Andhra Pradesh High Court - Amravati
Burramsetti Venkataramana vs Grandhi Balaji on 3 March, 2026
APHC010452322022
IN THE HIGH COURT OF ANDHRA PRADESH
AT AMARAVATI [3521]
(Special Original Jurisdiction)
TUESDAY,THE THIRD DAY OF MARCH
TWO THOUSAND AND TWENTY SIX
PRESENT
THE HONOURABLE DR JUSTICE Y. LAKSHMANA RAO
CRIMINAL REVISION CASE NO: 748/2022
Between:
1.BURRAMSETTI VENKATARAMANA, S/O MALAKONDAIAH, AGED
ABOUT 51 YEARS, R/O D.NO.20-12-65, SUKKARA PEDDAIAHGARI
VEEDHI, BHIMAVARAM, WEST GODAVARI DISTRICT.
...PETITIONER
AND
1.GRANDHI BALAJI, S/O VENKATA KRISHNAIAH, AGED 40 YEARS,
R/O D.NO.2-11-61/19, RAMARAJU THOTA, BHIMAVARAM, WEST
GODAVARI DISTRICT.
2.THE STATE OF ANDHRA PRADESH, REP. BY ITS PUBLIC
PROSECUTOR HIGH COURT OF A.P., AT AMARAVATI
...RESPONDENT(S):
Counsel for the Petitioner:
1.B CHANDRA SHEKHAR
Counsel for the Respondent(S):
1.PUBLIC PROSECUTOR (AP)
2.YASWANTH GADE
The Court made the following:
2
Crl.R.C.No.748 of 2022
03.03.2026
Dr.YLR,J
ORDER:
The Criminal Revision Case has been preferred under Sections 397 and 401 of Code of Criminal Procedure, 1973 (for brevity 'the Cr.P.C') against the judgment dated 04.08.2022 in Crl.A.No.440 of 2019 passed by the learned III Additional District and Sessions Judge, Bhimavaram confirming the judgment dated 30.10.2019 in C.C.No.112 of 2018 passed by the learned Principal Junior Civil Judge-cum-Judicial Magistrate of First Class, Bhimavaram, finding the revisionist guilty for the offence punishable under Section 138 of the Negotiable Instruments Act, 1881 (for short 'the N.I.Act.,') and convicted and sentenced the Revisionist to undergo simple imprisonment for a period of eight months.
2. Sri B.Chandrasekhar, learned Counsel for the Petitioner while reiterating the grounds of revision submits that the impugned conviction and sentence are vitiated by grave errors of law and fact, the learned Trial Court having failed to undertake a judicious appraisal of the evidence on record. The learned Trial Court has proceeded on a mechanical invocation of the statutory presumption under Section 139 of 'the N.I.Act.,' without appreciating that such presumption is rebuttable and must yield to cogent circumstances demonstrating improbability of liability. The complainant's own pleadings disclose that the alleged loan carried interest at 24% per annum, thereby rendering the liability on the date of issuance of the cheque at Rs.10,24,000/-, 3 Crl.R.C.No.748 of 2022 03.03.2026 Dr.YLR,J whereas the cheque was drawn only for Rs.10,00,000/-. This internal contradiction, unexplained and unrectified, strikes at the root of the complainant's case and renders the alleged debt not legally enforceable on the date of dishonour. The learned Trial Court's omission to address this inconsistency constitutes a misdirection in law and a miscarriage of justice.
3. It is further urged that the statutory requirement of service of demand notice, which is the sine qua non for the accrual of cause of action under Section 138 of 'the N.I.Act.,' has not been satisfied. The complainant relied upon a track consignment purportedly showing receipt on 05.01.2018, but that document was never marked as an exhibit. Instead, Exhibit P5 is a postal endorsement dated 08.03.2019, recording delivery of the registered article on 22.01.2018 "to mother of addressee." The reliance on this endorsement is wholly untenable, as the Petitioner's mother had expired on 04.09.2017, rendering such service a legal impossibility. The learned Trial Court's acceptance of this defective proof of service, and its consequent finding of compliance with the statutory notice requirement, is perverse and unsustainable. In the absence of valid service, the statutory preconditions under the proviso to Section 138 of 'the N.I.Act.,' stand unfulfilled, and the conviction cannot be maintained.
4. Learned Counsel for the Petitioner would also submit that the learned Trial Court erred in elevating the cheque, absent any promissory note, loan 4 Crl.R.C.No.748 of 2022 03.03.2026 Dr.YLR,J agreement, or acknowledgment, to the status of unimpeachable proof of liability between parties who had no demonstrated acquaintance or commercial dealings. The presumption under Section 139 of 'the N.I.Act.,' cannot be treated as irrefragable, it must be weighed against rebuttal circumstances. Here, the Petitioner discharged the burden of rebuttal by exposing the complainant's internal inconsistency on the quantum of liability and by demonstrating the impossibility of statutory notice service. The learned Trial Court's failure to weigh these rebuttal circumstances against the presumption amounts to a misapplication of law, supplanting adjudication with assumption.
