Cheque Dishonour: Notice Under Section 138 NI Act Presumed Served If Sent To Correct Address, Says Supreme Court

The Supreme Court recently held that a statutory notice under Section 138 of the Negotiable Instruments Act, 1881, is presumed to have been served on the drawer of a dishonoured cheque when it is sent by registered post to his correct address, even if the notice is received by a family member.

Section 138 of the NI Act makes the dishonour of a cheque a criminal offence when it is returned by the bank due to insufficient funds or because it exceeds the amount arranged with the bank.

A Bench of Justices Ahsanuddin Amanullah and Manmohan said the requirement of ‘giving of notice’ under proviso (b) to Section 138 is satisfied once the notice is dispatched to the drawer's correct address. The presumption, however, is rebuttable by the drawer.

Proviso (b) to Section 138 of the NI Act requires the payee or holder in due course to make a demand for payment by sending a written notice to the drawer within 30 days of receiving information about the cheque's dishonour.

Court also declared the 2009 judgment in M D Thomas Vs P S Jaleel as per incuriam for being contrary to the law laid down by a larger three-judge Bench in C C Alavi Haji Vs Palapetty Muhammed (2007).

The judgment came on an appeal filed by one Sainaba against the Kerala High Court's July 29, 2025 judgment, which had set aside the conviction of respondent No.2 under Section 138 on the ground that the statutory demand notice had been served on his mother and not on him personally.

What was the cheque dishonour case?

According to the complaint, respondent No.2 had borrowed Rs 3,00,000 from Sainaba and issued a cheque towards repayment. The cheque was dishonoured when presented.

Sainaba then sent the statutory demand notice by registered post to respondent No.2's correct address. The notice was received by his mother.

Respondent No.2, in his statement under Section 313 of the Code of Criminal Procedure [now Section 351 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS)], claimed that although he had borrowed Rs 7,00,000 from the complainant, he had repaid the entire amount. He also claimed that he had handed over a blank signed cheque while borrowing Rs 3,00,000.

The trial court convicted him under Section 138 on July 10, 2019 and sentenced him to six months' simple imprisonment and a fine of Rs 3,00,000, with a default sentence.

The Additional District & Sessions Judge dismissed his appeal on February 16, 2023.

However, the Kerala High Court, in revision, set aside the conviction on July 29, 2025, holding that the statutory notice had not been served on respondent No.2 but on his mother.

When is a cheque dishonour notice treated as served?

The Supreme Court referred to proviso (b) to Section 138. Court also relied on Section 27 of the General Clauses Act, 1897, which creates a presumption of service when a document is properly addressed, prepaid and sent by registered post.

Referring to K Bhaskaran Vs Sankaran Vaidhyan Balan & Anr (1999), the Bench said that where a notice is sent by registered post to the correct address, service may be deemed to have been effected unless the recipient proves that it was not actually served and that the non-service was not attributable to him.

Court reiterated the principle laid down in C C Alavi Haji (2007) that the requirement of ‘giving of notice’ is complied with once the notice is dispatched to the correct address.

The burden then shifts to the drawer to rebut the presumption by showing, for instance, that the notice was sent to an incorrect address, that he had no knowledge of the notice being brought to his address, or that the postal endorsement was incorrect.

2009 M D Thomas judgment

The Bench noted that in M D Thomas (2009), a division bench had set aside a Section 138 conviction merely because the statutory notice was served on the drawer's wife rather than on the drawer himself.

Court said the judgment did not consider the earlier three-judge Bench ruling in C C Alavi Haji or examine whether the notice had been correctly addressed or whether the wife lived with the drawer.

"If the judgment in M D Thomas were to be treated as binding precedent, it would lead to anomalous consequences," the Bench said.

"This court reiterates that the law requires only that the complainant dispatch the notice to the correct address of the drawer and the presumption in his favour cannot be defeated by circumstances beyond his control. Under Section 27 of the General Clauses Act, 1897, service is deemed to be effected, once the notice is properly addressed and sent by registered post," it added.

Court consequently held that M D Thomas was per incuriam and could not be treated as binding precedent under Article 141 of the Constitution.

"Furthermore, if allowed to stand as precedent, M D Thomas would enable unscrupulous drawers to evade liability on specious pleas, thereby frustrating the object of the statute," the Bench said.

Why did the presumption of service apply in this case?

The Supreme Court found that the notice had undisputedly been sent to respondent No.2's correct address.

Court noted that the same address appeared in the summons pursuant to which he entered appearance, his Vakalatnama, and his appeal and revision petitions. He had also never disputed the correctness of the address in his Section 313 statement.

Court further noted that respondent No.2 had not claimed that his relationship with his mother was inimical or that they lived separately.

The Bench therefore held that the presumption of service remained unrebutted.

"The High Court in the impugned Judgment wrongly shifted the burden from the accused-drawer to the complainant, contrary to the settled law laid down in C C Alavi Haji. Moreover, the High Court failed to consider the overwhelming material on record which conclusively establishes that the notice was delivered at the correct address of respondent No.2," Court said.

Holding that the high court had completely misread C C Alavi Haji, the Supreme Court allowed Sainaba's appeal, set aside the high court's judgment and restored the trial court's decision, which had convicted respondent No.2 under Section 138 and sentenced him to six months' imprisonment and a fine of Rs 3,00,000.

Case Title: Sainaba Vs State of Kerala & Anr

Bench: Ahsanuddin Amanullah and Manmohan 

Date of Judgment: September 30, 2026