A Person Who Is Neither A Signatory To The Cheque Nor Maintains A Joint Bank Account Cannot Be Prosecuted under S.138 Of Negotiable Instruments Act,1881 Even If The Liability To Pay Debt Is Joint : Supreme Court

The Supreme Court, while recently quashing the complaint filed u/s 138 r/w section 141 of the Negotiable Instruments Act,1881 (“NI Act”) has observed that a person who might have been liable to pay the debt jointly cannot be prosecuted unless the bank account is jointly maintained and that he was a signatory to the cheque.

“Section 138 of the NI Act does not speak about the joint liability. Even in case of a joint liability, in case of individual persons, a person other than a person who has drawn the cheque on an account maintained by him, cannot be prosecuted for the offence under Section 138 of the NI Act. ”, Division Bench of Justice MR Shah & Justice DY Chandrachud noted.

In the present matter, the complainant raised a professional bill of Rs 8,62,000/-against accused No 1 (husband) & 2 (wife/appellant) of rendering legal services. The accused No. 1 handed over to the complainant a post-dated cheque dated 15.03.2016 bearing No.227050 drawn on Union Bank of India for Rs.8,62,000/- returned unpaid upon presentation. After that, a complaint was filed u/s 138 r/w section 141 of the NI Act against both the accused(s) in the Court of the learned Metropolitan Magistrate, 43rdCourt at Borivali, Mumbai, upon the accused(s) failure to pay the amount on receipt of the legal notice within 15 days. Thereafter, an appeal was filed before Bombay High Court by the wife to quash the criminal complaint filed against her on the ground that she was neither a signatory to the dishonoured cheque & nor there was a joint bank account which was dismissed vide impugned order dated 21.08.2019. Thereafter, the appellant preferred the present appeal before this Court.

The issue that arose for consideration was whether the appellant could be prosecuted for the offence punishable under Section 138 r/w Section 141 of the NI Act.

The Court observed that a person is said to commit an offence u/s 138 of the NI Act when he is a signatory, draws the cheque for the discharge of any debt or other liability in whole or in part, and the said cheque has been returned by the bank unpaid.

“Section 138 of the NI Act does not speak about the joint liability. Even in case of a joint liability, in case of individual persons, a person other than a person who has drawn the cheque on an account maintained by him, cannot be prosecuted for the offence under Section 138 of the NI Act. A person might have been jointly liable to pay the debt, but if such a person who might have been liable to pay the debt jointly, cannot be prosecuted unless the bank account is jointly maintained and that he was a signatory to the cheque.”

Concerning complainant’s Counsel submission with respect to the fact that the appellant who was jointly liable to pay debt could be prosecuted u/s 141 of the NI Act as joint liability of two or more persons would fall within “other association of individuals”, the Bench observed that two private individuals could not be said to be “other associations of individuals”.

“There is no question of invoking Section 141 of the NI Act against the appellant, as the liability is the individual liability (may be a joint liability), but cannot be said to be the offence committed by a company or by its corporate or firm or other associations of individuals. The appellant herein is neither a Director nor a partner in any firm who has issued the cheque. Therefore, even the appellant cannot be convicted with the aid of Section 141 of the NI Act.”, the Court remarked

Thus the Bench while allowing the appellant’s appeal of quashing the criminal complaint against her u/s 138 r/w section 141 of the NI Act & setting aside the impugned judgement & order dated 21.08.2019 passed by the Bombay High Court observed that the High Court committed a grave error in not quashing the complaint against the appellant & the complaint could be said to be abuse of process of law.

Case Title: Alka Khandu Avhad v. Amar Shyam Prasad Mishra & Anr

Law Point/Statute Involved: Section 138 & Section 141 of Negotiable Instruments Act,1881