Refusal of statutory notice and post-complaint payment do not defeat Section 138 cheque dishonour liability

Refusal of a statutory notice raises a presumption of service under Section 27 of the General Clauses Act, and a bare denial does not rebut it. A cheque issued from a personal account towards the liability of a company or firm can satisfy Section 138 of the Negotiable Instruments Act, and the presumption under Section 139 applies unless the defence is proved. Subsequent payment after filing of the complaint does not wipe out criminal liability, though it may affect sentence. Compounding cannot be forced on an unwilling complainant; consent remains essential. The note records that the acquittal was set aside and conviction under Section 138 followed.

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Issues: (i) Whether the statutory notice under Section 138 was duly served when it was returned with an endorsement of refusal and was jointly addressed in one envelope to the accused and connected entities; (ii) Whether a cheque issued by the accused from his personal account towards the liability of the company and firm, and the complainant's receipt of payment after filing of the complaint, would negate liability under Section 138; (iii) Whether compounding of the offence could be compelled despite the complainant's unwillingness.

Issue (i): Whether the statutory notice under Section 138 was duly served when it was returned with an endorsement of refusal and was jointly addressed in one envelope to the accused and connected entities.

Analysis: The notice was addressed to the accused in his capacity as managing director and to the connected entities, but the envelope was returned as refused. Refusal of delivery attracts the presumption of service under Section 27 of the General Clauses Act, 1897. The accused's bare denial in the statement under Section 313 of the Code of Criminal Procedure, 1973 did not rebut that presumption.

Conclusion: The notice was duly served on the accused.

Issue (ii): Whether a cheque issued by the accused from his personal account towards the liability of the company and firm, and the complainant's receipt of payment after filing of the complaint, would negate liability under Section 138.

Analysis: Section 138 extends to a cheque drawn for discharge of any debt or other liability, and Section 139 raises a mandatory presumption in favour of the holder. A cheque may answer the statutory requirement even if it is issued towards the liability of another legally liable person. Subsequent payment after the offence is complete does not absolve criminal liability, though it may bear on sentence. The defence that the cheque was without consideration or issued only as surety was not proved.

Conclusion: The ingredients of Section 138 were satisfied and the acquittal could not be sustained.

Issue (iii): Whether compounding of the offence could be compelled despite the complainant's unwillingness.

Analysis: Compounding is a matter of compromise and cannot operate as a one-way process. Consent of the complainant is essential, and the Court cannot force a compromise upon an unwilling complainant, even in proceedings under Section 147 of the Negotiable Instruments Act, 1881.

Conclusion: Compounding could not be recorded without the complainant's consent.

Final Conclusion: The acquittal was set aside, the accused was convicted under Section 138 of the Negotiable Instruments Act, 1881, and compensation was awarded in lieu of sentence.

Ratio Decidendi: A cheque issued to discharge a legally enforceable liability attracts Section 138 and the statutory presumptions under Section 139, service by refusal is valid service, and subsequent payment after completion of the offence does not wipe out criminal liability.

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