In Sainaba v. State of Kerala & Anr., 2026 INSC 1069, the Supreme Court has clarified an important aspect of proceedings relating to dishonour of cheques under Section 138 of the Negotiable Instruments Act, 1881 (“NI Act”). The Court held that where a statutory demand notice is correctly addressed to the drawer and dispatched by registered post, the requirement of “giving of notice” under proviso (b) to Section 138 stands satisfied, even if the notice is received by a family member residing at that address rather than personally by the drawer.
The judgment is significant for businesses, creditors, lenders, promoters and directors who rely on cheques for payment or may become involved in cheque dishonour proceedings. A drawer cannot ordinarily defeat a Section 138 proceeding merely by contending that the statutory notice was not personally handed over to him.
Once the notice is properly addressed and dispatched to the correct address, a rebuttable presumption of service arises. The burden then shifts to the drawer to establish circumstances sufficient to rebut that presumption.
The Supreme Court has also expressly held that its earlier decision in M.D. Thomas v. P.S. Jaleel, (2009) 14 SCC 398, which had taken a different approach where the notice was received by the drawer’s wife, was rendered per incuriam and cannot be treated as binding precedent under Article 141 of the Constitution.
Why This Judgment Matters
For a creditor or business seeking to recover money through a cheque dishonour proceeding, service of the statutory demand notice is a critical procedural requirement.
The judgment makes clear that the creditor is not required to ensure that the drawer personally takes delivery of the notice. What is required is that the notice is properly addressed and dispatched in accordance with law.
For the drawer, however, a simple assertion that the notice was not personally received may not be enough. If the notice was sent to the correct address, the drawer must place material before the Court to rebut the resulting presumption of service.
The practical message is therefore straightforward:
The focus is on whether the notice was properly addressed and dispatched to the drawer’s correct address, not merely on who physically received the notice.
Brief Facts
The appellant-complainant alleged that respondent No. 2 had borrowed Rs. 3,00,000 and had issued a cheque towards repayment. The cheque was subsequently dishonoured.
The complainant issued a statutory demand notice dated 31 August 2016 by registered post at the respondent’s correct address. The notice was received by his mother. Despite receipt of the notice at his address, the respondent neither made payment nor sent a reply.
The Trial Court convicted the respondent under Section 138 of the NI Act and sentenced him to six months’ simple imprisonment and a fine of Rs. 3,00,000. The Appellate Court affirmed the conviction.
The Kerala High Court, however, allowed the respondent’s revision petition and set aside the conviction. The High Court reasoned that the notice had been received by the respondent’s mother and that there was no evidence establishing that the respondent was aware of the notice.
The complainant challenged the High Court’s decision before the Supreme Court.
What Does Section 138 Require?
Proviso (b) to Section 138 requires the payee or holder in due course to make a demand for payment of the cheque amount by giving a written notice to the drawer within thirty days of receiving information regarding dishonour.
Under proviso (c), the drawer has fifteen days from receipt of the notice to make payment. If payment is not made within that period, the statutory cause of action for prosecution arises.
The dispute in the present case was therefore not whether a statutory notice was necessary. It was whether the requirement of “giving of notice” could be treated as satisfied where the notice reached the drawer’s correct address but was received by his mother.
The Supreme Court held that it could.
Correct Address Creates a Rebuttable Presumption of Service
The Court relied upon the consistent line of Supreme Court decisions beginning with K. Bhaskaran v. Sankaran Vaidhyan Balan, followed by D. Vinod Shivappa v. Nanda Belliappa and the three-Judge Bench decision in C.C. Alavi Haji v. Palapetty Muhammed.
In K. Bhaskaran, the Supreme Court had distinguished between “giving” and “receiving” notice. Where the notice is dispatched by registered post to the correct address, service may be deemed to have been effected unless the drawer establishes that the notice was not actually served and that the non-service was not attributable to him.
The rationale is important. If personal receipt were insisted upon in every case, a drawer could potentially defeat the statutory mechanism simply by avoiding delivery.
The Supreme Court has therefore consistently rejected an interpretation that would allow a dishonest drawer to benefit from avoiding receipt of the notice.
What Happens Once the Notice Is Sent to the Correct Address?
The three-Judge Bench decision in C.C. Alavi Haji provides the clearest statement of the legal position.
The Supreme Court held that when a statutory notice is sent by registered post to the correctly addressed drawer, the mandatory requirement under proviso (b) to Section 138 stands complied with.
