D. Vinod Shivappa v. Nanda Belliappa

The Supreme Court delivered an indispensable ruling on the service of statutory demand notice under proviso (b) to Section 138 of the Negotiable Instruments Act, 1881. The Court held that once a statutory notice is sent by registered post with prepaid acknowledgment to the correct address of the drawer, a strong legal presumption of service arises under Section 27 of the General Clauses Act, 1897 and Section 114 of the Evidence Act. A dishonest drawer cannot evade criminal liability by deliberately avoiding postal delivery, procuring endorsements like 'unclaimed' or 'refused', or temporarily closing their premises.

• Presumption of Due Service under Section 27 General Clauses Act: Dispatch of statutory notice to correct address by registered post constitutes complete service in law.
• Drawer Cannot Benefit from Evasion: Postal endorsements such as 'not found', 'unclaimed', or 'refused' do not defeat Section 138 prosecution.
• Question of Fact to Be Determined at Trial: Whether the drawer deliberately avoided notice or was genuinely absent is a matter for trial, not a ground to quash at threshold.
• Balancing Complainant's Rights: The payee cannot be expected to follow the postman or ensure physical handover; proper dispatch exhausts the complainant's duty.
• Deemed Service and 15-Day Grace: Offence is complete if drawer fails to pay within 15 days of deemed service or fails to pay upon receiving court summons.

The respondent (complainant) filed a criminal complaint under Section 138 NI Act against the appellant for dishonor of a cheque for Rs. 50,000/- issued in discharge of a debt.

Upon dishonor, the complainant dispatched the statutory demand notice by registered post with acknowledgment due to the admitted residential address of the appellant within the statutory period.

The postal envelope returned unserved with the postal endorsement: 'Party not in station. Notice returned to sender.'

The appellant contended before the trial court and the Karnataka High Court that since the notice was never actually delivered to him, no cause of action arose under Section 138 proviso (c). The High Court rejected this contention and refused to quash the complaint. The accused appealed to the Supreme Court.

The question is: what is the meaning of the words 'giving of notice in writing to the drawer of the cheque' occurring in proviso (b) to Section 138 of the Act? Section 27 of the General Clauses Act, 1897 provides that service shall be deemed to be effected by properly addressing, prepaying and posting by registered post a letter containing the document. If a notice is sent by registered post with proper address to the drawer, the sender has fulfilled his statutory obligation. The complainant has no control over the postal department or the movements of the addressee. If the postal cover returns with endorsements such as 'refused', 'not found', 'door locked', or 'unclaimed', the court is entitled to presume that notice was served. If a strict interpretation is placed requiring proof of actual physical delivery into the hands of the drawer in every case, a dishonest drawer would easily defeat the very object of Section 138 by managing to avoid the postman, locking his door, or bribing the postal peon to write endorsements of absence. Whether the notice was deliberately evaded or whether the drawer was genuinely away on emergency without knowledge of the notice is a question of fact to be proved during trial. The complaint cannot be dismissed at the threshold merely because the postal endorsement says 'not in station' or 'unclaimed'. Furthermore, even if the drawer claims he did not receive notice, he can make payment within 15 days of receiving the court summons. If he does not pay even after appearing in court, he cannot plead non-receipt of notice.

• C.C. Alavi Haji v. Palapetty Muhammed (2007) 6 SCC 555: 3-Judge Bench affirmed Vinod Shivappa and held that paying within 15 days of summons avoids liability.
• N. Parameswaran Unni v. G. Kannan (2017) 5 SCC 737: Reaffirmed deemed service on 'door locked' and 'intimation delivered' endorsements.
• Ajeet Seeds Ltd. v. K. Gopala Rao (2014) 12 SCC 644: Applied Vinod Shivappa to reject quashing petitions based on notice denials.