Holding

The cause of action under Section 138 accrues only upon actual receipt of the statutory notice, so the limitation period ran from the second notice and the complaint was filed within time.

Summary

Dalmia Cement (Bharat) Ltd. issued a cheque to Galaxy Traders which was dishonoured. The appellant served a statutory notice on 13 June 1998, but the respondents claimed they received only an empty envelope and wrote to the appellant on 20 June. The appellant re‑presented the cheque on 1 July, which was again dishonoured, and served a second statutory notice on 27 July 1998. A complaint under Sections 138 and 142 of the Negotiable Instruments Act was filed on 9 September 1998, within the one‑month limitation period measured from the receipt of the second notice. The High Court quashed the complaint on the ground that the limitation period had expired from the first notice. The Supreme Court held that the cause of action arises only when the drawer actually receives a statutory notice; therefore the limitation period started from the second notice, and the complaint was timely. The High Court’s order was set aside and the trial magistrate was directed to proceed with the case.

Issues considered

The limitation period for filing a complaint under Section 142 of the Negotiable Instruments Act begins from the date the drawer actually receives the statutory notice, not merely when it is sent.
Whether a fresh statutory notice can be validly issued after the cheque is re‑presented when the first notice was not received.
The effect of the presumption of service under Section 27 of the General Clauses Act and its rebuttal in the context of statutory notice.

Legislation cited

Code of Criminal Procedure, 1973s. 482
General Clauses Act, 1897s. 27
Negotiable Instruments Act, 1881s. 138, s. 142

Subjects

Cheque dishonourSection 138 NI ActStatutory noticeLimitation periodReceipt of noticeGeneral Clauses ActPresumption of serviceCriminal complaintNegotiable instruments

Judgment

DALMIA CEMENT (BHARAT) LTD. A
v.
M/S. GALAXY TRADERS AND AGENCIES LTD. AND ORS.

JANUARY 19, 2001

[K.T. THOMAS AND R.P. SETHI, JJ.] B

Negotiable Instruments Act, 1881: Sections 138 and 142.

Dishonour of cheque-Statutory notice demanding payment issued to
drawer of cheque-But drawer denied receipt of notice-Cheque deposited C
again for encashment but dishonoured-Second statutory notice demanding
payment issued to drawer-As no payment was made complaint filed within
period of limitation calculated from second notice-Drawer did not deny
receipt of second notice-However, High Court quashed the complaint as it
was barred by limitation calculated from first notice-Correctness of-Held: D
Drawer tried to blow hot and cold denying receipt offirst notice of dishonour
and praying or dismissal of complaint on ground of limitation-Plea of
drawer not only contradictory and afterthought but carved out to resist the
lawful claim of drawer-Hence, High Court erred in quashing the complaint.

Dishonour of cheque-Offence of-Ingredients-Held: Include receipt E
of notice by accused under S. !38(b)-Giving of notice doe; not make the
offence but the receipt of notice by accused which gives cause of action to
file the complaint within the statutory period.

General Clauses Act, 1897: S.27.
F
Service of letter-Sent by post-Presumption of-Held: Is rebuttable-
Dispatcher may either accept the sendee 's stand that he has not received the
notice or prove ·that he received the notice-Dispatcher can adopt either of
the options-If he opts the former, he can take steps for effective service of
notice.
G
The cheque issued hy the respondents-accused to the appellant was
dishonoured. The appellant gave a statutory notice to the respondents in
terms of S.138(b) o( the Negotiable Instruments Act, 1881. However, the
respondents sent a letter dated 20-6-1998 to the appellant intimating that
they had received empty envelopes without any contents. The appellant H
461
462 SUPREME COURT REPORTS [200 I] I S.C.R.

A presented the cheque again to the bank and upon its dishonour gave a second
statutory notice to the respondents, which was received by them on
27-7-1998. As no payment was made the appellant filed a complaint under
.
Section 142 of the Act before the Magistrate on 9-9-1998. The respondents
filed a petition under Section 482 of the Code of Criminal Procedure, 1973
before the High Court for quashing the complaint on the ground that the
B same was barred by limitation with reference to the first notice. The High
Court allowed the petition. Hence th;s appeal.