5. The learned Appellate Court, instead of curing these defects, compounded them by affirming the conviction and further awarding compensation of Rs.10,00,000/- to the complainant, despite the complainant not having filed any appeal or cross‑appeal seeking such relief. This constitutes a transgression of the legitimate contours of appellate jurisdiction. The complainant was not an aggrieved party in appeal, and the scope of the accused's appeal could not be expanded to confer additional benefits upon the complainant. The award of compensation in such circumstances is a manifest illegality, an overreach of jurisdiction, and a miscarriage of justice.
6. In these circumstances, learned Counsel would submit that both the learned Trial Court and the learned Appellate Court have failed to appreciate 5 Crl.R.C.No.748 of 2022 03.03.2026 Dr.YLR,J the evidentiary contradictions, ignored the impossibility of statutory notice service, and exceeded jurisdictional limits in awarding compensation. The conviction and sentence, therefore, stand vitiated by errors of law and fact, and the Petitioner is entitled to have the same set aside in revision. It is prayed that this Court may be pleased to allow the revision, quash the conviction and sentence, and restore the Petitioner's liberty.
7. Per contra, Mr. Yaswanth Gade, learned Counsel appearing for the complainant/Respondent No.1 and Ms. P.Akhila Naidu, learned Assistant Public Prosecutor would submit that the conviction rendered by the learned Trial Court is perfectly in consonance with the statutory scheme of 'the N.I.Act.,' and the findings recorded therein are borne out by unimpeachable evidence. It is urged that the complainant had advanced a sum of Rs.10,00,000/- to the accused on 18.11.2017 in the presence of independent witnesses, and contemporaneously the accused issued a cheque bearing No.037462 drawn on Central Bank of India, Bhimavaram branch, towards discharge of the said liability. The cheque was presented within the period of validity, and was returned unpaid with the endorsement "Funds Insufficient." These circumstances squarely attract the ingredients of Section 138 of 'the N.I.Act.,' and the learned Trial Court rightly held that the offence stood established.
6Crl.R.C.No.748 of 2022
03.03.2026 Dr.YLR,J
8. The learned Counsel for Respondents would further contend that the statutory notice dated 30.12.2017 was duly issued to the accused demanding payment of the cheque amount, and the postal track consignment marked as Ex.P5 evidences delivery of the said notice at the proper address. In terms of Section 27 of the General Clauses Act, 1897 (for brevity 'the G.C.Act.,') once a notice is dispatched to the correct address, service is deemed to be effected unless rebutted by cogent evidence. The accused has not produced any credible material to dislodge this presumption. Mere assertions or fanciful explanations cannot suffice to rebut the statutory presumption. The learned Trial Court, therefore, rightly concluded that the complainant had complied with the mandatory requirements under Section 138(b) and (c) of 'the N.I.Act.,' and that the accused failed to tender payment within the stipulated period.
9. It is also submitted that the signature on Ex.P1 cheque is admitted by the accused, and once execution is proved or admitted, the presumptions under Sections 118 and 139 of 'the N.I.Act.,' come into play. These presumptions mandate that the cheque was issued for consideration and in discharge of a legally enforceable debt or liability. The complainant substantiated the transaction by examining himself as P.W.1 and corroborating witness P.W.2, whose testimony remained unshaken in cross-examination. The defence plea that the cheque was misappropriated by a third party is a bald assertion unsupported by any documentary proof or credible testimony. 7 Crl.R.C.No.748 of 2022
03.03.2026 Dr.YLR,J In the absence of tangible evidence, such a plea cannot neutralize the statutory presumption. The learned Trial Court, therefore, correctly held that the accused failed to rebut the presumption even on the touchstone of preponderance of probabilities.
10. The learned Counsel for the Respondents would submit that the learned Appellate Court, while affirming the conviction, was justified in awarding compensation to the complainant under Section 357 of 'the Cr.P.C.,' which is a discretionary power intended to secure restitution to the victim of the offence. The complainant, having suffered financial loss due to dishonour of the cheque, was rightly compensated, and such award does not transgress appellate jurisdiction. The concurrent findings of both courts below are well reasoned, supported by statutory presumptions and corroborated by evidence, and do not warrant interference in revision. It is thus prayed that the revision petition be dismissed, affirming the conviction and compensation awarded in favour of the respondent.
11. Thoughtful consideration is bestowed on the arguments advanced by the learned Counsel for the Petitioner, Respondent No.1 and the learned Assistant Public Prosecutor. I have perused the record.
