NI Act Notice Not Invalid Merely Because Postal Acknowledgment Signature Differs From Cheque: Kerala High Court

The Kerala High Court has recently ruled that once a complainant shows that a legal demand notice in a cheque bounce case was sent to the accused's correct address, a trial court cannot treat the notice as invalid merely because the signature on the postal acknowledgment card differs from the signature on the dishonoured cheque.

Justice A. Badharudeen said allowing such an approach would make it easy for accused persons to avoid liability.

"If such a procedure is recognized in law, clever accused may put a different signature in the acknowledgment card to contend that he did not accept the notice," the court observed.

The ruling came in an appeal against a Pathanamthitta Chief Judicial Magistrate's order acquitting an accused in a cheque bounce case under Section 138 of the Negotiable Instruments Act.

According to the complainant, the accused had borrowed ₹1.55 lakh and issued a cheque dated October 20, 2016 to repay the amount. When the cheque was presented to the bank, it was returned unpaid because there were insufficient funds in the account.

The complainant said he then sent the mandatory legal demand notice to the accused. No payment was made despite the notice. He therefore filed a complaint under Section 138 of the NI Act.

The magistrate acquitted the accused after holding that the complainant had failed to prove the legal notice. The magistrate reached this conclusion because the signature on the postal acknowledgment card did not match the signature on the cheque.

Referring to the Supreme Court's decision in Alavi Haji v. Palapetty Muhammed, the court said that once the complainant produces the postal receipt showing that the notice was sent to the accused's correct address, the law presumes that the notice was duly issued under Section 27 of the General Clauses Act. It also observed that serving the notice is not a requirement of law.

The court said the magistrate was wrong to conclude that there was no valid demand notice simply by comparing the signatures on the cheque and the acknowledgment card.

"Therefore, the finding entered into by the learned Magistrate to hold that there was no legal notice merely comparing the signatures of the accused in Ext.P1 with that of Ext.P5, would not suffice the requirement to find that there was no legal notice of demand. Therefore, the said findings is liable to be interfered and reversed," the court held.

The court further said that once the complainant produces the acknowledgment card, its main purpose is to determine whether the complaint was filed within the limitation period. If the accused still claims the notice was never received, it is for the accused to prove that claim. The court said this could be done by examining the concerned postman.

The court also rejected the challenge to the complainant's financial capacity. During cross-examination, the complainant initially said he had no documents to show that he had ₹1.55 lakh available to lend on the relevant date.

During re-examination, however, he explained that ₹65,000 came from the sale of timber. The remaining amount came from the sale of rubber sheets and agricultural produce. That explanation was not challenged.

The court found that the complainant had discharged the initial burden regarding the transaction that led to the execution of the cheque. This entitled him to rely on the statutory presumptions under Sections 118 and 139 of the NI Act.

Allowing the appeal, the court set aside the acquittal and convicted the accused under Section 138 of the NI Act. It sentenced him to simple imprisonment till the rising of the court and imposed a fine of ₹2 lakh.

The court directed that the ₹50,000 already paid by the accused during the pendency of the appeal be adjusted against the fine. The remaining fine, if realised, will be paid to the complainant as compensation.

For Appellant: Advocate V Philip Mathews

For Respondents: Advocates Manu Ramachandran, T.S Srath, M Kiranlal, R. Rajesh (Varkala) and MA Shihab, PP