Allowing the appeal, the Court
"'
HELD: I. To constitute an offence under Section 138 of the Negotiable
c Instruments Act, 1881, the complainant is obliged to prove its ingredients,
which include the receipt of notice by the accused under clause (b). It is not
the 'giving' of the notice, which makes the offence, but it is the 'receipt' of -+
the notice by the drawer, which gives the cause of action to the complainant
to file the complaint within the statutory period. 1456-D-E]
D
K. Bhaskaran v. Sankaran Vaidhyan Ba/an, (1999] 7 SCC 510, referred
to.

2. Section 27 of the General Clauses Act, 1897 deals with the ..._
presumption of service of a letter sent by post. The dispatcher of a notice has,
E therefore, a right to insist upon and claim the benefit of such a presumption.
But as the p'l-esumption is a rebuttable one, he has two options before him.
One is to concede the stand of the sendee that as a matter of fact he did not
receive the notice, and the other is to contest the sendee's stand and take
the risk for proving that he in fact received the notice. It is open to the

F
dispatcher to adopt either of the options. If he opts the former, he can afford
to take appropriate steps for the effective service of notice upon the addressee. •
Such a course has been adopted by the appellant-company in this case and
the complaint filed, admittedly, within limitation from the date of the notice
conceded to have been served upon the respondents. 1468-C-D(

G Sadanandan Bhadran v. Madhavan Suni/ Kumar, (19981 6 SCC 514
and STL Import, USA v. Exim Aides Silk Exporters, Bangalore, 1199914 SCC
567, referred to. •
3. The respondents have not denied the issuance of their letter dated
20-6-1998. Despite admitting its contents, they opted to approach the High
H Court for quashing the proceedings merely upon assumption, presumption
DALMIA C. (BHARAT) LTD. v. G.T. AND AGEN. LTD. [SETHI, J.] 463
and conjectures. They tried to blow hot and cold in the sanie breath, starting A
on the one hand that the notice of dishonour has not been received by them
and on the other praying for dismissal of the complaint on the plea that the
complaint was barred by time in view of the notice served by the appellant
which they had not received. The plea of the respondents was not only
contradictory, and an afterthought but apparently carved out to resist the B
claim of the complainant, and thereby frustrates the provisions of law. The
High Court fell in error in quashing the proceedings by not referring to the
letter of the respondents dated 20-6-1998. 1470-G-H; 471-A-BI

CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No.
957 of2000.
c
From the Judgment and Order dated 24.01.2000 in CRLMC 3140/99 of the
High Court ofKerala at Emakulam.

Dr. A.M. Singhvi, Gauri Rasgotra, Suman Jyoti Khaitan, E.M.S. Anam,
K. Rajeev, Badri Prasad Singh and K.M.K. Nair for the appearing parties. D
The Judgment of the Court was delivered by

SETHI, J. The complaint filed under Section 138 of the Negotiable
Instruments Act, 1881 (hereinafter called "the Act") was quashed by the High
Court vide the judgment impugned in this appeal ·holding that the same was E
barred by time as the complainant had allegedly failed to fiie it within the
statutory period from the date of accruing of the cause of action.

In order to appreciate the legal submissions, a resume of facts of the
j. case is necessary. In its complaint, the appellant-company had stated that
. Accused Nos. 2 to 9 who are partners of respondent-firm purchased cement F
from it and issued cheque for Rs. 9, 13,353.84 on 26th May, 1998 which was
drawn on Karur Vysa Bank Ltd., Ernakulam Branch. When presented for
collection, the cheque was dishonoured on account of insufficiency of funds
in the account of the accused. The information regarding non payment of the
cheque amount was communicated by the Bank to the complainant on 2.6.1998. G
The complainant on 13.6.1998, through its Advocate, issued a statutory notice
in terms of S.138 of the Act intimating respondents I and 2 regarding the
dishonour of the cheque and calling upon the respondents to pay the said
amount within a period of 15 days from the receipt of the said notice. The
postal acknowledgement receipt of the notice, served upon the respondents,
was received by the complainant on 15.6.1998. However, the respondents 1 H
464 SUPREME COURT REPORTS !200 I] I S.C.R.

