Stop-payment cheque dishonour and valid notice service support Section 138 prosecution, while vicarious liability needs specific averments.

Stop-payment dishonour of a cheque falls within Section 138 of the Negotiable Instruments Act, and refusal to receive statutory notice amounts to valid service, so prosecution can proceed on that basis. Vicarious liability under Section 141(1) arises only where the complaint contains sufficient averments that the accused officers were in charge of and responsible for the company's business at the time of the offence; bald assertions are not enough, so proceedings against directors lacking such material were quashed. Objections based on lack of prior written authorisation to file the complaint were rejected, and cheques said to be security cheques remained enforceable despite encashment of interest cheques.

---

---

Issues: (i) whether dishonour of a cheque with a stop-payment instruction attracts criminal liability under Section 138 of the Negotiable Instruments Act; (ii) whether the complaint disclosed the requisite averments to proceed against the persons other than the drawer under Section 141(1) of the Negotiable Instruments Act; (iii) whether the complaint was vitiated for want of proper authorisation to the person who signed and filed it; (iv) whether the cheques, being said to have been issued as security and the complainant having encashed interest cheques, could still form the basis of proceedings under Section 138; and (v) whether refusal to receive notice amounted to valid service.

Issue (i): whether dishonour of a cheque with a stop-payment instruction attracts criminal liability under Section 138 of the Negotiable Instruments Act

Analysis: The order proceeds on the basis that an instruction stopping payment, followed by return of the cheque with that endorsement, amounts to dishonour within the meaning of Section 138. Reliance is placed on the Supreme Court's view that stop-payment instructions do not take the case outside the statutory mischief, and the earlier contrary view is held not to be in consonance with that binding interpretation. On the facts, the cheques were presented after the drawer's notice not to present them and were returned for stoppage of payment.

Conclusion: The issue is answered against the petitioners and in favour of the complainant.

Issue (ii): whether the complaint disclosed the requisite averments to proceed against the persons other than the drawer under Section 141(1) of the Negotiable Instruments Act

Analysis: Liability of persons other than the company depends on averments and material showing that, at the time of the offence, they were in charge of and responsible for the conduct of the business of the company. The order accepts the complaints only to the extent of the drawer and the person who personally guaranteed repayment and acted on behalf of the drawer. As to the remaining directors, the complaints contain only bald assertions and no sufficient material showing the statutory responsibility required for prosecution.

Conclusion: The issue is answered partly in favour of the complainant and partly in favour of the petitioners; proceedings against the remaining directors are liable to be quashed.

Issue (iii): whether the complaint was vitiated for want of proper authorisation to the person who signed and filed it

Analysis: The objection is rejected on the footing that a company must act through a human agency and that representation in criminal proceedings may be by a person connected with its affairs and authorised for that purpose. The absence of a prior written authorisation at the time of filing is not treated as fatal in the facts of the case, particularly when authorisation was subsequently resolved and the complaint was otherwise maintainable through the company's representative.

Conclusion: The issue is answered against the petitioners.

Issue (iv): whether the cheques, being said to have been issued as security and the complainant having encashed interest cheques, could still form the basis of proceedings under Section 138

Analysis: The order holds that encashment of cheques towards interest does not extinguish the complainant's right to present the cheques issued towards the principal amount. A cheque issued as security does not, on these facts, defeat the statutory consequence when the principal cheques are dishonoured, and the existence of civil remedies does not bar prosecution under Section 138.

Conclusion: The issue is answered against the petitioners.

Issue (v): whether refusal to receive notice amounted to valid service

Analysis: Notices were sent to the registered office of the company and to the individual addresses furnished in the complaints. The endorsements showed refusal to receive the notices. Refusal is treated as valid service, and the plea of invalid notice is therefore rejected.

Conclusion: The issue is answered against the petitioners.

Final Conclusion: The proceedings were quashed only in respect of the directors against whom no sufficient averment or material showed that they were in charge of and responsible for the conduct of the business, while the complaints were permitted to continue against the drawer company and the person who had guaranteed and participated in the transaction.

Ratio Decidendi: For liability under Section 138 read with Section 141(1) of the Negotiable Instruments Act, stop-payment dishonour attracts prosecution, refusal of statutory notice is valid service, and vicarious liability of officers arises only when the complaint contains sufficient averments that they were in charge of and responsible for the conduct of the business at the time of the offence.

---