2025 (7) TMI 1776 - HC - Indian Laws

Acquittal Set Aside Under Section 138 NI Act for Wrong Limitation Calculation on Demand Notice Timing

G.D. NARANG Versus RAMESH KOTHARI

The HC set aside the trial court's acquittal of the accused under Section 138 of the NI Act, holding that the demand notice was sent within the prescribed ... Dishonour of Cheque - insufficient funds - demand notice issued within time limitation as prescribed under proviso (b) of Section 138 of NI Act - HELD THAT:- In the instant case, appellant/complainant has filed Ex.P/5’s receipt dated 2.11.1993, which shows that Ex.P/4’s notice was received by respondent/accused on 2.11.1993. Respondent/accused has not adduced any evidence to prove that in receipt Ex.P/5’s c to c signatures are not that of respondent. In this connection, respondent/accused has not examined any handwriting expert to prove that on receipt Ex.P/5, C to C signatures are not that of respondent/accused. There is no endorsement on Ex.P/5’s receipt or on Ex.P/4’s notice that Ex.P/4’s notice was not sent on correct address or it was sent on incomplete address. There is no endorsement on aforesaid that addressee was not found. Hence, returned unserved. In the instant case, appellant/complainant received information from Bank about dishonor of Ex.P/1’s cheque on 13.10.1993 (Ex.P/2)/15.10.1993 (Ex.P/3) and Ex.P/4’s demand notice was sent on 20.10.1993 by registered post. This is also evident from Ex.P/5’s receipt. Thus, Ex.P/4’s demand notice was sent within 15 days of receipt of information with respect to dishonor of Ex.P./5’s cheque. In view of discussion in the foregoing paras as well as provision contained in proviso (b) of Section 138 of NI Act as well as principle of law laid down by Hon’ble Apex Court in the case of C.C.Alavi Hajzi [2007 (5) TMI 335 - SUPREME COURT], it cannot be said that demand notice (Ex.P/4) sent by appellant/complainant was not within limitation as prescribed under the law and limitation of 15 days cannot be calculated from the date of receipt of demand notice - learned trial Court has materially erred in calculating the limitation from the date of receipt of demand notice and wrongly dismissed appellant’s complaint on aforesaid ground. The learned trial Court has materially erred in dismissing appellant/complainant's complaint and has wrongly acquitted respondent/accused of offence under Section 138 of NI Act. Hence, impugned judgment based by trial Court is set aside and respondent/accused is convicted for offence under Section 138 of NI Act - appeal allowed. ISSUES: Whether the demand notice under Section 138(b) of the Negotiable Instruments Act (N.I. Act) was issued within the prescribed limitation period of fifteen days from the receipt of information of cheque dishonour.Whether the limitation period for issuing the demand notice should be calculated from the date of sending the notice or from the date of its receipt by the drawer.Whether the cheque was issued for discharge of any debt or liability.Whether the trial court erred in acquitting the accused on the ground of limitation and other related facts. RULINGS / HOLDINGS: Demand notice (Ex.P/4) sent by the payee within 15 days of receipt of information from the bank regarding cheque dishonour complies with proviso (b) of Section 138 of the N.I. Act; the limitation period is to be calculated from the date of sending the notice, not from the date of its receipt by the drawer.The trial court 'materially erred in calculating the limitation from the date of receipt of demand notice' and wrongly dismissed the complaint on that ground.The cheque was issued for payment of rent arrears and thus for discharge of a liability; the contention that no rent was due on the date of issuance is not supported by evidence.The ingredients constituting an offence under Section 138 of the N.I. Act stand clearly established; hence, the accused is liable to be convicted. RATIONALE: The Court applied the statutory provision of proviso (b) of Section 138 of the N.I. Act, which requires the payee to give notice within fifteen days of receipt of information of cheque dishonour.The Court relied extensively on precedents, particularly the interpretation by the Hon'ble Apex Court in C.C. Alavi Haji vs. Palapetty Muhammed and others, which clarified that 'giving notice' means dispatching the notice within the limitation period, and the limitation is not dependent on the drawer's receipt date.The Court emphasized the principle that a strict interpretation favoring the drawer to evade notice would defeat legislative intent and allow dishonest evasion, thereby endorsing a liberal interpretation in favor of the payee.The Court noted that service of notice is 'deemed to have been effected' if sent by registered post to the correct address unless the drawer proves non-receipt without fault on his part, and that refusal or evasion of notice can be presumed from evidence.The Court rejected the defense based on the absence of postal receipt, holding that non-production of postal receipt does not adversely affect the payee's case if other evidence (such as acknowledgment receipt) is available.The Court held that factual disputes regarding receipt or refusal of notice are matters of evidence to be decided at trial and not at the stage of quashing proceedings.