12. Now the point for consideration is:
"Whether the judgment in Crl.A.No.440 of 2019, dated 04.08.2019, passed by the learned III Additional Sessions Judge, Bhimavaram, are correct, legal, and proper with respect to its 8 Crl.R.C.No.748 of 2022 03.03.2026 Dr.YLR,J finding, sentence, or judgment, and there are any material irregularities? And to what relief?"
13. It is apposite to refer the following judgments of the Hon'ble Supreme Court in this regard. The Hon'ble Apex Court in Central Bank of India v. Saxons Farms1, at paragraph No.8 held as under:
"8. The object of notice is to give a chance to the drawer of the cheque to rectify his omission and also to protect an honest drawer. Service of notice of demand in clause (b) of the proviso to Section 138 is a condition precedent for filing a complaint under Section 138 of the Act. In the present appeals there is no dispute that notices were in writing and these were sent within fifteen days of receipt of information by the appellant Bank regarding return of cheques as unpaid. Therefore, the only question to be examined is whether in the notice there was a demand for payment."
14. Thus, in Saxons Farms supra, the Hon'ble Supreme Court succinctly held that the statutory demand notice under clause (b) of the proviso to Section 138 of 'the N.I.Act.,' is a mandatory precondition to the institution of prosecution, its object being to afford the drawer an opportunity to rectify the omission and to safeguard bona fide drawers and where timely dispatch of the written notice is undisputed, the determinative inquiry is confined to whether the notice contains a clear and unequivocal demand for payment.
15. The Hon'ble Apex Court in K.R. Indira v. G. Adinarayana2, at paragraph No.8 it is held as under:
"8. As was observed by this Court in Central Bank of India v. Saxons Farms [(1999) 8 SCC 221 : 1999 SCC (Cri) 1411] the object of the notice is to give a chance to the drawer of the cheque to rectify his omission. The demand in the notice has to be in relation to "said amount of money" as 1 (1999) 8 SCC 221 2 (2003) 8 SCC 300 9 Crl.R.C.No.748 of 2022 03.03.2026 Dr.YLR,J described in the provision. The expression "payment of any amount of money" as appearing in the main portion of Section 138 of the Act goes to show that it needs to be established that the cheque was drawn for the purpose of discharging in whole or in part of any debt or any liability, even though the notice as contemplated may involve demands for compensation, costs, interest etc. The drawer of the cheque stands absolved from his liability under Section 138 of the Act if he makes the payment of the amount covered by the cheque of which he was the drawer within 15 days from the date of receipt of notice or before the complaint is filed."
16. Therefore, in K.R. Indira supra, the Hon'ble Supreme Court reaffirmed that the statutory demand notice under clause (b) of the proviso to Section 138 of 'the N.I.Act.,' must specifically relate to the "said amount of money"
reflected in the dishonoured cheque, and that the legislative expression "payment of any amount of money" in the main provision underscores that the cheque must have been drawn towards discharge, whether in whole or in part, of a legally enforceable debt or liability. The Court further clarified that although a notice may incidentally include demands for ancillary components such as interest, costs, or compensation, the drawer stands absolved of penal liability if he tenders payment of the cheque amount within fifteen days of receipt of notice or before the complaint is instituted.
17. The Hon'ble Apex Court in Rahul Builders v. Arihant Fertilizers & Chemicals3, at paragraph No.10 held as under:
"10. Service of a notice, it is trite, is imperative in character for maintaining a complaint. It creates a legal fiction. Operation of Section 138 of the Act is limited by the proviso. When the proviso applies, the main section would not. Unless a notice is served in conformity with proviso (b) appended to Section 138 of the Act, the complaint petition would not be maintainable."3
(2008) 2 SCC 321 10 Crl.R.C.No.748 of 2022 03.03.2026 Dr.YLR,J
18. So, in Rahul Builders supra, the Hon'ble Supreme Court unequivocally held that service of the statutory demand notice in conformity with clause (b) of the proviso to Section 138 of 'the N.I.Act.,' is imperative and foundational to the very maintainability of a complaint, the proviso operating as a limiting condition upon the main provision; and absent due service of such notice, the complaint is rendered non- maintainable in law.
19. The Hon'ble Apex Court in Kaveri Plastics v. Mahdoom Bawa Bahrudeen Noorul4, at paragraph No.7 held as under:
"7. When the proviso (b) to section 138 stipulates the service of notice as one of the conditions for constituting the offence, and when the words "said amount" is incorporated in the language of the provision, it is the amount which is specifically referable to the amount recoverable under the cheque in question. Reading section 138 of the Act in a composite manner, the word "said amount" occurring in the proviso (b) is connectible with and operates in conjunction with language in the parent part of the section "where any cheque drawn by a person. .. of any amount of money"."
