Section 138 NI Act | Presumption Of Service Is Attracted Once Notice Is Dispatched To Correct Address Of Drawer: Supreme Court

"Once the notice is dispatched to the correct address, the presumption in terms of the judgment in C.C. Alavi Haji (supra) arose and it was incumbent upon the drawer/accused to establish either that the address was incorrect or that he had no knowledge of the notice having been brought to his address." Supreme Court, in a significant ruling dated September 30, 2026, held that a complainant satisfies the statutory requirement of 'giving notice' under proviso (b) to Section 138 of the Negotiable Instruments Act, 1881, merely by dispatching the notice to the correct address of the drawer via registered post.

A bench comprising Justice AHSANUDDIN AMANULLAH and Justice MANMOHAN observed that once the notice is sent to the correct address, a rebuttable presumption of valid service arises under Section 27 of the General Clauses Act, 1897, and Section 114 of the Indian Evidence Act, 1872, regardless of whether the notice was physically received by the drawer or a family member residing at that address.

Presumption of service is a settled legal position

The dispute arose from a complaint under Section 138 of the NI Act where the accused contended that the statutory demand notice was invalid because it was received by his mother rather than personally by him. While the trial and appellate courts convicted the accused, the Kerala High Court set aside the conviction, ruling that the complainant failed to prove that the accused was aware of the notice. The Supreme Court, in reversing the High Court's decision, emphasized that the High Court had fundamentally erred by shifting the burden of proof from the accused to the complainant.

The court clarifies the scope of 'giving' vs 'receiving' notice

The primary question before the court was whether the receipt of a statutory notice by a family member residing at the correct address of the drawer constitutes valid service under the NI Act. The court was also called upon to determine whether a previous coordinate bench judgment in M.D. Thomas vs. P.S. Jaleel, which held otherwise, remained good law. The court clarified that the legislative intent behind the proviso to Section 138 is to provide an opportunity for an honest drawer to make amends, not to provide a loophole for a "trickster cheque drawer" to evade liability.

Reaffirming the doctrine of deemed service

The bench underscored that the law, as established in the three-judge bench decision of C.C. Alavi Haji vs. Palapetty Muhammed, does not require the complainant to prove actual receipt. The court noted that if the drawer claims non-receipt, the burden rests squarely on them to establish that the address was incorrect, the postal endorsement was erroneous, or that they were unaware of the notice being brought to their premises.

Supreme Court declares M.D. Thomas as per incuriam

Addressing the conflict in precedents, the bench categorically held that the judgment in M.D. Thomas vs. P.S. Jaleel was rendered per incuriam as it failed to consider the binding pronouncements of larger benches. The court observed that treating a family member residing at the same address as an "unrelated third party" is legally fallacious. The judgment explicitly states that such an interpretation would create anomalous consequences where a complainant whose notice is actually delivered to a family member is denied the benefit of presumption, whereas one whose notice is returned unclaimed would enjoy it.

The court highlights the danger of enabling evasive tactics

The Court emphasized that the presumption in favour of the complainant cannot be defeated by circumstances beyond their control. Permitting a drawer to evade liability on the ground that a family member received the notice would frustrate the object of the statute. The Court reiterated that a drawer who fails to respond even after receiving the court summons, which includes a copy of the complaint, cannot subsequently plead lack of proper service of the statutory notice.

Rationale for reversing the High Court's order

In the present case, the accused had not disputed the correctness of his address throughout the trial and had even appeared before the court based on summons delivered at the same address. Since the accused failed to lead any evidence to rebut the presumption of service, the trial court's conviction was restored. The High Court, in its revisional jurisdiction, was held to have erred by re-appreciating evidence to reach a conclusion that was contrary to settled law.

Final order restores trial court conviction

Consequently, the Supreme Court allowed the appeal, setting aside the order of the Kerala High Court and restoring the sentence of six months simple imprisonment along with the fine imposed by the trial court. The judgment clarifies that once the procedural requirements under Section 138 are met by dispatching notice to the correct address, the onus of disproving service rests entirely on the drawer.

Date of Decision: 30 September 2026