Section 138 of NI Act not applicable to person having joint liability if the cheque is not drawn by him: Supreme Court of India

When there is a joint liability shared by two persons and a cheque is issued in the name of only one person, a complaint of cheque bounce can only be filed against the person in whose name the cheque was drawn. This was decided in the case of Alka Khandu Avhad vs. Amar Syamprasad Mishra & Anr. [CRIMINAL APPEAL NO. 258 OF 2021] in the Supreme Court of India by Hon’ble Judge M.R Shah.

The facts of the case are that a complaint was filed under Section 138 of Negotiable Instruments Act, 1881, by a practicing advocate against a couple for handing over a cheque with insufficient funds for the legal services provided by him.  After this, the respondent sent legal notice asking them to pay the required amount of money. However, due to lack of response from their side, the respondent filed a complaint against them for a cheque bounce case and the Magistrate directed to issue process against both the accused.  The accused went to the High court of Bombay by way of filing petition under Article 226 to quash the complaint. However, as the judgement was made against him, this appeal came to the Supreme Court of India.              

The counsel for the appellant submitted that the dishonoured cheque was issued by her husband and not her and even the account in question was not a joint account and that the appellant was neither the signatory to the cheque nor the cheque was drawn from the bank account of the appellant and therefore the appellant cannot be prosecuted for the offence punishable under Section 138 of the NI Act. 

On the other hand, the counsel for the respondent argued that the liability to pay the debt towards the professional bill was the joint liability of both the accused as the complainant represented both the accused and, therefore, Section 141 of the NI Act shall be applicable.

The court heard the contentions and went back to the provision of Section 138 of the Act. A close analysis of it showed that the main three essentials of it are: (i) the cheque is drawn by a person who has account 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  (ii) the said cheque is returned by the bank unpaid, because of the amount of money standing to the credit of that account is insufficient to honour the cheque.

After considering the above points, the court said that offence is said to be committed only by him who has an account in his name and cheque drawn from that account and his fund are insufficient to repay for his liability. 

It said “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”

For reasons stated above, the appeal succeeded and the criminal complaint filed against the wife was quashed.

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