A and 2, vide their letter dated 20th June, 1998, which was received by the
Advocates of the appellant on 30th June, 1998, intimated that they had in
effect received empty envelopes without any contents and requested the
appellant to mail the contents. It is worth noticing that by the time the
complainant received the intimation of the respondents, the statutory period
B of filing the complaint was about to expire. Believing the averments of the
respondents to be true, though not admitting but as an abundant caution the
appellant presented the cheque again on I. 7.1998 to the drawee bank through
their bankers. The cheque was again dishonoured by the drawee bank on
2. 7.1998. A registered statutory notice was issued to the accused intimating
the dishonour of the cheque and the payment was demanded. The accused
C received the said notice on 27.7.1998 but did not make the payment. According
to the complainant, the accused on 6.7.1998 sent a registered cover to its
Ernakulam office which contained some waste newspaper bits. As despite
dishonour of the cheque and receipt of notice, the cheque amount was not
paid, the appellant filed the complaint on 9th September, 1998, admittedly,
within the statutory period from the second notice. The Additional Chief
D Judicial Magistrate, Ernakulam took the cognizance and issued process to the
respondents. Instead of appearing before the Magistrate, the respondents
filed a petition under Section 482 of the Code of Criminal Procedure in the
High Court praying for quashing the complaint on the ground that the same
was barred by limitation which was disposed of vide the judgment impugned
E in this appeal.

The Act was enacted and Section 13 8 thereof incorporated with a
.#-specified object of making a special provision by incorporating a strict liability
so far as the cheque, a negotiable instrument, is concerned. The law relating
to negotiable instrument is the law of commercial world legislated to facilitate •
F the activities in trade and commerce making provision of giving sanctity to
the instruments of credit which could be deemed to be convertible into money
and easily passable from one person to another. In the absence of such
instruments, including a cheque, the trade and commerce activities, in the
present day would, are likely to be adversely affected as it is impracticable
G for the trading community to carry on with it the bulk of the currency in force.
The negotiable instruments are in fact the instruments of credit being convertible A
on account of legality of being negotiated and are easily passable from one
hand to another. To achieve the objectives of the Act, the legislature has, in
its wisdom, thought it proper to make such provisions in the Act for conferring
such privileges to the mercantile instruments contemplated under it and
H provide special penalties and procedure in case the obligations under the
DALMIA C. (BHARAT) LTD. v. G.T. AND AGEN. LTD. [SETHI. J.] 465
instruments are not discharged. The laws relating to the Act are, therefore, A
~ required to be interpreted in the light of the objects intended to be achieved
by it despite there being deviations from the general law and the procedure
provided for the redressal of the grievances to the litigants. Efforts to defeat
the objectives of law by resorting to innovative measures and methods are
to be discouraged, lest it may affect the commercial and mercantile activities
in a smooth and healthy manner, ultimately affecting the economy of the B
country .
• Section 138 of the Act makes a civil transaction to be an offence by
fiction of law. Where any cheque drawn by a person on an account maintained
by him with a banker for payment of any amount of money to another person c
is returned by the bank unpaid either because of the amount or money
standing to the credit of that person being insufficient to honour the cheque
~ ot that it exceeds the amount arranged to be paid from that account, such
person, subject to the other conditions, shall be deemed to have committed
an offence under the section and be punished for a term which may extend
to one year or with fine which may extend to twice the amount of cheque or D
with both. To make the dishonour of the cheque as an offence, the aggrieved
party is required to present the cheque to the bank within a period of six
_,. months from the date on which it is drawn or within the period of its validity,
whichever is earlier and the payee or the holder in due course of the cheque
makes a demand for payment of the cheque amount by giving a notice in E
writing lo the drawer of the cheque within 15 days of the receipt of information
by him from the bank regarding the return of the cheque as unpaid and drawer
of the such cheque fails to make the payment of the amount within 15 days
of the receipt of the said notice. Section 139 refers to presumption that unless
.... the contrary is proved, the holder received the cheque of the nature referred
to under Section 138 for the discharge in whole or in part or of any debt or F
other liability. Section 140 restricts the defence in any prosecution under
Section 138 of the Act and Section 141 refers to ~uch offence committed by
the companies. Section 142 provides that notwithstanding anything contained
in the Code of Criminal Procedure no court shall take congnizance of an
offence under the section except upon a complaint in writing made by the

.. payee or as the. case may be, the holder of the cheque and that such
complaint is made within one month of the date on which the cause of action
G

arose under clause (c) of proviso to Section 138 of the Act.

