Excel Industries Limited vs Prakash

Anand Byrareddy, J—Heard the learned counsel for the appellant.

The appellant was the complainant who had lodged a private complaint. It is a concern involved in the manufacture of chemicals and having its branch office at Hubli and the accused is said to be carrying on business in the name and style of M/s. Basava Agro Agency, in Chittapur. He was purchasing pesticides from the complainant, on credit basis. It transpires that he had issued a cheque, in discharge of an amount due from him, dated 22.11.2001, for a sum of Rs. 2 lakh. The cheque when presented for clearance was dishonoured for want of sufficient funds. The complainant having been informed of this, the complainant had issued a legal notice calling upon the respondent-accused to make the payment within 15 days of receipt of the notice. The notice was returned as not claimed by the accused. It is in that background that a complaint was lodged. The trial Court having examined the evidence tendered by the complainant and the defence set up by the respondent had framed the following points for consideration:

i) Whether the complainant proves that the accused inspite of "insufficient funds" in his account at State Bank of Hyderabad has issued a cheque for Rs. 2,00,000/- (Two lakhs) bearing cheque No. 664389 dated 22.11.2001 and that, the accused has filed to pay the said cheque amount within 15 days after receipt of the legal notice issued by the complainant and thereby committed an offence punishable u/Sec. 138 N.I. Act?

ii) Whether the accused is liable to be convicted for the said offence?

iii) What order?

The trial Court held point Nos. 1 and 2 in the affirmative and convicted the accused to pay a fine of Rs. 5,000/- and in default to undergo simple imprisonment for a period of three months and also directed payment of a sum of Rs. 2 lakh being the cheque amount.

This was challenged by the accused in an appeal before the lower appellate Court. The lower appellate court has allowed the appeal mainly relying on the decision of this Court in K. Narayana Nayak Vs. Sri M. Shivarama Shetty, (2008) CriLJ 3411 : (2008) ILR (Kar) 3635 : (2008) 6 KarLJ 756 : (2008) 3 KCCR 1569 and has opined that it was necessary for the complainant to examine the postal authority in order to prove non-service of notice and further the burden of proving the serving of notice was on the complainant and admittedly there could not be any deemed service of the notice and therefore the conviction was bad in law and has allowed the appeal.

However, on this aspect of the matter, the law is no longer res integra as the Apex Court has laid down in the case of C.C. Alavi Haji Vs. Palapetty Muhammed and Another, (2007) 2 BC 533 : (2007) 137 CompCas 692 : (2007) CriLJ 3214 : (2007) 7 JT 498 : (2007) 147 PLR 813 : (2007) 7 SCALE 380 : (2007) 6 SCC 555 : (2007) 77 SCL 117 : (2007) 7 SCR 326 : (2007) 2 UJ 675 wherein it was held that when a notice is sent by registered post by correctly addressing the drawer of the cheque, the mandatory requirement of issue of notice in terms of Clause (b) of proviso to Section 138 of the Negotiable Instruments Act, 1881, (hereinafter referred to as ''the Act'' for brevity) stands complied with and therefore at the time of taking cognizance of the complaint under Section 138 of the Act, the Court is required to be, prima facie, satisfied that a case under the said Section is made out and the mandatory statutory procedural requirements have been complied with. It is then for the drawer to rebut the presumption about the service of notice and show that he had no knowledge that the notice was issued to his address or that the address mentioned on the cover was incorrect or that the letter was never tendered or that the report of the postman was incorrect and that the interpretation of the provision would effectuate the object and purpose for which proviso to Section 138 of the Act was enacted, namely, to avoid unnecessary hardship to an honest drawer of a cheque and to provide him an opportunity to make amends. The entire purpose of requiring a notice is to give an opportunity to the drawer to pay the cheque amount within 15 days of service of notice and thereby free himself from the penal consequences of Section 138 and in this regard in D. Vinod Shivappa Vs. Nanda Belliappa, AIR 2006 SC 2179 : (2006) 3 BC 465 : (2006) 131 CompCas 663 : (2006) CriLJ 2897 : (2006) 3 CTC 591 : (2006) 11 JT 187 : (2006) 143 PLR 787 : (2006) 6 SCALE 277 : (2006) 6 SCC 456 : (2006) 3 SCR 1008 Supp : (2006) AIRSCW 2757 : (2006) 4 Supreme 540 , the Apex Court has quoted with approval the observations made therein as under:

"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 apart of their modus operandi to cheat unsuspecting persons."

It has been further observed that the requirement of giving a notice is a clear stipulation of giving of a notice before filing a complaint. Any drawer who claims that he did not receive the notice sent by post, can, within 15 days of receipt of summons from the court in respect of the complaint under Section 138 of the Act, make payment of the cheque amount and submit to the Court that he had made payment within 15 days of receipt of summons by receiving a copy of complaint with the summons and, therefore, the complaint is liable to be rejected. A person who does not pay within 15 days of receipt of the summons from the Court along with the copy of the complaint under Section 138 of the Act, cannot obviously contend that there was no proper service of notice as required under Section 138, by ignoring statutory presumption to the contrary under Section 27 of the General Clauses Act, 1897, and Section 114 of the Evidence Act, 1872, and that any other interpretation of the proviso would defeat the very object of the legislation.

It is further observed as laid down in K. Bhaskaran Vs. Sankaran Vaidhyan Balan and Another, AIR 1999 SC 3762 : (2005) 3 BC 158 : (2000) 99 CompCas 268 : (1999) CriLJ 4606 : (1999) 3 Crimes 212 : (1999) 3 CTC 358 : (1999) 7 JT 558 : (2000) 124 PLR 113 : (1999) 6 SCALE 272 : (1999) 7 SCC 510 : (1999) 3 SCR 271 Supp : (1999) 2 UJ 1529 : (1999) AIRSCW 3809 : (1999) 8 Supreme 608 that if the "giving of notice" in the context of Clause (b) of the proviso was the same as the "receipt of notice" a trickster cheque drawer would get the premium to avoid receiving the notice by adopting different strategies and escape from legal consequences of Section 138 of the Act and it is therefore the settled legal position that if once the complainant has put the notice in transit through the Postal Department and it is returned unserved and if this factum is brought to the attention of the Court, it would be the burden on the accused to demonstrate that either address was incorrect or that the Postal Department had not sought to really serve the accused etc., for otherwise as laid down above, there was no such compulsion to establish that the notices was duly served by the complainant. Hence, the appellate court was not justified in relying upon the decision of this Court which may no longer be good law in having reversed the judgment of the trial Court. Therefore, the judgment of the lower appellate court is set aside.

It is further noticed that the trial Court while imposing a fine of Rs. 5,000/- has directed payment of Rs. 2 lakh to the complainant. This is an irregularity. Section 138 of the Act only provides for payment of fine out of which compensation could be ordered in terms of Section 357 of the Code of Criminal Procedure, 1973, to the complainant. There is no such jurisdiction to direct payment, as if, it was a suit for recovery of money. Accordingly, the respondent is convicted for an offence punishable under Section 138 and is sentenced to pay a fine of Rs. 2,05,000/- within a period of six weeks out of which Rs. 2 lakh shall be paid to the complainant, in default of which, the respondent is sentenced to simple imprisonment for a period of three months. The petition is allowed in terms as above.