20. Hence, in Kaveri Plastics supra, the Hon'ble Supreme Court clarified that when proviso (b) to Section 138 of 'the N.I.Act.,' mandates service of the statutory notice as a condition precedent to the constitution of the offence, the expression "said amount" used therein must be understood as specifically referable to the exact sum recoverable under the dishonoured cheque. The Court held that a harmonious and composite reading of Section 138 of 'the N.I.Act.,' reveals that the term "said amount" in the proviso operates in conjunction with the language of the main provision, namely, "where any 4 2025 SCC OnLine SC 2019 11 Crl.R.C.No.748 of 2022 03.03.2026 Dr.YLR,J cheque drawn by a person... of any amount of money", thereby underscoring that the demand notice must unequivocally pertain to the cheque amount itself.
21. The Hon'ble Apex Court in Harman Electronics (P) Ltd. v. National Panasonic India (P) Ltd5 at paragraph No.13 & 15 held as under:
"13. It is one thing to say that sending of a notice is one of the ingredients for maintaining the complaint but it is another thing to say that dishonour of a cheque by itself constitutes an offence. For the purpose of proving its case that the accused had committed an offence under Section 138 of the Negotiable Instruments Act, the ingredients thereof are required to be proved. What would constitute an offence is stated in the main provision. The proviso appended thereto, however, imposes certain further conditions which are required to be fulfilled before cognizance of the offence can be taken. If the ingredients for constitution of the offence laid down in provisos (a), (b) and (c) appended to Section 138 of the Negotiable Instruments Act are intended to be applied in favour of the accused, there cannot be any doubt that receipt of a notice would ultimately give rise to the cause of action for filing a complaint. As it is only on receipt of the notice that the accused at his own peril may refuse to pay the amount. Clauses (b) and (c) of the proviso to Section 138 therefore must be read together. Issuance of notice would not by itself give rise to a cause of action but communication of the notice would.
15. For constitution of an offence under Section 138 of the Act, the notice must be received by the accused. It may be deemed to have been received in certain situations. The word "communicate" inter alia means "to make known, inform, convey, etc"."
22. Ergo, in Harman Electronics supra, the Hon'ble Supreme Court clarified that while the dispatch of a statutory notice is an ingredient for maintaining a complaint under Section 138 of 'the N.I.Act.,' the mere act of sending such notice does not by itself give rise to the cause of action, it is the communication or receipt of the notice by the drawer that triggers the statutory consequence. The Court held that the main provision defines the offence, whereas the proviso attaches mandatory preconditions, particularly those in 5 (2009) 1 SCC 720 12 Crl.R.C.No.748 of 2022 03.03.2026 Dr.YLR,J clauses (a), (b), and (c), which must be satisfied before cognizance can be taken. Since the drawer's failure must occur within fifteen days of receiving the notice, the receipt of the notice, actual or deemed, is indispensable for the offence to be complete, thereby underscoring that issuance without communication is legally insufficient.
23. The Hon'ble Apex Couat in K. Bhaskaran v. Sankaran Vaidhyan Balan6, at paragraph No.18 held as under:
"18. On the part of the payee he has to make a demand by "giving a notice"
in writing. If that was the only requirement to complete the offence on the failure of the drawer to pay the cheque amount within 15 days from the date of such "giving", the travails of the prosecution would have been very much lessened. But the legislature says that failure on the part of the drawer to pay the amount should be within 15 days "of the receipt" of the said notice. It is, therefore, clear that "giving notice" in the context is not the same as receipt of notice. Giving is a process of which receipt is the accomplishment. It is for the payee to perform the former process by sending the notice to the drawer at the correct address."
24. Thus, in K. Bhaskaran supra, the Hon'ble Supreme Court elucidated that while the payee is required to "give" a written notice demanding payment, the statutory scheme does not equate the mere act of giving with the actual receipt of such notice by the drawer. The Court clarified that "giving notice" is only the initiating process, whereas "receipt of notice" is its legal culmination, and it is the latter event that triggers the commencement of the fifteen- day period within which the drawer must discharge the liability. Accordingly, the payee's obligation is fulfilled by dispatching the notice to the correct address, 6 (1999) 7 SCC 510 13 Crl.R.C.No.748 of 2022 03.03.2026 Dr.YLR,J but the offence under Section 138 of 'the N.I.Act.,' is attracted only upon receipt, actual or deemed, of that notice by the drawer.
25. The High Court of Jammu & Kashmir in Engineering Control v. Banday Infratech (P) Ltd7 at paragraph No.14 held as under:
"14. It was further observed by the Court that for constitution of an offence under Section 138 of the Act, the notice must be received by the accused. The Court went on to observe that it may be deemed to have been received in certain situations. An inference of having received the notice by a drawer of a cheque can be raised only if the notice has been dispatched to his correct address. Such an inference cannot be drawn if the notice has been sent on the incorrect address of the drawer of the cheque."
