Cheque Bounce Case Cannot Be Dismissed For Want Of Service Report; MP High Court Frames Guidelines On Presumption Of Service

The Madhya Pradesh High Court has held that non-production of a service report or postal track report cannot by itself be a ground to dismiss a complaint under Section 138 of the Negotiable Instruments Act at the threshold, particularly when the complainant asserts that the statutory notice was duly dispatched to the correct address of the accused.

Justice Himanshu Joshi observed that once a notice is properly addressed, prepaid, and sent by registered post, a presumption of service arises under Section 27 of the General Clauses Act, and the complaint cannot be rejected at the initial stage on technical grounds.

The Court said, “Non-production of the service report or track report by itself cannot be a ground to dismiss a complaint under Section 138 of the Negotiable Instruments Act at the threshold, particularly when the complainant has asserted that the notice was duly dispatched on the correct address of the accused.”

The dispute arose from a cheque bounce case in which Vinay Kumar Mishra alleged that Aditya Nayak had borrowed 5 lakh and issued cheques towards repayment, which were dishonoured for insufficient funds.

After the cheque dated July 20, 2020 was dishonoured, Mishra sent a statutory notice dated August 11, 2020 by registered post on August 12, 2020 and later filed a complaint under Section 138 on September 1, 2020.

The Magistrate dismissed the complaint for want of proof of service of notice as no track report was produced, and the Sessions Court upheld that order.

Mishra argued that once notice is properly addressed and sent by registered post, service must be presumed under Section 27 of the General Clauses Act and the complaint cannot be dismissed at the threshold for non-production of a track report.

Nayak contended that compliance with the statutory requirements under Section 138 is mandatory and that the complaint was premature in the absence of proof of service.

Allowing the petition, the High Court held that the courts below had wrongly assumed that presumption of service can arise only after thirty days from dispatch of notice and clarified that no such rigid rule exists.

The Court observed that service must be presumed in the ordinary course of postal business and that the question whether notice was actually served is a matter of evidence to be examined during trial.

The Court said, “The question whether the notice was actually served or not is essentially a matter of evidence, which can appropriately be examined during trial, and the accused is always at liberty to rebut the statutory presumption of service.”

To avoid similar dismissals in the future, the Court laid down the following guidelines regarding the presumption of service of statutory notice under Section 138:

1. Where notice is sent by registered post or speed post to the correct address, a presumption of service under Section 27 of the General Clauses Act shall ordinarily arise.
2. A complaint should not be dismissed solely because the track report or acknowledgment due card is not filed, if dispatch of notice is shown.
3. If notice is sent within the same city or district, service may ordinarily be presumed within three to five days from dispatch.
4. If notice is sent to another district within the same State, service may ordinarily be presumed within five to seven days.
5. If notice is sent to another State, service may ordinarily be presumed within seven to ten days.
6. Additional reasonable time may be allowed where the address is in a remote or rural area.
7. The presumption of service remains rebuttable, and the issue of actual service should be decided during trial and not at the threshold
   .

The court held that dismissing complaints on technical grounds such as non-production of a track report defeats the object of Section 138, which is intended to ensure the credibility of commercial transactions, and set aside the orders of the courts below while restoring the complaint for decision on merits.