The Supreme Court set aside the Kerala High Court’s order that had quashed a conviction under Section 138 of the Negotiable Instruments Act, 1881, restoring the trial court’s sentence of six months’ simple imprisonment and a fine of Rs.3,00,000. The Court held that dispatch of a statutory demand notice by registered post to the correct address of the drawer raises a rebuttable presumption of service, which is not defeated by receipt of the notice by a family member residing at the same address.
Background & Facts
The Dispute
The appellant-complainant lent Rs.3,00,000 to respondent No.2, who issued cheque No. 479097 drawn on the Catholic Syrian Bank, Perumba voor Branch. The cheque was dishonoured for insufficiency of funds. The appellant-complainant issued a statutory demand notice dated 31st August 2016 through registered post at the correct address of respondent No.2; the notice was received by his mother, who resided with him. Respondent No.2 did not pay or reply, leading to a complaint under Section 138 NI Act.
Key Facts
- Loan amount: Rs.3,00,000 (later claimed by respondent as Rs.7,00,000, alleged repaid).
- Cheque No. 479097, Catholic Syrian Bank, Perumba voor Branch, dishonoured on presentation.
- Statutory demand notice dated 31st August 2016, sent by registered post to correct address.
- Notice received by mother of respondent No.2 (residing at same address) on 11th December 2025 (as per paper book).
- Complaint filed as S.T. Case No. 114 of 2017.
- Respondent’s statement under Section 313 CrPC: claimed borrowed Rs.7,00,000, repaid entire amount, gave blank signed cheque for Rs.3,00,000 loan.
Procedural History
- 10th July 2019: Trial Court convicted respondent No.2 under Section 138 NI Act, sentenced to six months’ simple imprisonment and fine Rs.3,00,000 with default stipulation.
- 16th February 2023: Additional District & Sessions Judge dismissed Criminal Appeal No. 175 of 2019, upholding Trial Court’s finding on service of notice.
- 2023: Respondent filed Criminal Revision Petition No. 865 of 2023 before Kerala High Court.
- 29th July 2025: Kerala High Court allowed revision, set aside conviction on ground that notice was served on mother, not accused.
- 10th November 2025: Notice issued (as per paper book).
- 11th December 2025: Notice served upon respondent No.2 (as per paper book).
- 30 September 2026: Supreme Court judgment.
Relief Sought
The appellant sought restoration of the trial court’s judgment and sentence, including imprisonment of six months, fine of Rs.3,00,000, and default stipulation.
The Legal Issue
The central question was whether service of a statutory demand notice by registered post to the correct address of the drawer is deemed valid when the notice is received by a family member residing at the same address, and whether the burden to rebut the presumption of service lies on the accused.
Arguments Presented
For the Appellant/Petitioner
Reliance on C.C. Alavi Haji v. State of Kerala (2007) 6 SCC 555, D. Vinod Shivappa v. Nanda Bell iappa (2006) 6 SCC 456, K. Bhaskaran vs. Sankaran Vaidhyan Balan (1999) 7 SCC 510, and Madan & Co. v. Wazir Jaivir Chand (1989) 1 SCC 264 to argue that dispatch of notice by registered post to correct address raises a presumption of service under Section 27 of the General Clauses Act, 1897 and Section 114 of the Evidence Act, 1872, which the accused must rebut by showing lack of knowledge or incorrect address.
For the Respondent/State
Learned counsel for the State of Kerala stated that the State is not a contesting respondent as the matter pertains to dishonour of cheque issued by respondent No.2 on account of insufficiency of funds.
The Court's Analysis
The Court examined the legislative scheme of Section 138 NI Act, emphasizing that the cause of action arises only after failure to pay within fifteen days of receipt of notice. It held that the requirement of “giving of notice” under proviso (b) is satisfied once the notice is dispatched to the correct address by registered post, drawing on Section 27 of the General Clauses Act, 1897 and Section 114 of the Evidence Act, 1872.
"Once the notice is dispatched to the correct address of respondent No.2, the statutory requirement of ‘giving of notice’ under proviso (b) to Section 138 of the Act, 1881 stood satisfied."
The Court further explained that the presumption of service is rebuttable; the accused may rebut it by proving that the notice was not sent to the correct address, that he had no knowledge of its receipt, or that the postal endorsement is erroneous. Mere receipt by a family member residing at the same address does not rebut the presumption.
The Court noted that the High Court’s reliance on M.D. Thomas vs. P.S. Jaleel (2009) 14 SCC 398 was erroneous, as that judgment was rendered per incuriam, ignoring the binding precedent of C.C. Alavi Haji and the settled principle that service is deemed effected upon correct addressing and posting, irrespective of the recipient’s identity.
Consequently, the impugned judgment was held to be per incuriam and incapable of being treated as binding precedent under Article 141 of the Constitution.
The Verdict
The appellant succeeded. The Supreme Court set aside the impugned judgment of the Kerala High Court dated 29th July 2025, restored the trial court’s judgment dated 10th July 2019, and affirmed the sentence of simple imprisonment for six months and a fine of Rs.3,00,000 with a default stipulation of further imprisonment.
What This Means For Similar Cases
Presumption of Service Stands
- Dispatch of a statutory notice by registered post to the correct address raises a rebuttable presumption of service under Section 138 NI Act.
- The prosecution need not prove actual receipt by the accused.
Burden on Accused to Rebut
- The accused must rebut the presumption by showing lack of knowledge, incorrect address, or faulty postal endorsement.
- Mere denial of receipt is insufficient.
Family Receipt Does Not Rebut Presumption
- Receipt of the notice by a family member residing at the same address does not defeat the presumption.
- The accused’s relationship with the recipient or their co-habitation is irrelevant to the presumption.
Per Incuriam Doctrine
- Judgments rendered in ignorance of binding precedent are per incuriam and lack stare decisis effect.
- Practitioners should challenge such judgments on the ground of per incuriam to restore correct law.