26. Hence, in Engineering Control supra, the High Court of Jammu & Kashmir held that receipt of the statutory demand notice by the accused is indispensable for the constitution of an offence under Section 138 of 'the N.I.Act.,' though such receipt may, in appropriate circumstances, be deemed in law. The Court clarified that any presumption of deemed service can arise only where the notice has been dispatched to the correct address of the drawer, conversely, no such inference is available when the notice is sent to an incorrect or improper address, thereby negating the foundational requirement of valid service.
27. The Hon'ble Apex Court in D. Vinod Shivappa v. Nanda Belliappa8, at paragraph No.13 & 15 held as under:
"13. Section 138 of the Act was enacted to punish those unscrupulous persons who purported to discharge their liability by issuing cheques without really intending to do so, which was demonstrated by the fact that there was 7 2022 SCC OnLine J&K 540 8 (2006) 6 SCC 456 14 Crl.R.C.No.748 of 2022 03.03.2026 Dr.YLR,J no sufficient balance in the account to discharge the liability. Apart from civil liability, a criminal liability was imposed on such unscrupulous drawers of cheques. The prosecution, however, was made subject to certain conditions.
With a view to avoid unnecessary prosecution of an honest drawer of a cheque, or to give an opportunity to the drawer to make amends, the proviso to Section 138 provides that after dishonour of the cheque, the payee or the holder of the cheque in due course must give a written notice to the drawer to make good the payment. The drawer is given 15 days' time from date of receipt of notice to make the payment, and only if he fails to make the payment he may be prosecuted. The object which the proviso seeks to achieve is quite obvious. It may be that on account of mistake of the bank, a cheque may be returned despite the fact that there is sufficient balance in the account from which the amount is to be paid. In such a case if the drawer of the cheque is prosecuted without notice, it would result in great injustice and hardship to an honest drawer. One can also conceive of cases where a well- intentioned drawer may have inadvertently missed to make necessary arrangements for reasons beyond his control, even though he genuinely intended to honour the cheque drawn by him. The law treats such lapses induced by inadvertence or negligence to be pardonable, provided the drawer after notice makes amends and pays the amount within the prescribed period. It is for this reason that clause (c) of proviso to Section 138 provides that the section shall not apply unless the drawer of the cheque fails to make the payment within 15 days of the receipt of the said notice. To repeat, the proviso is meant to protect honest drawers whose cheques may have been dishonoured for the fault of others, or who may have genuinely wanted to fulfil their promise but on account of inadvertence or negligence failed to make necessary arrangements for the payment of the cheque. The proviso is not meant to protect unscrupulous drawers who never intended to honour the cheques issued by them, it being a part of their modus operandi to cheat unsuspecting persons.
15. We cannot also lose sight of the fact that the drawer may by dubious means manage to get an incorrect endorsement made on the envelope that the premises has been found locked or that the addressee was not available at the time when postman went for delivery of the letter. It may be that the address is correct and even the addressee is available but a wrong endorsement is manipulated by the addressee. In such a case, if the facts are proved, it may amount to refusal of the notice. If the complainant is able to prove that the drawer of the cheque knew about the notice and deliberately evaded service and got a false endorsement made only to defeat the process of law, the court shall presume service of notice. This, however, is a matter of evidence and proof. Thus even in a case where the notice is returned with the endorsement that the premises has always been found locked or the addressee was not available at the time of postal delivery, it will be open to the complainant to prove at the trial by evidence that the endorsement is not correct and that the addressee, namely, the drawer of the cheque, with knowledge of the notice had deliberately avoided to receive notice. Therefore, it would be premature at the stage of issuance of process, to move the High Court for quashing of the proceeding under Section 482 of the Code of Criminal Procedure. The question as to whether the service of 15 Crl.R.C.No.748 of 2022 03.03.2026 Dr.YLR,J notice has been fraudulently refused by unscrupulous means is a question of fact to be decided on the basis of evidence. In such a case the High Court ought not to exercise its jurisdiction under Section 482 of the Code of Criminal Procedure."
28. So, in D. Vinod Shivappa supra, the Hon'ble Supreme Court explained that the proviso to Section 138 of 'the N.I.Act.,' is designed as a safeguard to protect honest drawers whose cheques may be dishonoured due to inadvertence, negligence, or bank error, by mandating that the payee must issue a written notice and afford the drawer fifteen days from the date of receipt to make amends before criminal liability can arise. The Court emphasized that this statutory buffer is not intended to shield unscrupulous drawers but to prevent injustice to bona fide ones. It further held that where a drawer, by dubious means, engineers false postal endorsements or deliberately evades service, the Court may presume due service upon proof of such conduct. Issues of fraudulent refusal or manipulated endorsements, being quintessential questions of fact, must be determined on evidence at trial, and therefore cannot justify quashing proceedings under Section 482 of 'the Cr.P.C.,' at the threshold.
