India:

Alternate Modes Of Service For A Demand Notice Against A Dishonoured Cheque

15 September 2020

King, Stubb & Kasiva

While Covid-19 rages and ravages in the outdoors, there is also
a great deal of turbulence indoors with the restricted functioning
of courts, a necessary evil in such tumultuous times. However, to
mitigate the adverse effects of the closure of courts, the
Hon’ble Supreme Court of India vide order dated 23.03.2020
passed in Suo Moto (Civil) Writ Petition No. 3 of 2020
held that the period of limitation in all proceedings, irrespective
of the limitation prescribed under the general law or special laws
whether condonable or not shall stand extended with effect from
15.03.2020 till further orders passed by the Hon’ble Apex
Court itself. Since there were some lacunae in the order dated
23.03.2020, the Suo Moto Writ Petition was listed again
several times and modifications were made.

On 17.07.2020, the Hon’ble Supreme Court catapulted
several steps forward with respect to the manner of service of
notices including a statutory demand notice for the dishonour of
cheque under Section 138 of the Negotiable Instruments Act, 1881.
The Hon’ble Supreme Court allowed service through the modes
of email, fax and commonly used instant messaging services (subject
to service additionally through email when instant messaging
services are utilized).

Demand notices under Section 138 till the present day always lay
under a cloud of ambiguity with no clarity as to acceptability
through email. Further, since the issuance of the same is a
statutory prerequisite to the filing of criminal complaint, legal
professionals always prefer to walk the fail-safe path of service
of a hard copy. Adding to that the lack of judicial precedent on
service through electronic modes, there was not much scope for
creativity. Further, since service has to be effected through a
notice issued within 30 days of dishonour of cheque, it led to many
unscrupulous drawers of such dishonoured cheques to simply evade
service through clever and conniving means for a short period of
one month and they were free from the criminal liability associated
with the Negotiable Instruments Act, 1881. While this issue of
evasion of service has been addressed and discussed in plenty of
judgments and certain safeguards granted, no concrete resolution
came to the fore.

It is further worthwhile to discuss here that newer legislations
such as the Insolvency & Bankruptcy Code, 2016 wherein service
of demand notice is also a statutory requirement, specify the
various modes through which service can be affected. The same
includes email as well even going to the extent that it is
specified who the valid recipients of the email would be in order
to deem completion of valid service. However, no amendments were
made to the Negotiable Instruments Act, 1881 to include service
through alternative modes.

Since the advent of modern technology and easy accessibility, it
made no logical sense that service through electronic means would
be rendered invalid even before the direction of the Hon’ble
Apex Court. As there is a strict timeline for completion of the
service of demand notice in the case of a dishonoured cheque, it
also seems unreasonable that the intention of the legislators was
to restrict the timeline further by half a day i.e. till the end of
the working day of the nearest post office. A 30-days timeline
indicates that the aggrieved party should be granted an opportunity
till the end of the 30^th day by the clock to safeguard
its rights and interests against the criminal breach by the
accused.

While through a legal fiction, the dishonour of cheque has been
fastened with criminal liability in effect, any interpretation
which would restrict the service of notice to exclusively through a
physical mode would render the remedy practically ineffective. In
support of the above comes the Information Technology Act, 2000
which was enacted with the purpose of granting legal recognition to
transactions carried out through electronic modes. It would not be
remiss here to refer to Section 4 of the IT Act which reads as
below:

While the above section seemingly provides a blanket allowance
to all written legal communications, the same is to be read in
consonance with the First Schedule to the Act which specifies the
documents or transactions to which the IT Act will not apply. The
said Schedule clearly states that the Act does not apply to
“A negotiable instrument (other than a cheque) as defined
in section 13 of the Negotiable Instruments Act, 1881 (26 of
1881)”. The above leads to the conclusion that the
provisions of the IT Act would apply to cheques and hence legal
action be initiated in respect of dishonour of cheque.

In light of the above-detailed facts and circumstances, it is
amply clear that the intention of the legislature was never to
restrict the service of demand notices for dishonour of cheques to
only physical modes. But due to the lack of an explicit amendment
in the Negotiable Instruments Act, 1881 it has been a trend in the
legal community to take the conservative route. Since Section 138
imputes criminal liability upon the issuer of the cheque for
dishonour, in a cost-benefit analysis the fear of improper service
leading to dismissal of the criminal complaint rides high and
hence, the provisions of the Information Technology Act, 2000 have
not been taken advantage off. The decision of the Supreme Court is
thus a gust of fresh air and a much needed leap for cheque
dishonour complaints to keep up with the fast-changing times and
will increase the effectiveness of the remedy thereby rendering
greater justice.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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