The Kerala High Court, in a significant ruling, has held that the cause of action for filing a complaint under Section 138 of the Negotiable Instruments (N.I.) Act, 1881, arises only after the expiry of the statutory 15-day period for payment, even in cases where the legal notice sent to the drawer of the cheque is returned with the endorsement ‘refused’. Justice Gopinath P. set aside the acquittal of the accused in three cheque dishonour cases, declaring that a prior co-ordinate bench decision in Jayakrishnan v. Unnikrishnan (2015) was per incuriam as it failed to consider binding Supreme Court precedent.
Case Background
The judgment was delivered in a set of three criminal appeals (Crl.A.Nos. 277, 278, and 291 of 2023) challenging the common judgment of the Judicial First Class Magistrate Temporary Court, Neyyattinkara, dated December 30, 2022.
The appellants, P.S. Madhusoodanan and Suresh Kumar (brothers), had filed complaints against Alamelu Ammal and Venkiteswaran (a couple) under Section 138 of the N.I. Act. The complainants alleged that they had advanced loans totaling Rs. 13,00,000 to the accused, who had issued cheques for repayment. These cheques were subsequently dishonoured upon presentation.
The trial court acquitted the accused, finding the complaints not maintainable. The Magistrate concluded that the complaints were filed beyond the statutory limitation period prescribed under Section 142 of the N.I. Act. This conclusion was based on the legal principle laid down by the Kerala High Court in Jayakrishnan v. Unnikrishnan, which held that if a statutory notice is ‘refused’, the cause of action begins to run from the date the refused notice is returned to the sender, and the 15-day waiting period for payment does not apply. It was undisputed that if this principle were correct, the complaints were indeed time-barred.
Arguments Before the High Court
The counsel for the appellants argued that the cause of action to file a complaint would only commence after the completion of the 15-day period stipulated in clause (c) of the proviso to Section 138, irrespective of whether the notice was actually received or returned as ‘refused’. They placed reliance on the Supreme Court judgments in C.C. Alavi Haji v. Palapetty Muhammed and another, (2007) 6 SCC 555 and K. Bhaskaran v. Sankaran Vaidhyan Balan and another, (1999) 7 SCC 510. It was submitted that the decision in Jayakrishnan (supra) was per incuriam for not considering these binding precedents.
Conversely, the counsel for the respondents (accused) supported the trial court’s decision. They contended that when a drawer refuses the notice, it signifies an unequivocal refusal to pay, and therefore, the cause of action should arise immediately upon the notice being returned to the sender. It was argued that the Supreme Court in Alavi Haji (supra) was primarily considering the presumption of service under Section 27 of the General Clauses Act, 1897, and not the specific issue at hand.
Court’s Analysis and Finding
Justice Gopinath P., after hearing the arguments, found that the issue was “squarely covered in favour of the appellants by the judgment of the Supreme Court in Alavi Haji (supra).”
The Court reproduced extensive passages from the Alavi Haji judgment, where a three-judge bench of the Supreme Court had clarified the interpretation of “giving of notice” under Section 138. The Supreme Court had held that the payee’s obligation is to dispatch the notice to the correct address. Upon doing so, the principle of deemed service under Section 27 of the General Clauses Act is attracted. The apex court had emphatically stated:
“It is, thus, trite to say that where the payee dispatches the notice by registered post with correct address of the drawer of the cheque, the principle incorporated in Section 27 of the GC Act would be attracted; the requirement of Clause (b) of proviso to Section 138 of the Act stands complied with and cause of action to file a complaint arises on the expiry of the period prescribed in Clause (c) of the said proviso for payment by the drawer of the cheque.” (Emphasis supplied in judgment)
Based on this clear pronouncement from the Supreme Court, the High Court concluded that the view taken in Jayakrishnan (supra) was incorrect. Justice Gopinath P. held:
“On a reading of the judgment of the Supreme Court in Alavi Haji (supra), I am constrained to hold that the view taken by this Court in Jayakrishnan (supra) is per incuriam and without noticing the decision of the Supreme Court in Alavi Haji (supra).”
Final Decision
Concluding that the trial court’s decision to dismiss the complaints as time-barred was based on an incorrect legal premise, the High Court allowed the appeals. The judgments of the Judicial First Class Magistrate Temporary Court, Neyyattinkara, were set aside.
The cases (S.T.Nos.351/2016, 353/2016 and 352/2016) were remanded back to the trial court for fresh consideration on all other issues on merits. The court clarified that it had only considered the issue of limitation and all other points were left open. The parties were directed to appear before the trial court on October 13, 2025.