Supporting the judgment of the High Court, the learned counsel appearing
for the respondents has submitted that as upon presentation and dishonour H
466 SUPREME COURT REPORTS [2001) 1 S.C.R.

A of the cheque by the bank on 28th May, 1998 which was intimated to the
complainant, a cause of action had accrued, the complaint could be filed only
within 30 days from the date of the alleged receipt of the first notice by the
accused. He contends that as according to the complainant the postal
acknowledgement receipt of the notice was received by the complainant on
B 15th June, 1998, the complaint filed by it after 15th July, 1998 was barred by
time. As admittedly, the complaint was filed by the appellant on 9th September,
1998, it is contended that the same being barred by limitation was rightly
quashed by the High Court. However, the learned counsel for the appellant
submitted that as the respondents had disclaimed to have received the notice
of dishonour sent to them on 13th June, 1998, no option was left to the
C appellant except to present the cheque again and when not paid, serve a fresh
notice for r.he purposes of making out a case and offence within the meaning
of Section 138 of the Act.

To constitute an offence under S.138 of the Act the complainant is
obliged to prove its ingredients which include the receipt of notice by the
D accused under clause (b). It is to be kept in mind that it is not the 'giving'
of the notice which makes the offence but it is the 'receipt' of the notice by
the drawer which gives the cause of action to the complainant to file the
complaint within the statutory period. This Court in K.Bhaskaran v. Sankaran
Vaidhyan Ba/an & Anr., [1999] 7 SCC 510 considered the difference between
E 'giving' of a notice and 'receipt' of the notice and held:

"On the part of the payee he has to make a demand by 'giving
a notice' in writing. If that was the only requirement to complete the
offence on the failure of the drawer to pay the cheque amount within
15 days from the date of such 'giving', the travails of the prosecution
F would have been very much lessened. But the legislature says that
failure on the part of the drawer to pay the amount should be within
15 days 'of the receipt' of the said notice. It is, therefore, clear that
'giving notice' in the context is not the same as receipt of notice.
Giving is a process of which receipt is the accomplishment. It is for
G the payee to perfonn the former process by sending the notice to the
drawer at the correct address .

. In Black's Law Dictionary 'giving of notice' is distinguished from
'receiving of notice' (vide p.621): "A person notifies or gives notice
to another by taking such steps as may be reasonably required to
H inform the other in the ordinary course, whether or not such other
DALMIA C. (BHARAT) LTD. v. G.T. AND AGEN. LTD. [SETHI, J.] 467

. - actually comes to know of it". A person 'receives' a notice when it
is duly delivered to him or at the place of his business.
A

If a strict interpretation is given that the drawer should have
actually received the notice for the period of 15 days to start running
no matter that the payee sent the notice on the correct address, a
trickster cheque drawer would get the premium to avoid receiving the B
notice by different strategies and he could escape from the legal
consequences of Section 138 of the Act. It must be borne in mind that
the court should not adopt an interpretation which helps a dishonest
evader and clips an honest payee as that would defeat the very
legislative measure.
c
In Maxwell's Interpretation of Statutes, the learned author has
emphasised that 'provisions relating to giving of notice often receive
liberal interpretation' (vide p. 99 of the 12th Edn.). The context
envisaged in Section 138 of the Act invites a liberal interpretation for
the person who has the statutory obligation to give notice because D
he is presumed. to be the loser in the transaction and it is for his
interest the very provision is made by the legislature. The words in
clause (b) of the proviso to Section 138 of the Act show that the
payee has the statutory obligation to 'make a demand' by giving
notice. The thrust in the clause is on the need to 'make a demand'.
It is only the mode for making such demand which the legislature has E
prescribed. A payee can send the notice for doing his part for giving
the notice. Once it is despatched his part is over and the next depends
on what the sendee does.

