Section 138 NI Act - No Requirement To Serve Notice Under Certificate Of Posting; Service Through Registered Post Proper : Karnataka High Court

A bench of Justice  Ashok G Nijagannavar on March 1, while setting aside the acquittal order passed by the trial court against an accused under Section 138 NI Act, said :

"When a sender has dispatched the notice through registered post with correct address written on it, Section 27 of General Clauses Act could be profitably imported and in such a situation service of notice deemed to have been effected on the sender unless he proves that it was really not served and he was not responsible for such non-service."

Case Background:

The appellant-complainant, had given a loan of Rs.1,50,000 to the respondent-accused for his family necessities. The accused, having failed to pay the amount within a reasonable time, had issued three cheques. The said cheques were presented to bank for encashment but they were dishonoured and returned with an endorsement "funds insufficient".

The appellant issued legal notice dated 22.05.2006, but it was returned with an endorsement "not claimed". Since the respondent-accused failed to repay the loan amount, he filed a private complaint under Section 200 Cr.P.C. for the offence punishable under Section 138 N.I.Act.

The trial court on analysis of the evidence adduced by the appellant arrived at a factual finding that the accused had duly issued cheques in question for a sum of Rs.50,000/- each in favour of the appellant in discharge of a debt or liability. However, the trial Court was of the opinion that appellant ought to have issued a notice under Certificate of Posting (COP) in addition to the notice sent through Registered Post with Acknowledgment Due (RPAD).

With the said observation, the trial Court came to the conclusion that the appellant has not sent the legal notice to the accused under certificate of posting, there is no presumption of proper service of notice to the accused thus has failed to prove that he had intimated the accused regarding dishonour of cheques and nothing on record that accused has received intimation.

Appellant's submissions:

Advocate Gururaj Joshi appearing for the appellant submitted "The said finding of the trial Court is erroneous. The documentary evidence placed on record clearly goes to show that legal notice was sent through registered post acknowledgment due. The envelope, which is returned as unclaimed, clearly goes to show that there was proper service of notice as required under Section 17 of the General Clauses Act. However, the trial Court has failed to consider this aspect. Thus, it has resulted in miscarriage of justice."

He relied on the following judgments in support of his contention: 2014 STPL 9253 SC [2014 (AIR (SCW) 4321] in the case of Ajeet Seeds Ltd. vs. K.Gopala Krishnaiah. 2013 STPL 2766 Karnataka in the case of M.S.Srikara Rao vs. H.C.Prakash and 2018 STPL 12982 Karnataka in the case of Prabhakar Shripati Hegde vs. B.V.Naik.

Contention of the respondent:

Advocate Ramakrishna, appearing for the accused supported the decision of the trial Court and submitted that there are no valid grounds to interfere with the order passed by the trial Court. Considering all these facts, the trial Court has rightly come to the conclusion that the appellant-complainant has intentionally issued legal notice to the wrong address and has managed to file a false case against the respondent-accused. There is no convincing evidence to show that the respondent-accused has committed the offence punishable under Section 138 of N.I.Act.

Court Findings:

The court after going through the facts of the case and section Section 94 of Negotiable Instruments Act and Section 17 of General Clauses Act and the judgments cited by the appellant said "In the present case, there is no rebuttal evidence to show that the complainant has deliberately and intentionally sent the legal notice to the wrong address and the accused was not working at the place and address shown in the registered envelope."

It added "The finding recorded by the Court below regarding service of notice through registered post holding that there is no proper service of notice is contrary to Section 138 of N.I.Act. In view of the ratio laid down in the aforesaid decisions, there is proper service of notice and there was no requirement to serve the notice under certificate of posting. The respondent-accused has failed to rebut the presumption by placing cogent and convincing evidence. Therefore, this Court is of the view that the findings recorded by the Court below cannot be sustained in law."

Accordingly it allowed the appeal and set aside the order dated July 5, 2011 and convicted the accused for the offence punishable under Section 138 of N.I.Act. The accused was directed to pay a fine amount of Rs.1,60,000. Out of the fine amount, a sum of Rs.10,000 shall be remitted to State by way of fine and the remaining fine amount of be paid to the appellant by way of compensation along with interest at the rate of 6% p.a. from the date of complaint till realization of the cheque amount.

The court directed the accused to deposit the amount within eight weeks from the date of this order.