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Issues: (i) Whether a prosecution under Section 138 of the Negotiable Instruments Act was maintainable when statutory demand notice was not served on the drawer company and the company was later arrayed as an additional accused without condonation of delay. (ii) Whether the absence of foundational averments in the complaint that the company was the drawer of the cheque vitiated cognizance and the conviction of both the company and the managing director.
Issue (i): Whether a prosecution under Section 138 of the Negotiable Instruments Act was maintainable when statutory demand notice was not served on the drawer company and the company was later arrayed as an additional accused without condonation of delay.
Analysis: The cheque had been drawn from the company's account, so the company was the drawer and the principal offender. In such a prosecution, service of the statutory demand notice on the drawer company is mandatory. The company was brought in later through Section 319 of the Code of Criminal Procedure, 1973, long after the complaint was filed, and no condonation was sought for the delayed cognizance against it. The later summoning could not cure the original non-compliance with the statutory preconditions for a complaint under Section 138.
Conclusion: The prosecution was not maintainable against the company, and the conviction based on such prosecution could not stand.
Issue (ii): Whether the absence of foundational averments in the complaint that the company was the drawer of the cheque vitiated cognizance and the conviction of both the company and the managing director.
Analysis: The complaint initially proceeded on the basis that the individual director was the drawer, and it did not contain the necessary averments that the company was the drawer of the cheque. That defect was not validly cured by the later application to implead the company. Since liability of the director was only vicarious, the prosecution against the director also depended on a valid prosecution of the drawer company. Once the company could not be validly proceeded against, the foundation for proceeding against the director also failed.
Conclusion: Cognizance and conviction against both accused were unsustainable.
Final Conclusion: The revision succeeded, the concurrent findings of conviction and sentence were set aside, and the accused were acquitted.
Ratio Decidendi: In a prosecution under Section 138 of the Negotiable Instruments Act where the cheque is drawn on a company's account, the complaint must contain the necessary averments against the company as the drawer and the statutory demand notice must be served on that company; a later attempt to implead the company cannot cure the defect or sustain vicarious liability of the director.
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