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March 30, 2021

Is service of notice through a registered post is proper service of notice under the Negotiable Instruments Act?

by CA Jessica Nagaonkar in Legal Court Judgement

Is service of notice through a registered post is proper service of notice under the Negotiable Instruments Act?

Section 94 of Negotiable Instruments Act, 1881 pertains to mode in which notice may be given. According to the said section, notice of dishonour may be given to a duly authorized agent of the person to whom it is required to be given, or, where he has died, to his legal representative, or, where he has been declared an insolvent, to his assignee; may be oral or written; may, if written, be sent by post; and may be in any form; but it must inform the party to whom it is given either in express terms or by reasonable intendment that the instrument has been dishonoured, and in what way, and that he will be held liable thereon; and it must be given within a reasonable time after dishonour, at the place of business or (in case such party has no place of business) at the residence of the party for whom it is intended. If the notice is duly directed and sent by post and miscarries, such miscarriage does not render the notice invalid.

Let us refer to the case of M Nagappa vs Mohamad Aslam Savanpur where the issue under consideration was whether service of notice through a registered post is proper service of notice, under section Section 138 of Negotiable Instruments Act and is there a requirement to serve the notice under certificate of posting or not

Facts of the Case:

  • The appellant-complainant had given a loan of Rs.1,50,000 to the respondent-accused for his family necessities through a cheque for a sum of Rs.1,00,000 and also paid a sum of Rs.50,000 in cash.
  • The respondent-accused, having failed to pay the amount within a reasonable time, had issued three cheques for sums of Rs.50,000 each.
  • The said cheques were presented to bank for encashment but they were dishonoured and returned with an endorsement “funds insufficient”.
  • The appellant-complainant got issued legal notice, but it was returned with a “not claimed” comment.
  • Since the respondent-accused failed to repay the loan amount, the appellant-complainant filed a private compliant under Section 200 Cr.P.C. for the offence punishable under Section 138 NI Act.
  • On recording the sworn statement, the case was registered but the accused denied the same and claimed to be tried.

Proceedings of the Trial Court

  • The Trial Court was of the opinion that appellant-complainant ought to have issued a notice under Certificate of Posting (COP) in addition to the notice sending through Registered Post with Acknowledgment Due (RPAD).
  • With the said observation, the trial Court came to the conclusion that the contention of the appellant-complainant that he intimated the respondent-accused regarding dishonour of the cheque led to suspicion as the P.W.1 also admitted in the cross-examination to a suggestion made by the respondent-accused that the appellant-complainant had not sent the legal notice to his correct address.
  • Further it was observed that the appellant-complainant had not sent the legal notice to the respondent-accused under certificate of posting, there was no presumption of proper service of notice to the respondent-accused and had further held that the appellant-complainant had failed to prove that he had intimated the respondent-accused regarding dishonour of cheques and nothing on record that respondent-accused had received intimation.
  • With these observations, the complaint came to be dismissed.
  • Being aggrieved by the said order of acquittal, the appellant-complainant appealed before the High Court (HC)

Observations of the High Court (HC)

  • 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.
  • On analysis of the evidence placed on record, trial Court arrived at the factual finding that the respondent-accused had duly issued three cheques for a sum of Rs.50,000 each towards discharge of legally payable debt.
  • The said cheques were presented to the bank for payment within the period of its validity, but the said cheques were dishonoured for want of funds and returned with an endorsement of bank “insufficient funds” in the account of respondent-accused in the bank on which the cheques were drawn.
  • The statutory notice of dishonour was duly issued, to which there was no response from the respondent-accused
  • The trial Court rightly came to the conclusion that the appellant-complainant had financial capacity to lend money.
  • The trial Court also rightly disbelieved the reason that the respondent-accused had not placed cogent evidence to show that the cheques issued by him in favour of the complainant are towards payment of premium.
  • There was no plausible explanation by the respondent-accused as to why the cheques were issued in the name of appellant-complainant.
  • In the present appeal, the trial Court dismissed the complaint only on the reason that the legal notice issued through RPAD to respondent-accused was returned un-served as ‘not claimed’.
  • The postal cover sent through RPAD returned as not claimed did not mean due service of notice.
  • Even during the course of cross-examination, nothing was elicited regarding service of notice.
  • When the appellant-complainant had not sent the legal notice to the respondent-accused under certificate of posting, there was no presumption of due service of notice to the respondent-accused.
  • The respondent-accused had not placed rebuttal evidence to prove that the notice was not sent to the correct address and the respondent-accused was not working at the address.
  • The respondent-accused had not at all denied that he was working as Health Inspector at the City Municipality Council.
  • When a sender had 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 proved that it was really not served and he was not responsible for such non-service.
  • 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.
  • 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 NI Act.

As there was proper service of notice and there was no requirement to serve the notice under certificate of posting. The respondent-accused had failed to rebut the presumption by placing cogent and convincing evidence. Therefore, HC was of the view that the findings recorded by the Court below could not be sustained in law.

Accordingly it allowed the appeal and set aside the earlier order and convicted the accused for the offence punishable under Section 138 of NI 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

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