Case: D. Vinod Shivappa Vs. Nanda Belliappa

1. 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)2. 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 known3. The representative facts are taken from Criminal Appeal No. 1255 of 20044. 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 appellant5. 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.

Court's reasoning:
12. 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 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 him13. 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 persons14. 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 address18. This Court noticed the position well settled in law that the notice refused to be accepted by the drawer can be presumed to 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 Court25. 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