2025 (10) TMI 63 - HC - Indian Laws

Offence under Section 138 not made out where statutory notice receipt not proved; Sections 27 and 114 insufficient

Mr. Pierre Antonio Lobo Versus Mr. Jose Remedios, The State of Goa.

Bombay HC held that offence under Section 138 N.I. Act was not made out because the complainant failed to prove valid receipt of the statutory notice. ... Violation of principles of natural justice - valid service of notice or not - Dishonour of Cheque - funds insufficient - Complainant had failed to prove that the cheques issued by the Accused were towards legally enforceable debt - legal notice of dishonour of cheque was received by the Accused or not - HELD THAT:- In order to attract an offence under Section 138, it is necessary, that when the cheque is dishonored, a notice is addressed by the Complainant to the Accused asking him to make the payment under the cheque, and if the Drawer of the cheque fails to make the payment of the money within a period of 15 days from “receipt of the notice”, an offence under Section 138 is attracted - It therefore becomes essential to determine whether the Drawer has failed to make the payment pursuant to the notice being received by him, as the complaint can be filed under Section 138, only upon such a contingency. The service by post within the meaning of Section 27 shall be deemed to be effective by properly addressing, pre-paying and posting by Registered post, a letter containing the document, and such a letter shall be presumed to be duly delivered in the ordinary course of post - What is most important, is the letter being properly addressed to the Noticee. A perusal of Order V, Rule 15 of CPC make it clear that if the summons are served on any adult member of the family, whether male or female, residing with the Noticee, when he is absent from his residence, that would be considered to be a service upon the Defendant. The explanation appended to the said Rule state that a servant is not a member of the family within the meaning of the Rule. The presumption under Section 114 of the Indian Evidence Act, 1872 that under the common course of business, and particularly, as to illustration (f) i.e. whether a letter was received, it is shown to have been posted, but the usual course of the post was interrupted by disturbance, which enables the Court to presume the existence of any fact, which it thinks likely to have happened in the course of natural events, human conduct and public and private business, in their relation to the facts of a particular case - However, when it is not proved by the Complainant that the girl who accepted the notice is a member of the family of the Accused, in the normal course of business, the notice could have been received by any girl in the locality, playing or wandering around at the time when the Postman reached the spot. Unless and until it is proved that she belongs to the family and notice is accepted by her, in the normal course of business, it cannot be said that the service is complete. It is found that the Accused is not served with the notice issued by the Complainant and the reliance placed on Section 27 of the General Clauses Act by the Trial Judge, cannot be justified, in absence of notice being received, the contingencies stipulated under Section 138(c) of the Drawer having failed to make the payment within 15 days from the date of notice, has not arisen. The Appellate Court has therefore, rightly appreciated the evidence rendered and being satisfied that the offence under Section 138 of the N.I. Act is not made out, has rightly acquitted the Accused Mr. Jose Remedios in both the cases - appeal dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether the presumption under Section 27 of the General Clauses Act and Section 114 of the Indian Evidence Act operates to deem service/receipt of legal notice sent by registered post where acknowledgement (A.D.) bears a signature not proved to be that of the addressee or a family member. 2. Whether the presumption under Section 139 of the Negotiable Instruments Act (read with Sections 113 and 114 of the Evidence Act) that a cheque is drawn for legally enforceable debt was rebutted by the accused so as to defeat conviction under Section 138 of the Negotiable Instruments Act. 3. Whether, in the absence of proved receipt of the statutory demand notice, the contingency in proviso (c) to Section 138 (failure to make payment within fifteen days of receipt of notice) arises so as to attract criminal liability under Section 138. ISSUE-WISE DETAILED ANALYSIS Issue 1: Operation of Section 27 (General Clauses Act) and Section 114 (Evidence Act) in respect of service by registered post where A.D. is signed by a person whose relationship to the addressee is not proved Legal framework: Service by post is governed by Section 27 of the General Clauses Act which creates a rebuttable presumption that where a document is properly addressed, prepaid and posted by registered post it is deemed to have been delivered in the ordinary course of post unless the contrary is proved. Section 114 of the Evidence Act permits general presumptions based on the common course of business, including presumptions about delivery of letters. Precedent treatment: The judgment relies on established principles that Section 27 raises a stronger, specific presumption of delivery than the general presumption under Section 114, and that where registered post is returned with postal endorsements such as 'refused' or other endorsements, due service is to be presumed unless contrary is proved. Earlier apex authority has held that it is unnecessary to aver evasion of service where registered post is proved sent to the correct address. Interpretation and reasoning: The Court analyzed the evidentiary quality of the A.D. cards and delivery evidence. Where the A.D. card bears the full, specific address of the addressee and the signature on acknowledgment is proved to be that of the addressee or an adult member of his family residing with him, the presumption under Section 27 will apply. Conversely, where the acknowledgment is signed by an unproven third person (here a girl aged 15 whose relationship to the addressee was not established) or the address on the A.D. is scanty/insufficient (so that the postal delivery cannot be said to have been properly addressed to the noticee), the specific presumption under Section 27 does not arise. In such circumstances the general presumption under Section 114 is of limited application because the normal course of business inference cannot displace the real possibility that delivery occurred to a random person in the locality rather than to a family member or the addressee. The Court