Person Who Has Not Drawn The Cheque Cannot Be Prosecuted U/s 138 NI Act Even In Case Of Joint Liability: Supreme Court

The Supreme Court observed that, 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 Negotiable Instruments 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.", the bench comprising Justices DY Chandrachud and MR Shah observed.

In this case, the original complainant, a lawyer, raised a professional bill for the legal work done by him to represent a couple in the legal proceedings. The cheque issued by the husband got dishonoured. The lawyer filed a complaint against both the accused – husband and wife for the offence punishable under Section 138 of the NI Act.  According to him, it was the joint liability of both the accused to pay the professional bill as the original complainant represented both the accused. The accused wife approached the High Court seeking to quash the criminal complaint filed against her mainly on the ground that she was neither a signatory to the cheque dishonoured nor there was a joint bank account. This petition was dismissed by the High Court.

In appeal, the Apex Court bench, referred to Section 138 of the NI Act, and observed that before a person can be prosecuted, the following conditions are required to be satisfied: i) that the cheque is drawn by a person and on an account maintained by him with a banker; ii) for the payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability; and iii) the said cheque is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account.

The bench rejected the contention of the complainant that the complaint against wife-accused is maintainable as the cheque was issued towards discharge of legal liability of both the accused. The court observed:

"Therefore, a person who is the signatory to the cheque and the cheque is drawn by that person on an account maintained by him and the cheque has been issued for the discharge, in whole or in part, of any debt or other liability and the said cheque has been returned by the bank unpaid, such person can be said to have committed an offence. 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."

Section 141 NI Act  cannot be made applicable to the individuals

Yet another contention was that the accused can be convicted with the aid of Section 141 of the NI Act is concerned. Rejecting the said contention, the court said: 

Section 141 of the NI Act is relating to the offence by companies and it cannot be made applicable to the individuals. Learned counsel appearing on behalf of the original complainant has submitted that "Company" means any body corporate and includes, a firm or other association of individuals and therefore in case of a joint liability of two or more persons it will fall within "other association of individuals" and therefore with the aid of Section 141 of the NI Act, the appellant who is jointly liable to pay the debt, can be prosecuted. The aforesaid cannot be accepted. Two private individuals cannot be said to be "other association of individuals". Therefore, 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 liabilities), but cannot be said to be the offence committed by a company or by it 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.

Observing thus, the bench allowed the appeal and quashed the complaint against the accused (wife).

Case: Alka Khandu Avhad vs. Amar Syamprasad Mishra [CrA 258 OF 2021]

Coram: Justices DY Chandrachud and MR Shah

Citation: LL 2021 SC 146

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