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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

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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

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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.

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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

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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

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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

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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.

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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

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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

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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

presumed2. 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 1 M/S New India Sugar Mills Ltd. v. Commissioner of Sales Tax, AIR 1963 SC 1207 2Jagdish 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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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

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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