also applied the principle embodied in civil procedural rules that service on an adult family member is effective but a servant (or an unproven minor) is not treated as a family member for such purposes. Ratio vs. Obiter: Ratio - Section 27 presumption requires proof that the letter was properly addressed to the noticee (sufficiently specific address) and proof that the acknowledgment was given by the addressee or an adult member of the family; if these are lacking, Section 27 cannot be invoked. Observation - general comments on the strength of Section 114 vs Section 27 are confirmatory of established law. Conclusion: Where the A.D. receipt is signed by a person whose relationship to the addressee is not proved and is a minor, or where the address on the A.D. is insufficiently specific for reliable delivery to the noticee, the presumption under Section 27 does not operate and the Court cannot deem service/receipt of the notice to have been effected. Issue 2: Rebuttal of statutory presumption under Section 139 of the Negotiable Instruments Act - whether accused raised a probable defence sufficient to displace the presumption of legally enforceable debt Legal framework: Section 139 creates a presumption that where a cheque is produced by the payee, it was issued for the discharge of a legally enforceable debt or liability. Once the presumption arises, the onus shifts to the accused to produce evidence to rebut this presumption by establishing a probable or reasonable defence; the accused's burden is one of preponderance of probability, not proof beyond reasonable doubt. Precedent treatment: The judgment recognizes established authority that the accused must lead evidence to establish a probable defence; mere formal denials or minimal answers to Section 313 questions may be insufficient to rebut the statutory presumption. However, the appellate evaluation must consider the totality of evidence and whether the accused's explanation is credible and raises reasonable doubt. Interpretation and reasoning: The Court confined its primary analysis to the notice/service issue (Issue 1) because the statutory requirement of receipt of notice is a pre-condition for Section 138 criminal liability. Given the conclusion that notices were not proved to have been received, the Court held that the contingency under Section 138(c) could not arise and conviction could not be sustained on that basis. The Court accepted that the Appellate Court had also found that the accused had raised a reasonable and probable defence in the appellate proceedings concerning the existence of loan/consideration, but the High Court's decision rested primarily on non-service of notice. Thus, while the presumption under Section 139 ordinarily shifts onus to the accused, the failure to satisfy the notice requirement obviates the need to determine in detail whether the presumption was rebutted in each instance because a statutory precondition for criminality remained unfulfilled. Ratio vs. Obiter: Ratio - Even where a presumption under Section 139 exists, the prosecution must satisfy all statutory prerequisites to Section 138 including proving receipt of statutory notice; failure to prove receipt is fatal to conviction irrespective of whether Section 139 is rebutted. Obiter - Observations on the sufficiency of cross-examination or Section 313 replies to rebut Section 139 are contextual and do not displace the primacy of the notice requirement. Conclusion: The presumption under Section 139 is operative in appropriate cases, but proof of statutory notice/receipt remains an independent and essential requirement; absent proof of receipt, conviction under Section 138 cannot be sustained even if questions as to issuance-for-debt exist. Issue 3: Necessity of proved receipt of statutory demand notice to attract offence under Section 138 - causal nexus between notice receipt and criminal liability Legal framework: Proviso (b) and (c) to Section 138 require (b) that the payee give a demand notice in writing to the drawer within thirty days of receiving information from the bank of return of cheque, and (c) that the drawer fails to make payment within fifteen days of receipt of that notice. Therefore, receipt of the notice by the drawer is a statutory antecedent condition for prosecution under Section 138. Precedent treatment: The Court referred to established precedents that the object of the statutory notice provision is to prevent a drawer from evading liability by avoiding receipt of notice; statutory presumptions aid the payee but are rebuttable. High Court emphasized the practical effect of presumption principles and that if service is not proved, the statutory contingency under clause (c) does not arise. Interpretation and reasoning: Applying the foregoing, the Court examined whether evidence adduced by the complainant established receipt. Given deficiencies - signature on A.D. not proved to be the addressee or adult family member, A.D. address too scanty for reliable delivery - the Court concluded that receipt of notice was not proved. Therefore the condition precedent in proviso (c) (failure to make payment within 15 days of receipt) had not arisen and the statutory offence could not be said to be made out. The Court further noted that even if the cheque was dishonoured and otherwise satisfied presentation/legal formalities, the absence of proven receipt of the demand notice breaks the chain necessary to sustain criminal liability under Section 138. Ratio vs. Obiter: Ratio - Receipt of the demand notice by the drawer is an essential statutory requirement for attraction of Section 138; proof of posting alone, without proof that the letter was properly addressed and delivered to the addressee or an adult family member, is insufficient. Obiter - Remarks on tactical avoidance of notice by drawers and the policy rationale for the presumption were explanatory. Conclusion: The prosecution must prove, beyond relying on an unproved A.D. signature or deficient address, that the drawer received the statutory demand notice; absent such proof the proviso (c) contingency is not triggered and conviction under Section 138 cannot be sustained. Final determination and cross-reference Having concluded (Issue 1) that the specific statutory presumption under Section 27 did not apply on the facts (unproven recipient/minor or scanty address), and (Issue 3) that the statutory prerequisite of receipt of notice under the proviso to Section 138 was therefore unfulfilled, the Court held that conviction under Section 138 could not be maintained irrespective of arguments on whether the presumption under Section 139 was rebutted. The appellate court's acquittal on these grounds was upheld.