Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(Online)(Ker) 34554

IN THE HIGH COURT OF KERALA AT ERNAKULAM
A. Badharudeen, J
Sreekumaran Namboodiri – Appellant
Versus
U.P. Mohammed – Respondent
Crl.Appeal No.897/2007 | Crl.L.P. NO.277 OF 2007 | ST NO.1898 OF 2005

Advocates:
For the Appellants/Petitioners: M. Muhammed Shafi, A. Parvathi Menon, P. Sanjay
For the Respondents: Vipin Narayan.A

A demand notice sent to the drawer's correct address and returned 'unclaimed' constitutes valid service. Once the complainant proves the debt transaction, the statutory presumption shifts the burden of proof to the accused, who must provide cogent evidence to rebut the presumption of liability.

Headnote:(A) Negotiable Instruments Act, 1881 - Section 138 and 139 - Dishonour of cheque - Legal notice - Deemed service - Return of notice with endorsement 'unclaimed' - Held, if demand notice is sent to the correct address of the drawer, it is deemed to be served, meeting the requirement of law. (Para 10)

(B) Burden of proof - Presumption - Once the complainant establishes the transaction and execution of the cheque, the initial burden is satisfied, shifting the onus to the accused to rebut the presumption under Section 139 by adducing cogent evidence. (Para 10)

Facts of the case:
An appeal was preferred against an order of acquittal passed by the trial court in a complaint filed for the dishonour of a cheque issued in discharge of a debt. The trial court had acquitted the accused primarily on the ground that the demand notice was returned 'unclaimed' and therefore not legally served, alongside minor inconsistencies in the testimony of the complainant regarding the nature of their relationship.

Findings of Court:
The appellate court held that an endorsement of 'unclaimed' on a notice sent to the correct address constitutes valid service. It determined that the complainant had successfully proved the transaction and the execution of the cheque, and the accused failed to rebut the statutory presumption by adducing any evidence of discharge.

Issues: Whether the return of a demand notice with an 'unclaimed' endorsement constitutes valid service of notice under the relevant statute and whether the accused successfully rebutted the presumption of liability.

Ratio Decidendi: Where a demand notice is issued to the correct address of the drawer, an 'unclaimed' return implies refusal to accept, thus satisfying the requirement of service. Upon proof of the debt and issuance of the instrument, the presumption of liability arises, and it remains for the accused to displace this by producing reliable evidence.

Result: Appeal allowed; acquittal set aside and accused found guilty.

Judgement Key Points

Key Points: - The appellate court held that an endorsement of "unclaimed" on a notice sent to the correct address constitutes valid service. (!) - Once the complainant proves the debt transaction and execution of the cheque, a presumption under Section 139 NI Act arises, shifting the onus to the accused to rebut with cogent evidence. (!) - The burden is on the accused to displace the presumption with reliable evidence of discharge; failure to do so supports a finding of guilt under Section 138 NI Act. (!) - Ext.P5 (notice sent to the correct address and returned unclaimed) can be considered valid service if not shown to be issued to an incorrect address. (!) - The court reversed a trial court acquittal, found the accused guilty under Section 138 NI Act, and sentenced accordingly. (!) - The case involves a cheque for Rs. 90,000 issued in discharge of a debt of Rs. 90,000, dishonoured for insufficient funds, with a demand notice returned unclaimed. (!) (!) - The evidence supported the complainant’s account of the transaction and the issuance of the cheque; the accused did not establish discharge of liability. (!)

How to determine whether a demand notice returned with an endorsement "unclaimed" constitutes valid service under Section 138 of the NI Act?

What is the burden of proof and how does the presumption under Section 139 NI Act operate when a complainant proves the debt transaction and the execution of the cheque?

What is the appropriate remedy when an appellate court finds that service was valid and the presumption was not rebutted, leading to conviction under Section 138 NI Act?

Table of Content
1. appellate court review of magistrate acquittal orders. (Para 1 , 2 , 3 , 4)
2. parties' contentions regarding legal notice validity and proof of transaction. (Para 5 , 6)
3. section 139 presumption and requirements of section 138 notice service. (Para 7 , 8 , 9 , 10)
4. final conviction, sentencing, and execution order. (Para 11)

“C.R”

A. BADHARUDEEN, J.

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Crl.Appeal No.897 of 2007

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Dated this the 11th day of June, 2026

Judgment in S.T.1898/2005 dated 24.01.2007 on the files of Judicial First Class Magistrate Court, Kunnamangalam, is under challenge in this appeal filed by appellant, who is the complainant in the above case.

2. Heard the learned counsel for the appellant/complainant and the learned counsel appearing for the 1st respondent/accused. Also heard the learned Public Prosecutor representing State of Kerala. Perused the judgment under challenge and the records of the trial court.

3. The complainant launched prosecution alleging commission of offence punishable under Section 138 of the Negotiable Instruments Act (`NI Act' for short) by the accused, when cheque for Rs.90,000/- issued to discharge the liability of Rs.90,000/- alleged to be borrowed by the accused from the complainant got dishonoured when it

was presented for collection.

4. The learned Magistrate ventured the matter and recorded evidence. PW1 was examined. Exts.P1 to P5 were marked on the side of the complainant. No defence evidence was adduced by the accused. The learned Magistrate on appreciation of evidence, acquitted the accused.

5. While seeking interference in the verdict impugned, it is submitted by the learned counsel for the appellant that even though Ext.P3 legal notice was issued within time, consequential to dishonour of Ext.P1 cheque, the same was returned with endorsement `unclaimed’ and the returned notice was marked as Ext.P5. The learned counsel for the appellant submitted that despite tendering of Ext.P5 the learned Magistrate found that there was no legal notice in the eye of law, as the accused denied his address shown in Ext.P3 and Ext.P5. According to the learned counsel for the appellant, the said finding is erroneous since issuance of notice in the correct known address by the complainant to the accused would suffice the requirement of notice under Section 138(1)(b) of the NI Act. He also pointed out that the trial court found a minor improbability in the evidence of PW1 to disbelieve him and to hold that the complainant

failed to prove the transaction and execution of the cheque. According to the learned counsel for the appellant, an anomaly was found by the learned Magistrate in the evidence of PW1. The anomaly is that the complainant averred in the complaint that he and the accused were known to each other but when he filed chief affidavit he stated that the accused was his friend. According to him, the same is not a reason to discard the evidence of PW1 to prove the transaction which led to issuance of Ext.P1 cheque, which, in fact, failed to be shaken during cross examination. Therefore the verdict would require interference.

6. The learned counsel for the 1st respondent/accused supported the verdict and contended that there was no legal notice in this matter and the transaction was failed to be proved by the appellant. Thus the verdict is liable to be sustained.

7. Points arise for consideration are:

(i) Whether the learned Magistrate is right in holding that the accused is not guilty of the offence under Section 138 of the N.I Act?

(ii) Is it necessary to interfere with the judgment in any manner?

(iii) The order to be passed?

8. In this case, the case advanced by the appellant is that the accused borrowed Rs.90,000/- on 25.04.2005 and in discharge of the said liability he had issued cheque dated 05.01.2005 for the said amount drawn on Lord Krishna Bank, Kozhikode Brnach. Though the complainant accepted the cheque in lieu of cash and presented it

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