The Kerala High Court has held that a demand notice issued under Section 138 of the Negotiable Instruments Act, 1881, and returned with the postal endorsement “unclaimed” constitutes valid deemed service when sent to the correct known address of the drawer.
Setting aside a trial court acquittal, the bench of Justice A. Badharudeen convicted the accused in a cheque dishonour case involving a cheque of ₹90,000 and imposed a fine of ₹1.30 lakh.
BUY NOW: E-Magzine On Landmark Supreme Court Judgements Under Limitation Act Till 2025 : PART-1
The complainant alleged that the accused had borrowed ₹90,000 on 25 April 2005 and subsequently issued a cheque towards repayment of the debt. When the cheque was presented for encashment, it was dishonoured due to insufficient funds. Thereafter, a statutory demand notice was issued under Section 138 of the Negotiable Instruments Act. However, the notice was returned by postal authorities with the endorsement “unclaimed.”
The trial court acquitted the accused, holding that there was no valid service of the statutory notice and expressing doubts regarding the complainant’s version of the transaction.
Examining the evidence, the High Court observed that the complainant had entered the witness box and consistently deposed regarding the loan transaction, issuance of the cheque, its dishonour, and the subsequent issuance of the statutory notice. The Court noted that the defence version was merely suggested during cross-examination and was not supported by any independent evidence.
The accused had claimed that he had borrowed only ₹5,000 from the complainant’s nephew, had issued a blank cheque in connection with that transaction, and had already repaid the amount. However, the Court pointed out that no evidence was adduced to substantiate this defence and the nephew was not examined as a witness.
According to the Court, once the complainant established the transaction and execution of the cheque, the statutory presumption under Section 139 of the Negotiable Instruments Act became available in his favour, and the accused failed to rebut that presumption.
A key issue before the Court was whether the statutory demand notice requirement under Section 138(b) had been satisfied when the notice was returned as “unclaimed.” The trial court had accepted the accused’s contention that there was no valid service because he disputed the address mentioned in the notice.
Rejecting this view, the High Court held that issuance of notice to the correct known address of the drawer is sufficient compliance with the statutory requirement. The Court further observed that the same address was later used successfully for serving court summons, which the accused accepted and responded to.
Relying on the Supreme Court’s landmark ruling in Alavi Haji v. Palapetty Muhammed [(2007) 3 KLT 77], the Court reiterated that a notice sent by registered post to the correct address is deemed to have been served even if it is returned unclaimed. The endorsement “unclaimed” indicates refusal or failure on the part of the addressee to receive the notice and therefore satisfies the legal requirement of service.
The Court clarified that unless the accused can convincingly prove that the notice was not sent to his address, an “unclaimed” endorsement is sufficient to establish both issuance and deemed acceptance of the statutory notice.
The High Court also disagreed with the trial court’s reliance on a minor discrepancy in the complainant’s description of his relationship with the accused. While the complaint stated that the parties were known to each other, the complainant later referred to the accused as his friend during evidence.
The Court held that such a trivial variation could not be treated as a material contradiction affecting the credibility of the transaction, since both descriptions merely reflected an existing acquaintance between the parties.
After finding that the complainant had successfully discharged the initial burden of proof and that the accused failed to rebut the statutory presumption under Section 139, the High Court concluded that the offence under Section 138 of the Negotiable Instruments Act stood established.
Accordingly, the Court set aside the acquittal and convicted the accused. The accused was sentenced to simple imprisonment till the rising of the court and directed to pay a fine of ₹1,30,000. In default of payment of the fine, he would undergo four months’ imprisonment. The accused was directed to appear before the Magistrate Court on 7 July 2026 for execution of the sentence.
Membership Required to Access Case Details & Order Copy
To view the complete Case Details and Download Order Copy, you must have an active membership. Please subscribe to continue.