29. The Hon'ble Apex Court in C.C. Alavi Haji v. Palapetty Muhammed9, at paragraph No.15 held as under:
"15. Insofar as the question of disclosure of necessary particulars with regard to the issue of notice in terms of proviso (b) of Section 138 of the Act, in order to enable the court to draw presumption or inference either under Section 27 of the GC Act or Section 114 of the Evidence Act, is concerned, there is no material difference between the two provisions. In our opinion, 9 (2007) 6 SCC 555 16 Crl.R.C.No.748 of 2022 03.03.2026 Dr.YLR,J therefore, when the notice is sent by registered post by correctly addressing the drawer of the cheque, the mandatory requirement of issue of notice in terms of Clause (b) of proviso to Section 138 of the Act stands complied with.
It is needless to emphasise that the complaint must contain basic facts regarding the mode and manner of the issuance of notice to the drawer of the cheque. It is well settled that at the time of taking cognizance of the complaint under Section 138 of the Act, the court is required to be prima facie satisfied that a case under the said section is made out and the aforenoted mandatory statutory procedural requirements have been complied with. It is then for the drawer to rebut the presumption about the service of notice and show that he had no knowledge that the notice was brought to his address or that the address mentioned on the cover was incorrect or that the letter was never tendered or that the report of the postman was incorrect. In our opinion, this interpretation of the provision would effectuate the object and purpose for which proviso to Section 138 was enacted, namely, to avoid unnecessary hardship to an honest drawer of a cheque and to provide him an opportunity to make amends."
30. Thus, in C.C. Alavi Haji supra, the Hon'ble Supreme Court held that when a statutory demand notice is dispatched by registered post to the correct address of the drawer, the mandatory requirement of issuance of notice under clause (b) of the proviso to Section 138 of 'the N.I.Act.,' stands duly satisfied, enabling the court to draw the necessary presumption of service under Section 27 of the General Clauses Act or Section 114 of the Evidence Act. The Court emphasized that the complaint must disclose the essential particulars relating to the mode of issuance of notice, and that at the stage of cognizance the court need only be prima facie satisfied regarding compliance with the statutory requirements. It is thereafter for the drawer to rebut the presumption by demonstrating absence of knowledge of the notice, incorrect address, non- tendering, or erroneous postal endorsement. This construction, the Court observed, effectuates the legislative intent of protecting honest drawers while 17 Crl.R.C.No.748 of 2022 03.03.2026 Dr.YLR,J ensuring that they are afforded an opportunity to make amends before being exposed to criminal liability.
31. The High Court of Kerala in Saju v. Shalimar Hardwares10, at paragraph No.11 held as under:
"11. Therefore, the service of notice on the relative of the accused is not sufficient, especially when there is no evidence from the side of the complainant that the accused was aware of the service of notice on his relative. If there is no such evidence, it is to be presumed that the statutory notice under Section 138(b) of the Negotiable Instruments Act, 1881 is not served on the accused. The upshot of the above discussion is that the conviction and sentence imposed on the petitioner are to be set aside."
32. Hence, in Shalimar Hardwares supra, the High Court of Kerala held that service of the statutory notice upon a relative of the accused is legally insufficient, particularly in the absence of any material indicating that the accused had knowledge of such service. The Court observed that where no evidence is forthcoming to establish that the notice reached the accused or was communicated to him through the relative, the presumption of due service under Section 138(b) of 'the N.I.Act.,' cannot be invoked, and consequently, the statutory notice must be deemed unserved, vitiating the conviction and sentence founded thereon.
33. The Hon'ble Apex Court in Jugesh Sehgal v. Shamsher Singh Gogi11, at paragraph No.13 held as under:
"13. It is manifest that to constitute an offence under Section 138 of the Act, the following ingredients are required to be fulfilled:10
2025 SCC OnLine Ker 4794 11 (2009) 14 SCC 683 18 Crl.R.C.No.748 of 2022 03.03.2026 Dr.YLR,J
(i) a person must have drawn a cheque on an account maintained by him in a bank for payment of a certain amount of money to another person from out of that account;
(ii) the cheque should have been issued for the discharge, in whole or in part, of any debt or other liability;
(iii) that 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;
(iv) that cheque is returned by the bank unpaid, either because of the amount of money standing to the credit of the 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 the bank;
(v) the payee or the holder in due course of the cheque 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 15 days of the receipt of information by him from the bank regarding the return of the cheque as unpaid;
(vi) the drawer of such cheque fails to make payment of the said amount of money to the payee or the holder in due course of the cheque within 15 days of the receipt of the said notice.
