Supreme Court declares a 2009 cheque-bounce precedent per incuriam over notice served on a relative

Justices Ahsanuddin Amanullah and Manmohan restore a conviction set aside by the Kerala High Court, holding that dispatch to the correct address raises the presumption whoever receives it.

A statutory demand notice in a cheque-bounce case was posted to the drawer's correct address and signed for by his mother. The Kerala High Court held that was no service at all and set aside his conviction. The Supreme Court has now restored it, and gone further: it has declared that a 2009 decision of its own, which acquitted a drawer because the notice had been taken in by his wife, was rendered in ignorance of a binding three-judge ruling and is per incuriam — not binding under Article 141. Justices Ahsanuddin Amanullah and Manmohan held that once a notice is dispatched to the correct address the presumption of service arises whoever receives it, and it is for the drawer to rebut it. The judgment was authored by Justice Manmohan.

Rs 3 lakh, a blank signed cheque, and a notice taken in at home

The complainant's case was that the accused had borrowed Rs 3,00,000 from her and, towards repayment, issued a cheque drawn on a bank branch at Perumbavoor, which was dishonoured on presentation. She issued the statutory demand notice on 31 August 2016 by registered post to his correct address. His mother received it. No payment followed and no reply was sent, and the complaint under Section 138 of the Negotiable Instruments Act, 1881 was filed in 2017.

Examined under Section 313 of the Code of Criminal Procedure, the accused said he had borrowed Rs 7,00,000 in all and had repaid the whole of it, and that he had handed over a blank signed cheque when taking the Rs 3,00,000.

The trial court convicted him in July 2019 and sentenced him to six months' simple imprisonment with a fine of Rs 3,00,000 and a default stipulation. On the service point it reasoned that the address on the notice, the acknowledgement card, the complaint and the accused's own vakalath were one and the same, and that when summons issued to that address he appeared and contested. The Additional District and Sessions Judge dismissed his appeal in February 2023, noting that he had never challenged the correctness of the address, either in his plea of defence or in his answers under Section 313, and that his mother had received the notice sent by registered post.

The High Court of Kerala took a different view in revision. Unless there was evidence that the accused was aware of the notice, it held, the court could not conclude that notice was served on him; it was proved that the mother had received it, and there was no case that he knew of it. On that ground alone the concurrent convictions were set aside. Before the Supreme Court the accused, though served, did not appear, and the State of Kerala told the Court it was not a contesting respondent.

The argument from the consequences

Counsel for the complainant put the case on two footings. The first was authority: a line of decisions holding that dispatch of a notice by registered post to the correct address of the drawer raises a presumption of due service under Section 27 of the General Clauses Act, 1897 and Section 114 of the Indian Evidence Act, 1872, so that once the notice is posted to the correct address it is not for the complainant to prove its receipt by the addressee. Here the notice went to the correct address and was received by the drawer's mother, who lived with him; he never challenged the correctness of that address, and indeed appeared in court on summons served at the very same one. His failure to rebut the presumption was not answered by the bare fact that his mother signed for it.

The second footing was what the opposite rule would produce. The High Court's reasoning, counsel submitted, reduces the efficacy of Section 138 by handing an unscrupulous drawer an easy escape: he need only ensure that notices are taken in by family members rather than by himself, even though they are sent to his correct address. Counsel also argued that the High Court had exceeded its revisional jurisdiction under Section 397 by re-appreciating the entire evidence and substituting its own view for concurrent findings of fact recorded by the trial court and affirmed on appeal — a revisional court not being a second appellate court, and not entitled to interfere with findings of fact unless they are perverse or rest on no evidence.

Giving a notice and receiving one

Proviso (b) to Section 138 requires the payee to demand payment by giving a notice in writing to the drawer within thirty days of learning of the dishonour, and the cause of action arises only on the drawer's failure to pay within fifteen days of receipt. Section 27 of the General Clauses Act, 1897 provides that where a statute authorises service by post, service is deemed effected by properly addressing, pre-paying and posting the letter by registered post, and, unless the contrary is proved, to have been effected when the letter would be delivered in the ordinary course.

The Court traced a consistent line of authority built on that provision. In K. Bhaskaran v. Sankaran Vaidhyan Balan, where the notice came back unclaimed, the Court held that giving notice is not the same as receiving it — giving is the process of which receipt is the accomplishment — and that where the sender has dispatched it by post to the correct address, service may be deemed effected unless the sendee proves it was not really served and that he was not responsible for the non-service. A strict reading, it warned, would give a trickster drawer a premium for avoiding the notice by different strategies.

