Section 138 notice, director liability, and enforceable debt principles limit quashing in cheque dishonour prosecutions.

Under Section 138 of the Negotiable Instruments Act, individual notice to every director is not necessarily required once notice is issued to the company, and disputes over alleged evasion or constructive service of notice require evidence. A director's claim that he resigned before the complaint or was not in charge of the company's affairs involves disputed facts and is ordinarily for trial, not quashing. The provision also covers cheques issued to discharge a legally enforceable debt or liability, including liability said to belong to another company, subject to the statutory presumption under Section 139 and rebuttal at trial.

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Issues: (i) Whether absence or alleged evasion of statutory notice to a director warrants quashing of prosecution under Section 138 of the Negotiable Instruments Act, 1881; (ii) Whether a director's plea that he had resigned before the complaint and was not in charge of the company's affairs can be decided in quashing proceedings; (iii) Whether a cheque issued by one company towards a debt said to be owed by another company is outside the scope of Section 138 of the Negotiable Instruments Act, 1881.

Issue (i): Whether absence or alleged evasion of statutory notice to a director warrants quashing of prosecution under Section 138 of the Negotiable Instruments Act, 1881.

Analysis: Once notice is issued to the company, individual notice to every director is not necessarily required for fastening liability. The question whether the notice sent to the petitioner was actually avoided, returned in the ordinary course, or constituted constructive service is a matter requiring evidence. A person may be treated as receiving notice when it is duly delivered at the proper address, and evasion cannot be used to defeat the statutory scheme.

Conclusion: The plea based on non-service of notice was rejected and did not justify quashing.

Issue (ii): Whether a director's plea that he had resigned before the complaint and was not in charge of the company's affairs can be decided in quashing proceedings.

Analysis: The complaint contained averments that the petitioner was a director and was in charge of the affairs of the company. Whether he had in fact ceased to be a director, or whether he was responsible for the conduct of business at the relevant time, involved disputed factual questions. Such matters are not to be resolved by minute scrutiny in proceedings for quashing and must ordinarily be tested at trial.

Conclusion: The resignation and no-control defence was held to be a trial issue and not a ground for quashing.

Issue (iii): Whether a cheque issued by one company towards a debt said to be owed by another company is outside the scope of Section 138 of the Negotiable Instruments Act, 1881.

Analysis: The expression "debt or other liability" covers a legally enforceable debt or liability, and the section does not require that the debt necessarily be owed by the drawer alone. A cheque may be issued for discharge of another person's liability, and the statutory presumption under Section 139 supports such a construction unless displaced in trial. The complaint therefore disclosed a legally enforceable liability for the purposes of Section 138.

Conclusion: The contention that the cheque was issued for a different company's debt and was therefore unenforceable was rejected.

Final Conclusion: The petition disclosed no ground for interference, and the prosecution was permitted to proceed in accordance with law.

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