Being cumulative, it is only when all the aforementioned ingredients are satisfied that the person who had drawn the cheque can be deemed to have committed an offence under Section 138 of the Act."
34. Ergo, in Jugesh Sehgal supra, the Hon'ble Supreme Court comprehensively delineated the essential and cumulative ingredients for the constitution of an offence under Section 138 of 'the N.I.Act.,' namely: that the cheque must be drawn on an account maintained by the drawer; that it must have been issued towards discharge of a legally enforceable debt or liability; that it must be presented within its period of validity; that it must be returned unpaid for insufficiency of funds or for exceeding arrangement; that the payee must issue a written demand notice within fifteen days of receiving intimation of dishonour; and that the drawer must fail to remit the cheque amount within fifteen days of receiving such notice. The Court held that only upon the 19 Crl.R.C.No.748 of 2022 03.03.2026 Dr.YLR,J satisfaction of all these statutory conditions, operating conjunctively, can penal liability under Section 138 of 'the N.I.Act.,' be said to arise.
35. The factual matrix of the present case, as borne out from the complaint and the evidence adduced, is that the complainant and the accused were acquainted, the latter being engaged in prawn business. On 18.11.2017, the accused is stated to have approached the complainant seeking financial assistance for his business exigencies. The complainant, acceding to such request, advanced a sum of Rs.10,00,000/- in the presence of witnesses, namely Koyyani Yarra Rao @ Bujji and Bellamkonda Verriyya Naidu. It was agreed that the said amount would be repaid within one month together with interest at 24% per annum. Contemporaneously, the accused issued a cheque bearing No.037462 drawn on Central Bank of India, Bhimavaram branch, for Rs.10,00,000/-, ostensibly towards discharge of the said liability.
36. Subsequently, upon lapse of the stipulated period, the accused failed to liquidate the debt despite repeated demands. The complainant, acting upon the representation of the accused that sufficient funds were available in his account, presented the cheque through his banker, City Union Bank, Bhimavaram, on 27.12.2017. The cheque was returned unpaid on 28.12.2017 with the endorsement "Funds Insufficient." Consequent thereto, the complainant issued a statutory notice dated 30.12.2017 demanding payment of the cheque amount. The said notice was alleged to have been served on 20 Crl.R.C.No.748 of 2022 03.03.2026 Dr.YLR,J 05.01.2018, but the accused neither tendered payment within the statutory period nor furnished any reply, thereby attracting the penal consequences under Section 138 of 'the N.I.Act.'
37. On the strength of the sworn affidavit filed by the complainant, the learned II Additional Judicial Magistrate of First Class, Bhimavaram, took cognizance of the offence and registered the case as C.C.No.63/2018, later transferred and renumbered as C.C.No.112/2018 before the learned Principal Junior Civil Judge-cum-Judicial Magistrate of First Class, Bhimavaram. During trial, the complainant examined himself as PW1 and marked Exs.P1 to P5, including the dishonoured cheque, return memo, legal notice, and postal track consignment. He further examined PW2 to corroborate the transaction. The accused, upon examination under Section 313 of 'the Cr.P.C.,' denied the incriminating circumstances and set up a defence that the cheque had been misappropriated by one Naga Sailaja. However, no defence evidence was adduced. Thus, the factual substratum before the learned Trial Court comprised the complainant's assertion of a legally enforceable debt, the dishonour of the cheque, and the alleged service of statutory notice, juxtaposed against the accused's bare denial and plea of misuse of a blank cheque.
38. The foundational requirement for the invocation of penal liability under Section 138 of 'the N.I.Act.,' is the valid service of the statutory demand notice 21 Crl.R.C.No.748 of 2022 03.03.2026 Dr.YLR,J as contemplated under proviso (b) and (c) thereto. The service of such notice constitutes the sine qua non for the crystallization of the cause of action. In the present case, the complainant has sought to rely upon Ex.P5, a postal endorsement dated 08.03.2019, purporting delivery on 22.01.2018 "to mother of addressee." This endorsement, however, is demonstrably untenable, for the undisputed record reveals that the mother of the revisionist had expired on 04.09.2017 as per the death certificate issued by the Registrar (Birty & Death), Municipality Bhimavaram. The purported service upon a deceased person is a juridical impossibility, and the reliance placed upon such endorsement by the Courts below amounts to a manifest error. The presumption under Section 27 of the General Clauses Act, 1897, of service upon proper despatch, stands rebutted by cogent and unimpeachable evidence of the demise, duly corroborated by authentic records. In the absence of valid service, the statutory edifice of the prosecution collapses at its inception, and the conviction recorded on such infirm foundation is vitiated by perversity, warranting interference under Sections 397 and 401 of 'the Cr.P.C.'