A presumption of service arises under Section 27 of the General Clauses Act, 1897 and Section 114 of the Indian Evidence Act, 1872.
The drawer can still rebut this presumption. For example, the drawer may establish that:
- the address mentioned on the notice was incorrect;
- the notice was never tendered;
- the postal endorsement was incorrect; or
- the drawer had no knowledge that the notice had been brought to his address.
However, the initial burden does not remain with the complainant indefinitely. Once the requirements giving rise to the presumption are established, the burden shifts to the drawer.
Does It Matter If a Family Member Receives the Notice?
The Supreme Court’s answer is effectively no, not by itself.
In the present case, the notice was received by the respondent’s mother. The Court examined the surrounding circumstances and found that the address mentioned in the statutory notice was indeed the respondent’s correct address.
The respondent had appeared pursuant to summons served at the same address. His Vakalatnama carried the same address, as did his appeal and revision petitions. Importantly, he had never disputed the correctness of the address in his statement under Section 313 of the Code of Criminal Procedure.
The Court also noted that it was not the respondent’s case that he and his mother lived separately or that their relationship was inimical.
Accordingly, the mere fact that his mother physically received the notice did not rebut the presumption of service.
The important distinction is therefore between incorrect address and correct address but receipt by another person.
Where the notice is sent to an incorrect address, the statutory presumption may not arise.
Where it is sent to the correct address, the identity of the person who physically receives it does not, by itself, defeat the presumption.
Supreme Court Rejects the Approach in M.D. Thomas
A particularly important aspect of the judgment is the Supreme Court’s treatment of M.D. Thomas v. P.S. Jaleel.
In that case, a Division Bench had set aside a conviction under Section 138 on the basis that the statutory notice had been served upon the drawer’s wife rather than the drawer himself.
The Supreme Court in Sainaba found that M.D. Thomas had not considered the authoritative three-Judge Bench decision in C.C. Alavi Haji. It also had not examined whether the notice had been sent to the correct address or whether the wife resided with the drawer.
The Court held that if the notice had been sent to the correct address, the statutory presumptions under Section 27 of the General Clauses Act and Section 114 of the Evidence Act would apply irrespective of the identity of the recipient.
The Court consequently declared M.D. Thomas to be per incuriam and held that it could not be treated as binding precedent under Article 141 of the Constitution.
Why the Supreme Court Considered the Earlier Approach Problematic
The Court also pointed out the anomalous consequences that would follow if M.D. Thomas continued to be treated as binding.
Under K. Bhaskaran, D. Vinod Shivappa and C.C. Alavi Haji, a complainant may benefit from a presumption of service even where a notice sent to the correct address is not actually delivered to the drawer and is returned as unclaimed.
However, under the approach in M.D. Thomas, a complainant could potentially lose the benefit of the presumption where the notice was actually delivered at the correct address but was received by a family member residing there.
The Supreme Court found such a distinction difficult to sustain.
The law requires the complainant to properly address and dispatch the notice. It does not require the complainant to control who ultimately accepts delivery at the correct address.
Practical Implications for Businesses
The judgment has practical significance for both creditors issuing statutory notices and companies, promoters and directors facing cheque dishonour proceedings.
For creditors, the key takeaway is to ensure that the notice is sent within the prescribed period to the drawer’s correct address, while retaining proof of dispatch and delivery. Once these requirements are satisfied, personal receipt by the drawer need not be separately established.
For drawers, non-receipt of the notice personally is not, by itself, sufficient to defeat the proceedings. Where the notice was sent to the correct address, the drawer would need to rebut the resulting presumption of service with appropriate evidence.
The judgment therefore reinforces the importance of accurate address records, proper statutory compliance and preservation of documentary evidence in cheque dishonour matters.
Conclusion
The Supreme Court’s judgment in Sainaba v. State of Kerala & Anr. provides clarity on a recurring issue in cheque dishonour litigation.
The statutory requirement under proviso (b) to Section 138 is satisfied when the demand notice is properly addressed to the drawer and duly dispatched. Once that requirement is established, a rebuttable presumption of service arises. The fact that the notice is received by a family member at the correct address does not, without more, defeat that presumption.
The judgment is also significant because the Supreme Court has expressly declared M.D. Thomas v. P.S. Jaleel to be per incuriam, removing uncertainty created by that decision.
For businesses, the practical lesson is clear: accurate address records, proper dispatch of statutory notices and preservation of documentary proof remain critical in cheque dishonour matters. For drawers, personal non-receipt of a notice is not, by itself, sufficient to defeat the statutory presumption of service.
