Mirza & Associates, Advocates & Attorneys

_{An article by Ms. Mansi Indurkar third-year law student of National Law University, Odisha}

Recently, Tripura High Court has held that the part of the payee is over once the demand has been issued as given under the Negotiable Instruments Act, 1881, is sent by post to the correct address in the event of dishonor of a cheque, and the notice is deemed to have been served on the defaulter in accordance with the presumption under Section 27 of the General Clauses Act, 1897 unless proven to the contrary. According to the findings of the court, the accused has failed to provide any ‘convincing evidence’ to prove his innocence. It has been found that the accused has to avoid the demand notice which was being sent to him. 

Past Practices Before the Judgment

MODE OF SERVICES

Clause (b) of section 138 of the Negotiable Instrument Act deals with demand notice. However, the said act does not provide the mode of service of demand notice. To meet the need of the section the notice has to be in writing[1]. For this, the most common way is to send the notice via post which is come under section 27 of the General Clauses Act which gives the meaning of service by post. It suggests that “ where any Act authorizes any document to be served by post, where the expression “serve” or either of the expressions “give” or “send” or any other expression is used, then, unless a different intention appears, the service shall be deemed to be effected by properly addressing pre-paying and posting by registered post. Hence, service by post implies service by registered post. In the case, D Vinod Shivappa v Nanda Belliappa[2] the Supreme Court held Section 27 of the General Clauses Act gives rise to a presumption that service of notice has been effected when it is sent to the correct address by registered post. In view of the said presumption, when stating that notice has been sent by registered post to the address of the drawer, it is unnecessary to further aver in the complaint that in spite of the return of the notice unserved, it is deemed to have been served or that the addressee is deemed to have knowledge of the notice.

PERIOD OF NOTICE

As the section provides within 30 days of receipt of information from the bank about the dishonour of the cheque, the payee should have made a written demand on the drawer for payment of the amount of money represented by the cheque within 15 days. The section only provides that the drawer gets 15 days from the receipt of the notice to make the payment to avoid liability. Thus, the notice has been held to be valid even where it provides for the making of payment within seven days, or 8 days or 10 days, or for any other period less than 15 days, as the drawer would be entitled to make the payment within 15 days of receipt of payment. In Harish C Duggal Agencies Pvt Ltd v German Remedies Ltd,[3] a bench of the Supreme Court has also held that the notice was not invalid because it gave only 11 days to the accused to pay up and that prosecution could be launched only after the 15 day period allowed by the statute expired.

RECEIPT OF NOTICE

On the mere proof of the facts that the notice was sent on the incorrect address, the court cannot rush to conclude the deemed service of notice. Where notices were received back with the postal endorsement “not available”, the court held that unless there is proof that there is service of notice or the endorsement was managed by the accused-addressee, it cannot be said that there was valid service of notice. The proceedings are liable to be quashed if no proof is produced of service of notice on the accused. In N Velayutham v Sri Ganesh Steel Syndicate, as the postal notice was returned with the endorsement “addressee not available in the station”, it was held that there was no service of the notice on the drawer.[4]

In Vasudevan v Rajamal,[5] it was held that deliberate evasion of notice would amount to constructive service of notice. Where a postal notice is tendered by a postal person at the address of the accused but could not be actually served owing to his culpable default or deliberate evasion; it would constitute “receipt” of notice. The burden of establishing the facts rests on the complainant. Therefore, the burden is on the complainant to show that the accused drawer has managed to get an incorrect postal acknowledgment.

CONCLUSION

By looking at the past practices, the burden of proof lies with the complainant once he has sent the deemed notice to show that the drawer is deliberately ignoring the notice even the has sent it to a correct address. Also, the courts under such cases where the post returned as unclaimed held that it amounts to constructive service of notice and it is on the complainant to prove that the drawer is evading from his liability. After the Judgment passed by Tripura High Court, the practice of mischief done by the drawer by simply ignoring service of notice would be lessened because now the burden of proof is on the accused to proof once the complainant sent the notice via registered post with a correct address mention on it. As it fulfils the object of the section to give chance to the drawer to rectify his omissions, and to protect an honest drawer. The object of a notice indicating the factum of dishonour of the cheque is to give an opportunity to the drawer to make the payment within 15 days so that it will not be necessary for the payee to proceed against him in any criminal action, even though the bank dishonored the cheques.

[1] Central Bank of India v Saxon Farms, (1999) 4 Crimes 221 SC.

[2] D Vinod Shivappa v Nanda Belliappa, (2006) AIR SCW 2757.

[3] Harish C Duggal Agencies Pvt Ltd v German Remedies Ltd (1997) 1 Crimes 421.

[4] N Velayutham v Sri Ganesh Steel Syndicate , (1995) 83 COMP CASES 785.

[5] Vasudevan v Rajamal (1992) 1 MWN (Cri) 241.