39. In the table of the list of documents filed along with the complaint dated 22.01.2018, at Sl.No.5 there is a reference about the track consignment dated 20.01.2018 issued by the Postal Authority showing that Petitioner/Accused had received the notice on 05.01.2018. Even at para No.iii of the complaint, the Respondent No.1/complaint averred that the Accused/Petitioner had 22 Crl.R.C.No.748 of 2022 03.03.2026 Dr.YLR,J received the notice on 05.01.2018. Whereas, in Ex.P5 track consignment issued by the Head Post master, Grade III, Bhimavaram, it was mentioned that lawyer's notice dated 30.12.2017 was received on 22.01.2018 at Kalla which is the address of mother of Petitioner/Accused. In the complaint the address of the Petitioner/Accused was mentioned as Bhimavaram-I. Therefore, it can be easily understood that the lawyer's notice was not received by the Petitioner/Accused at his place of ordinarily residing at Bhimavaram I Town, it was sent to Kalla village where mother of Petitioner/Accused resided. The contention of the Respondent No.1/complainant that Petitioner/Accused received notice on 05.01.2018 is false and untenable.
40. Equally fatal to the prosecution case is the inherent inconsistency in the complainant's own pleadings. The complainant has averred a loan transaction of Rs.10,00,000/- carrying interest at 24% per annum, which by the date of issuance of the cheque would have swelled to Rs.10,24,000/-. Yet, the cheque allegedly issued is only for the principal sum of Rs.10,00,000/-, leaving the accrued interest unaccounted for and unexplained. This arithmetical incongruity strikes at the root of the enforceability of the alleged debt and renders the transaction inherently improbable. The learned Trial Court, however, glossed over this glaring contradiction and invoked the presumption under Section 139 of 'the N.I.Act.,' as though it were irrebuttable. The presumption, though statutory, is not absolute; it yields to the preponderance 23 Crl.R.C.No.748 of 2022 03.03.2026 Dr.YLR,J of probabilities. In the present case, the revisionist has successfully discharged the burden by demonstrating the improbability of the transaction, thereby neutralizing the presumption. The learned Appellate Court's affirmation of conviction without addressing this contradiction perpetuates a miscarriage of justice.
41. The learned Courts below have further erred in transmuting the mere issuance of a cheque, unaccompanied by any promissory note, agreement, or acknowledgment, into sacrosanct proof of liability between parties who are otherwise strangers to prior dealings. Such blind adherence to the statutory presumption under Sections 118 and 139 of 'the N.I.Act.,' is a misdirection in law. The defence of misappropriation, though not buttressed by independent evidence, gains substantial weight from the infirmities inherent in the prosecution's case. The testimonies of P.W.1 and P.W.2, when subjected to the rigours of cross-examination, fail to withstand scrutiny and, when juxtaposed against the improbabilities highlighted, render the presumption neutralized. The conviction, therefore, cannot be sustained in law.
42. The learned Appellate Court has also transgressed its jurisdictional bounds by awarding compensation of Rs.10,00,000/- under Section 357 of 'the Cr.P.C.,' suo motu, in the absence of any appeal or cross-appeal by the complainant. There were no valid and special reasons assigned for imposing fine of Rs.10,00,000/- on the Petitioner and that fine amount is awarded as 24 Crl.R.C.No.748 of 2022 03.03.2026 Dr.YLR,J compensation. The reasons assigned by the learned Appellate Court, namely:
"The above discussed oral evidence of P.Ws.1 and 2 in chief as well as in the cross examination clinchingly shows that there is no dispute about the signature of accused on Ex.P.1 cheque. The argument of the learned defence counsel that complainant failed to prove his financial capacity by way of filing his income tax returns, has no force for the reason non-filing of income tax returns by the complainant is not fatal to his case since his evidence in the cross examination has clearly shown his financial capacity.", do not appear to be neither valid nor special reasons in the facts and circumstances of the case.
Such augmentation of relief, beyond the scope of the appeal, constitutes a jurisdictional overreach and offends the principles of natural justice as well as the constitutional guarantee under Article 21. The award of compensation in this manner is unsustainable and liable to be set aside.
43. In view of the concatenated infirmities, foremost being the non est service of statutory notice, compounded by the inherent improbability of the alleged debt, the misapplication of statutory presumptions, and the jurisdictional excess in awarding compensation, the findings of the learned Courts below are perverse and unsustainable.
44. In the result, the Criminal Revision Case is allowed. The conviction, sentence, and compensation awarded are hereby set aside, and the liberty of the Revisionist stands vindicated.25 Crl.R.C.No.748 of 2022
03.03.2026 Dr.YLR,J As a sequel, Miscellaneous petitions, if any pending, shall stand closed.
_________________________ DR. Y. LAKSHMANA RAO, J Date: 03.03.2026 VTS