It is well settled that a notice refused to be accepted by the F
addressee can be presumed to have been served on him (vide
Harcharan Singh v. Shivrani, [1981] 2 SCC 535 and Jagdish Singh
V. Natthu Singh, [1992] I sec 647.

Here the notice is returned as unclaimed and not as refused. Will
there by any significant difference between the two so far as the G
presumption of service is concerned? In this connection a reference
to Section 27 of the General Clauses Act will be useful. The section
. reads thus:

27. Meaning of service by post- Where any Central Act or
Regulation made after the commencement of this Act authorises H
468 SUPREME COURT REPORTS [200 I] I S.C.R.

A or requires any document to be served by post, whether the _ •
expression 'serve' or either of the expression 'give' or 'send' or -4'
any other expression is used, then, unless a different intention
appears, the service shall be deemed to be effected by properly
addressing, pre-paying and posting by registered post, a letter
containing the document, and unless the contrary is proved, to
B have been effected at the time at which the letter would be
delivered in the ordinary course of post."

Section 27 of the General Clauses Act deals with the presumption of
service of a letter sent by post. The despatch er of a notice has, therefore, a
C right to insist upon and claim the benefit of such a presumption. But as the
presumption is rebuttable one, he has two options before him. One is to
concede to the stand of the sen dee that as a matter of fact he did not receive
the notice, and the other is to contest the sendee' s stand and take the risk
for proving that he in fact received the notice. It is open to the despatcher
to adopt either of the options. l f he opts the former, he can afford to take
D appropriate steps for the effective service of notice upon the addressee. Such
a course appears to have been adopted by the appellant-company in this case
and the complaint filed, admittedly, within limitation from the date of the
notice of service conceded to have been served upon the respondents.

In Sadanandan Bhadran v. Madhavan Suni/ Kumar, [1998] 6 SCC 5 !4
E this Court held that clause (a) of the proviso to Section 138 did not put any
embargo upon the payee to successively present a dishonoured cheque
during the period of its validity. On each presentation of the cheque and its
dishonour a fresh right and not cause of action accrues. The payee or holder
of the cheque may, therefore, without taking pre-emptory action in exercise
of his right under clause (b) of Section 138 of the Act, go on presenting the
F cheque so as to enable him to exercise such right at any point of time during
the validity of the cheque. But once a notice under clause (b) of Section 138
of the Act is 'received' by the drawer of the cheque, the payee or the holder
of the cheque forfeits his right to again present the cheque as cause of action
has accrued when there was failure to pay the amount within the prescribed
G period and the period of limitation starts to run which cannot be stopped on
any account. This Court emphasised that "needless to say the period of one
month from filing the complaint will be reckoned from the date immediately
falling the day on which the period of 15 days from the date of the receipt
of the notice by the drawer expires" (emphasis supplied).

H In Sil import, USA v. Exim Aides Silk Exporters, Bangalore, (1999] 4
DALMIA C. (BHARAT) LTD. v. G.T. AND AGEN. LTD. [SETHI, J.] 469
sec 567 the respondents therein was an exporter of finished silk goods and A
the appellant company based at USA was an importer. The appellant owed
a certain amount towards sale consideration of goods exported to it by the
respondent and issued some cheque in their favour. Two of such cheques
were returned dishonoured with reason "no sufficient funds". The respondents
sent a notice to the appellant-company by fax on 11.6.1996 and notice by
registered post on the next day which was received by the appellant on 25th B
June, 1996. The respondents filed a complaint before the Magistrate in respect
of the said cheques on 8.8.1996. The appellant contended that the cause of
action having accrued on the expiry of 15 days from the date of notice sent
by fax on 26th June, 1996, the limitation for filing the complaint expired on 27th
June, 1996, therefore, the complaint filed on 8.8.1996 could not be taken C
congnizance of by the trial court. A II owing the appeal this Court held:

