What is Presumption Regarding Service of Notice u/s 138 of NI Act?

Introduction

Negotiable Instrument Act, 1881 cope with the instruments which are transferable from one person to another and the transferable materials are like a note of hand, negotiable paper, paycheque, and others. The modification took place in the year 1988 in the Negotiable Instrument Act, 1881 as well as section 138 was inserted in this bill accomplishing that dishonour of paycheque will be considered as a criminal sin leading to condemned custody for a duration expandable up to two years, which may either be expandable to the twice of the payment which was to be paid in actual otherwise will be punishable with the custody as well as the payment of damage jointly. Section 138 of the Negotiable Instrument Act, 1881 requires few chances which are supposed to be covered by this section so that lawsuit regarding the dishonour of paycheque gets registered. (1) Few elements are required which will be considered appropriate for satisfying the requirement of Section 138 which were being interpreted in Kusum Ignots and Alloys Ltd. v Pennar Peterson Securities Ltd. (2) like

  • The man may undergo through a lawful legitimate liability along with the liability a paycheque is drawn up to disburse the arrears or obligation.
  • Paycheque must be returned by the financial institution for the reason that there was inadequate finance or maybe the sum admitted by the financial institution to compensate eclipse.
  • Paycheque needs to be given to the financial institution six months from the moment when paycheque is drawn up or before the legality of the paycheque is over whatever is prior.
  • Drafted memorandum in thirty days must be issued to the person drawn the paycheque accompanying slip of information by the financial institution regarding the deficiency of cash proceeding from paycheque.
  • The beneficiary has not yet received the amount in fifteen days of the slip forwarded drafted memorandum to the person who draws the paycheque.

Notice

Section 138 of the Negotiable Instrument Act, 1881 requires notice regarding dishonour of paycheque to be issued and needs to be dispatched with the help of certified postal service sending to the draftsman of the paycheque. The notice must specify that the beneficiary in the given term of the paycheque asks for the cash through the medium of notice to the draftsman of the paycheque in thirty days from the slip of information provided by draftsman financial institution regarding non-payment of cash by a paycheque.

Who can send the notice regarding dishonour of paycheque?

A Beneficiary of paycheque after being known from the financial institution that the paycheque is been dishonoured than the beneficiary is required to issue a notice in thirty days asking for the sum of money from the drawer.

Notice is given to whom?

Notice is given to the following persons:

  • To the accredited person who is allowed
  • To the lawful heir when the drawer expired
  • To the handler when the drawer is announced bankrupt

The object behind dispatching notice?

Central Bank of India v. Saxons Farms (3), In this case, Supreme Court believed object behind giving notice is offering a try to the person liable for the payment of money to the payee so that he may fix up his failure and to safeguard the genuine drawers.

Presumption u/s 138 of Negotiable Instrument Act, 1881

The presumption held down by the section 118 and 139 of the Negotiable Instrument Act, 1881 is considered in the favour of the beneficiary of the person holding the paycheque unless and until it is proved to be conflicting and the presumption announced in respect of the beneficiary of a paycheque. Notice which is being dispatched at appropriate home to the drawer through any certified postal service will be considered as compelling, On the other hand, the draftsman has the immunity that he can quash the presumption which was made, this is made explicit by  Section 27 of the General Clauses Act, 1897 and Section 114 of the Evidence Act, 1872.

Section 27 of General Clauses Act, 1897 states that any fundamental bill or statute which is made thereafter introduction of General Clause Act, 1897 expects part of the paper to be dispatched through postal service in case any distinct motive occur supply is presumed to implement to the appropriate home or any opposed of the supply of paper is made then also the supply is presumed to be implemented to the appropriate home.

1. Raja Kumari v. P. Subbarama Naidu &Anr (4) Supreme Court while handling this case where the notice was not served by the evidence found out that the appropriate home belonging to the draftsman was closed, the court believed that the rule which was assimilated in section 27 of General Clauses Act, 1897 refers and the dispatching of the notice will be considered as served it will be the duty of the draftsman to prove that the notice was not dispatched and the delivery failure was not because of him.

2. Parameswaran Unni v. G. Kannan (5) is the Criminal Revision Petition No 644 of 1995 appeal begin after the judgement and order were given by the Trial Court and Appellate Court on 06/10/2003 was overruled by the High Court of Kerala that the 1st respondent cannot be condemn held down the section 138 of Negotiable Instrument Act, 1881. The Hon’ble Supreme Court considering the rule laid down in Section 27 of the General Clauses Act, 1897

and Section 114 of the Indian Evidence Act, 1972 confirms that the if already the notice is served at the appropriate home through the certified postal service it is considered that the notice is served. Supreme Court also agrees with the lower courts and overruling the High Court Kerala ordered him to pay in front of the Judicial Magistrate 1st class the sum of rupees two lakh/- out of which one lakh and thirty thousand rupees will be given to the appellant as indemnity. Defaulting the said amount in front of the 1st class Judicial Magistrate on the said date his condemnation and imprison ordered by the Ld. Trial Court must cease and the bond which was approved is now rescinded.

Section 139 of Negotiable Instrument Act, 1881 founds the presumption that when the paycheque is been issued in favour of the beneficiary it is considered that the paycheque was issued for disbursing the obligation. Basalingappa v. Mudibassapa. (6) Section 139 of the Negotiable Instrument Act, 1881 along with section 118 of the act for understanding the presumption regarding payback and span on the device and so on.

Foot Notes:

  1. Dishonour of cheque for insufficiency, etc., of funds in the accounts: Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall without prejudice to any other provisions of this Act, be punished with imprisonment for a term which may extend to one year, or with fine which may extend to twice the amount of the cheque, or with both:

PROVIDED that nothing contained in this section shall apply unless-

  1. a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier.
  2. b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice, in writing, to the drawer of the cheque, within fifteen days of the receipt of information by him from the bank regarding the return of the cheque as unpaid, and
  3. c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.

Explanation: For the purpose of this section, “debt or other liability” means a legally enforceable debt or other liability.

2.(2000) 2 SCC 745.

3.(1999) 8 SCC 221.

4.(2004) 8 SCC 774.

5.(2017) 5 SCC 737.

6.2019 SCC OnLine SC 491.

This Article Written by Chaitanya Dixit, Student of Teerthanker Mahaveer University, Moradabad, U.P.

Read Also: How Many Times A Cheque Can Be Bounced?

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