Cheque dishonour prosecution failed for non-compliance with mandatory notice requirements, while cheating and breach of trust charges were allowed to continue.

Section 138 of the Negotiable Instruments Act could not be sustained because the pleaded facts did not show the mandatory statutory notice and other required steps for a cheque dishonour prosecution, and the matter had already been pursued through an FIR rather than that special remedy. The petitioner was therefore relieved from liability under that provision. By contrast, the allegations under Sections 406 and 420 of the Indian Penal Code were allowed to proceed because the record showed a disputed factual matrix on inducement, the transaction, the claimed technology, and the supporting documents; those disputes could not be resolved in Section 482 proceedings, and the materials disclosed a prima facie case and sufficient suspicion to refuse discharge.

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Issues: (i) Whether the prosecution could continue under Section 138 of the Negotiable Instruments Act, 1881 on the facts pleaded. (ii) Whether the petitioner was entitled to discharge or quashing in respect of the allegations under Sections 406 and 420 of the Indian Penal Code, 1860.

Issue (i): Whether the prosecution could continue under Section 138 of the Negotiable Instruments Act, 1881 on the facts pleaded.

Analysis: The statutory notice and other mandatory steps contemplated for prosecution under the cheque dishonour provision were found absent on the facts stated, and the matter was already pursued through an FIR rather than the special statutory remedy. On that basis, the ingredients necessary to sustain the cheque dishonour allegation were not made out.

Conclusion: The proceeding under Section 138 of the Negotiable Instruments Act, 1881 was not sustainable and the petitioner was relieved from that liability.

Issue (ii): Whether the petitioner was entitled to discharge or quashing in respect of the allegations under Sections 406 and 420 of the Indian Penal Code, 1860.

Analysis: The record disclosed a disputed factual matrix regarding the transaction, the alleged inducement, the claimed technology, and the authenticity and relevance of the supporting documents. In such circumstances, the Court held that the materials disclosed a prima facie case and that disputed questions of fact could not be resolved in proceedings under Section 482 of the Code of Criminal Procedure, 1973. The discharge standard based on absence of strong suspicion was not satisfied for these offences.

Conclusion: The prosecution under Sections 406 and 420 of the Indian Penal Code, 1860 was maintained and discharge was refused on those counts.

Final Conclusion: The criminal proceedings survived only in part, with the cheque dishonour count being dropped while the cheating and criminal breach of trust allegations were permitted to proceed.

Ratio Decidendi: At the stage of discharge or quashing, the Court will not resolve disputed questions of fact or assess defence material of doubtful authenticity, and criminal proceedings may continue where the materials disclose a prima facie case and strong suspicion for the alleged offences.

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