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Issues: (i) Whether the complaint disclosed a prima facie offence under Section 138 despite the defence that the goods were rejected and no liability subsisted; (ii) Whether a separate notice under the proviso to Section 138 was required to be served on the director when the company and the director were prosecuted together under Section 141.
Issue (i): Whether the complaint disclosed a prima facie offence under Section 138 despite the defence that the goods were rejected and no liability subsisted.
Analysis: The cheque had been returned unpaid with the endorsement indicating insufficiency of funds, and the materials placed before the Court showed that the defence of rejection of goods raised a disputed factual question requiring evidence. At the stage of quashing, it could not be concluded that the company had no legally enforceable liability for which the cheque was issued and dishonoured.
Conclusion: The challenge on the ground of absence of liability failed.
Issue (ii): Whether a separate notice under the proviso to Section 138 was required to be served on the director when the company and the director were prosecuted together under Section 141.
Analysis: The cheque was issued on behalf of the company, which was the drawer, and the director was proceeded against in his capacity as a person in charge of and responsible for the conduct of the company's business. In such a prosecution, the statutory notice contemplated by Section 138 is required to be given to the drawer company, and a separate notice to the director is not a condition precedent to his prosecution along with the company under Section 141.
Conclusion: No separate notice to the director was required.
Final Conclusion: The proceeding disclosed no ground for quashing, and the criminal revision failed.
Ratio Decidendi: In a prosecution under Sections 138 and 141 of the Negotiable Instruments Act, 1881, a company issuing a cheque on behalf of its business is the drawer, and a director prosecuted vicariously with the company does not require a separate statutory notice under the proviso to Section 138; disputed questions about liability cannot be resolved at the quashing stage.
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