2025 (7) TMI 474 - HC - Indian Laws

Dishonour of Cheque - service of notice - notice received by the relative - proper service of notice or not - principles of natural justice - HELD THAT - As per Section 138(b) of the Act 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 thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid. Therefore a notice under Section 138(b) of the Act is mandatory and it should be served to the drawer of the cheque. PW1 was crossexamined by the accused in this aspect in detail - it is clear that the notice was served on the relative of the accused. PW1 has no case that the accused has knowledge of the receipt of the notice by his relative. If that is the case it can be presumed at least that there is constructive notice. There is no such case for the complainant. If that is the case it cannot be said that there is any service of notice to the petitioner. Moreover there is no substantial compliance with Section 138(b) of the Act either. The service of notice on the relative of the accused is not sufficient especially when there is no evidence from the side of the complainant that the accused was aware of the service of notice on his relative. If there is no such evidence it is to be presumed that the statutory notice under Section 138(b) of the Negotiable Instruments Act 1881 is not served on the accused. The upshot of the above discussion is that the conviction and sentence imposed on the petitioner are to be set aside. The conviction and sentence imposed on the revision petitioner are set aside and the revision petitioner is acquitted - the revision petition is allowed.

Summary

The core legal question considered in this judgment is whether a statutory notice under Section 138(b) of the Negotiable Instruments Act, 1881, when served upon a relative of the drawer of the cheque, can be treated as valid service of notice on the drawer himself.

The case arises from a prosecution under Section 138 of the Negotiable Instruments Act, which penalizes the dishonour of a cheque due to insufficient funds. The complainant sold building materials to the accused and received a cheque for Rs. 92,500/-. The cheque was dishonoured due to insufficient funds, and the complainant issued a legal notice demanding payment within the statutory period. The accused was convicted by the trial court and the conviction was upheld with modification of sentence by the appellate court. The accused challenged the conviction on the ground that the statutory notice was not properly served on him but instead was received by a relative.

Section 138(b) mandates that the payee or holder in due course must give a written demand notice to the drawer of the cheque within thirty days of receiving information from the bank regarding the cheque's dishonour. This notice is a mandatory precondition for initiating prosecution under Section 138.

The evidence revealed that the notice was served on a relative of the accused, not on the accused himself. The complainant did not establish that the accused had knowledge of the notice served on his relative. The prosecution contended that service on the relative should be deemed sufficient, but the accused argued that without direct or constructive notice to him, the requirement of Section 138(b) was not fulfilled.

The Court examined the deposition of the complainant's witness (PW1), which confirmed that the notice was accepted by a relative of the accused and that there was no evidence that the accused was aware of this service. The Court emphasized that mere service on a relative without proof of the drawer's knowledge does not satisfy the statutory requirement.

In support, the Court relied on the precedent set by the Apex Court in a similar case, which held that service of notice on the wife of the accused does not amount to compliance with Section 138(b). The Apex Court observed that the proviso to Section 138 imposes a strict obligation on the payee to serve the notice on the drawer personally. Service on a relative, without the drawer's knowledge, is insufficient and vitiates the prosecution.

The Court reasoned that the statutory scheme contemplates personal service or at least constructive notice to the drawer to ensure the drawer is aware of the demand for payment before criminal proceedings are initiated. This safeguards the drawer's rights and ensures fairness in the process.

Applying the law to the facts, since the complainant failed to prove that the accused had knowledge of the notice served on his relative, the mandatory condition under Section 138(b) was not fulfilled. The prosecution was thus unsustainable.

The Court rejected any competing argument that service on a relative could be deemed sufficient without the accused's knowledge, reiterating the strict compliance requirement mandated by the statute and upheld by the Apex Court.

Consequently, the Court set aside the conviction and sentence imposed on the accused by both the trial court and the appellate court. The accused was acquitted, bail bonds were cancelled, and any deposited amounts were ordered to be returned.

Significant holdings in this judgment include the following verbatim legal reasoning:

"Service of notice on the relative of the accused is not sufficient, especially when there is no evidence from the side of the complainant that the accused was aware of the service of notice on his relative. If there is no such evidence, it is to be presumed that the statutory notice under Section 138(b) of the Negotiable Instruments Act, 1881 is not served on the accused."

Further, the Court quoted the Apex Court's observation:

"In the present case, the notice of demand was served upon the wife of the appellant and not the appellant. Therefore, there is no escape from the conclusion that complainant - respondent had not complied with the requirement of giving notice in terms of cl.(b) of proviso to S.138 of the Act. Unfortunately, the High Court overlooked this important lacuna in the complainant's case. Therefore, the conviction of the appellant cannot be sustained."

The core principle established is that strict compliance with the notice requirement under Section 138(b) is mandatory and personal service or at least proof of the drawer's knowledge of the notice is essential. Service on a relative without the drawer's knowledge does not satisfy the statutory mandate and invalidates the prosecution.

In conclusion, the Court held that the statutory notice under Section 138(b) must be served on the drawer of the cheque personally or at least in a manner that the drawer has knowledge of such service. Failure to comply with this requirement results in the dismissal of the complaint and acquittal of the accused.