracted and no offence was made out.
8. The High Court by its judgment dated 06-10-2003 had allowed the
revision by reversing the concurrent findings of the two Courts
below holding that the statutory notice was beyond the prescribed
limitation period as mentioned under Section 138 of the N.I. Act.
9. Now the issue before us is even though the first notice was issued
by the appellant within time to the correct address of the first
respondent, whether the High Court was right in rejecting the case
of the appellant herein on the ground that second notice was
issued beyond the period of limitation i.e. 15 days from the date
of receiving dishonour intimation from the bank under Clause (b)
of the proviso to Section 138 of the N.I. Act.
10. Before delving into the issue, it would be appropriate to
reproduce Section 138 of the Act, as it then stood.
138. Dishonour of cheque for insufficiency, etc., of funds
in the account:
Where any cheque drawn by a person on an account
maintained by him with a banker for payment of any
amount of money to another person from out of that
account for the discharge, in whole or in part, of any
debt or other liability, is returned by the bank unpaid,
either because of the amount of money standing to the
credit of that account is insufficient to honour the
cheque or that it exceeds the amount arranged to be
paid from that account by an agreement made with that
bank, such person shall be deemed to have committed an
offence and shall, without prejudice. to any other
provision of this Act, be punished with imprisonment for
a term which may extend to two years, or with fine which
may extend to twice the amount of the cheque, or with
both:
Provided that nothing contained in this section shall
apply unless-
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 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,
within fifteen days 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.
Explanation.-For the purposes of this section, “debt or
other liability” means a legally enforceable debt or other
liability.
11. A bare reading of Section 138 of the N.I. Act, indicates that the
purport of Section 138 is to prevent and punish the dishonest
drawers of cheques who evade and avoid their liability. As
explained in Clause (b) of the proviso, the payee or the holder of
the cheque in due course is necessarily required to serve a
written notice on the drawer of the cheque within fifteen days
from the date of intimation received from the bank about
dishonour.
12. It is explicitly made clear under Clause (c) of Section 138 of
N.I. Act, that this gives an opportunity to a drawer of the cheque
to make payment within fifteen days of receipt of such notice sent
by the drawee. It is manifest that the object of providing Clause
(c) is to avoid unnecessary hardship. Even if the drawer has
failed to make payment within fifteen days of receipt of such
notice as provided under Clause (c), the drawer shall be deemed to
have committed an offence under the Act and thereafter the drawee
would be competent to file complaint against the drawer by
following the procedure prescribed under Section 142 of the Act.
13. It is clear from Section 27 of the General Clauses Act, 1897 and
Section 114 of the Indian Evidence Act, 1972, that once notice is
sent by registered post by correctly addressing to the drawer of
the cheque, the service of notice is deemed to have been effected.
Then requirements under proviso (b) of Section 138 stands
complied, if notice is sent in the prescribed manner. However, the
drawer is at liberty to rebut this presumption.
14. It is well settled that interpretation of a Statute should be
based on the object which the intended legislation sought to
achieve.
“It is a recognized rule of interpretation of statutes that
expressions used therein should ordinarily be understood in
a sense in which they best harmonize with the object of the
statute, and which effectuate the object of the
Legislature. If an expression is susceptible of a narrow or
technical meaning, as well as a popular meaning, the Court
would be justified in assuming that the Legislature used
the expression in the sense which would carry out its
object and reject that which renders the exercise of its
power invalid"[1].
15. This Court in catena of cases has held that when a notice is sent
by registered post and is returned with 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[2]. Though in process of interpretation right of an
honest lender cannot be defeated as has happened in this case.
From the perusal of relevant sections it is clear that generally
there is no bar under the N.I. Act to send a reminder notice to
the drawer of the cheque and usually such notice cannot be
construed as an admission of non-service of the first notice by
the appellant as has happened in this case.
16. Moreover the first notice sent by appellant on 12-04-1991 was
effective and notice was deemed to have been served on the first
respondent. Further, it is clear that the second notice has no
relevance at all in this case at hand. Second notice could be
construed as a reminder of respondent’s obligation to discharge
his liability. As the complaint, was filed within the stipulated
time contemplated under Clause (b) of Section 142 of the N.I. Act,
therefore Section 138 r/w 142 of N.I. Act is attracted. In the
view of the matter, we set aside the impugned judgment of the High
Court.
17. However, during the course of hearing, learned counsel for first
respondent, as agreed by appellant herein, submitted that first
respondent was willing to pay Rs. 2,00,000/- (Rupees two lakhs
only) in lieu of suffering simple imprisonment of three months as
imposed by the Trial Court, as confirmed by the first Appellate
Court, and endorsed by this Court.
18. In view of the undertaking given by the learned counsel, we direct
the first respondent to deposit the said amount of Rs. 2,00,000/-
(Rupees two lakhs only) before the Judicial First Class Magistrate-
II at Alappuzha on or before 30.04.2017. Out of the said amount of
Rs. 2,00,000/- (two lakhs only) so deposited, Rs.1,30,000/-
(one lakh thirty thousand) shall be paid to the appellant as
compensation.
19. In the event, first respondent fails to deposit the said amount of
Rs.2,00,000/- within the stipulated period as indicated above, the
conviction and sentence of three months awarded by the Ld. Trial
Court and affirmed by the Appellate Court shall stand restored and
bail granted to the first respondent shall stand cancelled.
20. The appeal is accordingly disposed of in the aforesaid terms.
..................................J
(N. V. Ramana)
.................................J
(Prafulla C. Pant)
New Delhi
Dated: 1st March, 2017
-----------------------
[1] M/S New India Sugar Mills Ltd. v. Commissioner of Sales Tax, AIR 1963
SC 1207
[2]Jagdish Singh v. Natthu Singh, (1992) 1 SCC 647; State of
M.P. v. Hiralal, (1996) 7 SCC 523 and V. Raja Kumari v. P. Subbarama
Naidu, (2004) 8 SCC 774.
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