"The language used in the above section admits of no doubt that
the Magistrate is forbidden from taking cognizance of the offence if
the complaint was not filed within one month of the date on which
the cause of action arose. Completion of the offence is the immediate D
forerunner of rising of cause of action. In other words cause of action
would arise soon after completion of the offence, and the period of
limitation for filing the complaint would simultaneously start running.
,
To circumvent the above hurdle, the respondent submitted that 15
days can be counted only from 25.6.1996, the date when the appellant E
received the notice sent by registered post and the cause of action
would have arisen only on 11.7.1996. The complaint which was filed
on 8.8.1996 is therefore within time, according to the learned counsel
for the respondent.

xxx xxx xxx F
The requirement for sending a notice after the cheque is returned
by the bank unpaid is set out in clauses (b) and ( c) of the proviso
to S.138 of the Act. They read thus:

"Provided that nothing contained in this section shall apply G
unless-

(a) xxx xxx

(b) the payee or the holder in due course of the cheque, as the
case may be, makes a demand for the payment of the said amount of
money by giving a notice in writing, to the drawer of the cheque, H
470 SUPREME' COURT REPORTS [200 I) I S.C.R.

A within fifteen days of the receipt of information by him from the bank
regarding the return of the cheque as unpaid; and

(c) the drawer of such cheque fails to make the payment of the
said amount of money to the payee or as the case may be, to the
holder in due course of the cheque within fifteen days of the receipt
B of the said notice".

The duty cast on the payee on receipt of information regarding ~
the return of the cheque unpaid is mentioned in clause (b) of Section
138. Within 15 days he has to make a demand for payment. The mode
of making such a demand is also prescribed in the clause, that it
c should be 'by giving notice in writing to the drawer of the cheque'.
Nowhere it is said that such notice must be sent by registered post
or that it should be despatched through a messenger."

and concluded:
D "The upshot of the discussion is, on the date when the notice sent
by fax reached the drawer of the cheque the period of 15 days (within
which he has to make the payment) has started running and on the
expiry of the period the offence is completed unless the amount has
been paid in the meanwhile. If no complaint was filed within one
... "
E month therefrom the payee would stand forbidden from launching a
prosecution thereafter, due to the clear interdict contained in Section
142 of the Act."

It is conceded in this case that in response to the notice sent by the
appellant through their counsel on 13th June, 1998, the respondents herein,
F vide their letter dated 20th June, 1998, intimated "received one empty envelope
without any content in it. Therefore request you to kindly send the content,
if any''. This intimation was received by the appellant on 30th June, 1998, the
day on which the period of limitation on the basis of earlier notice was to
expire. They had exercised the option to accept the averments made by the
respondents in their letter dated 20th June, 1998 and issue a fresh notice after
G
again presenting the cheque. The respondents have not denied the issuance
of their letter dated 20th June, 1998. Despite admitting its contents, they opted
..
to approach the High Court for quashing the proceedings merely upon
assumption, presumption and conjectures. They tried to blow hot and cold
in the same breath, stating on the one hand that the notice of dishonour has
H not been received by them and on the other praying for dismissal of the
DALMIA C. (BHARAT) LTD. v. G.T. AND AGEN. LTD. [SETHI, J.] 471

complaint on the plea that the complaint was barred by time in view Qf the. A
notice served by the appellant which they had not received. The plea ohbe
respondents was not only contradictory, and after thought but apparently
carved out to resist the claim of the complainant and thereby frustrate the
provisions of law.

The High Court fell in error by not referring to the letter of the B
respondents dated 20th June, 1998 and quashing the proceedings merely by
reading a line from para 6 of the complaint. The appellant in para 7 of their
complaint had specifically stated that "Even though the complainant is not
admitting the said allegation, on abundant caution the complainant presented
the cheque again on 1.7.98 to the drawee bank through the complainant's C
bankers, Punjab National Bank. The cheque was again dishonoured by the
drawee bank on 2.7.98 a registered lawyer notice was issued to the !st
accused firm as well as to the 2nd accused intimating the dishonour of the
cheque and demanding payment. The accused have received the notice on
27.7.98. The accused did not make any payment so far". The receipt of the
second notice has concededly not been denied by the respondents. D
Under the circumstances the appeal is allowecrand th~-order of the High
Court quashing the complaint filed by the appellant is set aside. The trial
Magistrate is directed to proceed against the respondents in accordance with
the provisions of law and expeditiously dispose of the compl~int.

V.S.S. Appeal allowed.