Section 138 notice by substance, not form, and later cheque payment does not erase criminal liability.

Section 138 notice is satisfied when served on the signatory-director acting for the drawer, because the notice must be read by substance rather than narrow technical form and its object is to afford an opportunity to pay. On that basis, service on the director was sufficient and the complaint could proceed under section 138 read with section 141. A later deposit of the cheque amount during appeal does not erase criminal liability already incurred, although it may be relevant at sentencing, and it cannot justify quashing otherwise sustainable proceedings. The order quashing the complaints was therefore set aside.

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Issues: (i) Whether notice issued after dishonour of the cheques was duly served on the drawer so as to satisfy the requirements of section 138 of the Negotiable Instruments Act, 1881; (ii) whether deposit of the cheque amount during the pendency of the appeal could sustain the order quashing the criminal proceedings.

Issue (i): Whether notice issued after dishonour of the cheques was duly served on the drawer so as to satisfy the requirements of section 138 of the Negotiable Instruments Act, 1881.

Analysis: The offence under section 138 is complete only when the cheque is dishonoured, demand is made in writing to the drawer within the prescribed time, and payment is not made within the statutory period. The notice in question was addressed to the director who had signed the cheques on behalf of the company, and the Court held that such notice could not be construed in a narrow technical manner divorced from its substance. Since the very object of notice is to afford the drawer an opportunity to make payment, service on the signatory-director was held sufficient. The earlier precedent on similar facts was treated as applicable.

Conclusion: The finding that there was no notice to the drawer was erroneous, and the complaint could proceed under section 138 read with section 141.

Issue (ii): Whether deposit of the cheque amount during the pendency of the appeal could sustain the order quashing the criminal proceedings.

Analysis: Once the offence under section 138 is committed, a later deposit of the amount does not erase criminal liability, though it may have relevance at the stage of sentence. The Court held that such subsequent payment could not justify quashing of proceedings that were otherwise unsustainable in law.

Conclusion: The deposit of money had no effect on the maintainability of the criminal prosecution or on the legality of quashing.

Final Conclusion: The High Court's order quashing the complaints was set aside and the criminal proceedings were directed to continue.

Ratio Decidendi: For an offence under section 138 of the Negotiable Instruments Act, 1881, notice must be construed according to its substance and service on the signatory of the dishonoured cheque acting for the drawer is sufficient; subsequent payment of the cheque amount does not extinguish the criminal liability already incurred.

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