Cheque Dishonour Quashing Limits: liability defence must go to trial, while non-drawers escape vicarious prosecution.

Proceedings under Section 138 of the Negotiable Instruments Act could not be quashed under Section 482 CrPC merely because the accused disputed that the cheques were issued towards an existing liability; where the complaint otherwise disclosed the ingredients of the offence, that defence had to be tested at trial. Prosecution was also unsustainable against petitioners 2 and 3, as they were neither drawers of the dishonoured cheques nor within the statutory vicarious liability framework of Section 141. The first petitioner, who had drawn the cheques as proprietor of the concern, remained liable to face trial, and the absence of a separate arraignment of the proprietary concern did not defeat the complaint.

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Issues: (i) Whether proceedings under Section 138 of the Negotiable Instruments Act could be quashed on the plea that the cheques were not issued in discharge of liability and that such defence required trial. (ii) Whether petitioners 2 and 3 could be prosecuted for dishonour of cheques drawn only by the first petitioner, and whether the first petitioner could avoid prosecution because the proprietary concern was not made an accused.

Issue (i): The complaint alleged dishonour of cheques issued pursuant to a compromise and disclosed the ingredients of the offence. The question whether the cheques were issued towards an existing liability was a matter for trial and could not be examined in proceedings under Section 482 of the Code of Criminal Procedure, 1973 on the basis of the defence version.

Conclusion: Quashing on this ground was not justified, and the first petitioner could not avoid trial on the plea that the cheques were not issued towards liability.

Issue (ii): Petitioners 2 and 3 were not shown to be drawers of the dishonoured cheques, the cheques were not drawn on any account held by them, and the case did not fall within the vicarious liability framework of Section 141 of the Negotiable Instruments Act, 1881. In contrast, the first petitioner had admittedly drawn the cheques as proprietor of the concern, and the proprietary concern not being separately arraigned did not defeat prosecution because the liability of the proprietor and the concern was joint and several.

Conclusion: Proceedings against petitioners 2 and 3 were quashed, while the first petitioner remained liable to face trial.

Final Conclusion: The petition succeeded only in part by terminating the prosecution against petitioners 2 and 3, but the first petitioner was left to stand trial for the cheque dishonour complaint.

Ratio Decidendi: Inherent quashing jurisdiction cannot be used to test the defence that a cheque was not issued towards liability when the complaint otherwise discloses an offence under Section 138; and vicarious liability under Section 141 cannot be fastened on persons who are neither drawers nor covered by the statutory framework, while a proprietor remains liable for cheques issued on behalf of a proprietary concern.

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