In D. Vinod Shivappa v. Nanda Belliappa, where the postal endorsement showed the addressee unavailable or the premises locked, the Court held that if every such instance were treated as absence of service the object of the statute would be defeated, since a dishonest drawer could evade service and escape prosecution altogether.

And in C.C. Alavi Haji v. Palapetty Muhammed, a three-judge Bench held that when the notice is sent by registered post correctly addressing the drawer, the mandatory requirement of proviso (b) stands complied with. It is then for the drawer to rebut the presumption by showing that he had no knowledge the notice was brought to his address, or that the address on the cover was incorrect, or that the letter was never tendered, or that the postman's report was wrong. That Bench added a practical answer for the honest drawer: anyone who says he did not receive the posted notice may, within fifteen days of receiving the summons and a copy of the complaint, pay the cheque amount and ask that the complaint be rejected — and a person who does not do so cannot then contend there was no proper service.

The 2009 decision that broke the line

Against that settled position stood M.D. Thomas v. P.S. Jaleel, decided in 2009. There a Division Bench set aside a conviction under Section 138 solely because the statutory notice had been served on the drawer's wife rather than on the drawer himself — without examining whether the notice had been correctly addressed, or whether the wife resided with him. It did so without noticing the authoritative three-judge pronouncement in C.C. Alavi Haji.

Applying State of U.P. v. Synthetics and Chemicals Ltd., the Court recorded that judgments rendered per incuriam are an exception to stare decisis because what is quotable in law has been avoided or ignored, the expression denoting a decision given in ignorance of a binding precedent of the Court or of a coordinate or higher court, or in disregard of a statute or a rule having the force of law.

Three things were wrong with the 2009 decision. It was given by a coordinate Bench without reference to binding precedent on the presumption of service. It contained no meaningful finding on whether the wife lived with the drawer or whether the notice went to the correct address. And it treated the drawer's wife as equivalent to an unrelated third party, when the presumption under Section 27 of the General Clauses Act and Section 114 of the Evidence Act is attracted by correct addressing, irrespective of the identity of the recipient.

The Court then set out the anomaly that followed from letting it stand. On Bhaskaran, Vinod Shivappa and Alavi Haji, a complainant whose notice is dispatched to the correct address and never delivered at all enjoys the presumption of service. On M.D. Thomas, a complainant whose notice is actually delivered, but taken in by a family member living at the same address, would be denied it. The law requires only that the complainant dispatch the notice to the correct address, and a presumption in his favour cannot be defeated by circumstances beyond his control.

The Court accordingly held M.D. Thomas to be per incuriam and not binding precedent under Article 141 of the Constitution, adding that if it were allowed to stand it would let unscrupulous drawers evade liability on specious pleas and frustrate the object of the statute.

Why the presumption was never rebutted here

Turning to the facts, the Court found the address indisputably correct, and said so from the record rather than from assertion. The accused entered appearance on summons delivered at that very address. The vakalatnama he filed bore the same address as the statutory notice. So did both his appeal and his revision petition. He never disputed the correctness of his address in his statement under Section 313. And it was not even his case that his relationship with his mother was inimical, or that the two of them lived separately.

Once the notice was dispatched to the correct address, therefore, the presumption under C.C. Alavi Haji arose, and it was for the drawer to establish either that the address was wrong or that he had no knowledge of the notice being brought to his address. He did neither, and the presumption remained unrebutted.

The High Court's judgment, the Court held, rested on a complete misreading of C.C. Alavi Haji. It had recorded that the decision required the complainant to prove the drawer knew of the notice and deliberately evaded service, and that unless there was evidence the accused was aware of the notice the court could not conclude it was served. That reasoning reversed the burden, moving it from the drawer to the complainant, contrary to settled law. The Court held the High Court had erred in reversing the concurrent findings of the trial court solely on the ground that the notice was not personally delivered to the drawer.

Order

The appeal was allowed and the impugned judgment of the High Court set aside. The judgment of the trial court, sentencing the accused to undergo simple imprisonment for six months and to pay a fine of Rs 3,00,000 with a default stipulation of further imprisonment, stands restored. The appeal was disposed of accordingly, along with any pending applications.