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Only the signatory of the cheque can be prosecuted under section 138 NI Act: Telangana High Court

Under Section 138 of the N.I. Act, it is only the drawer of the cheque who can be proceeded. In case of issuance of a cheque from a joint account, a joint account holder cannot be prosecuted unless the cheque has been signed by each and every person who has a joint account holder. Such an observation was made by the Hon’ble Telangana High Court before Hon’ble Justice Dr. SHAMEEM AKTHER in the matter of Kodam Danalakshmi vs The State of Telangana [Criminal Petition Nos. 5068, 5069, 5076 and 5081 of 2021].

The facts of the case were that a cheque was issued from a joint account held jointly by the appellate and her husband. The said cheque was dishonored. It was the contention of the appellate that she had no information whatsoever about the issuance and the dishonor of the said cheque in question. On the other hand, it was the contention of the respondent that the appellate held the account jointly with her husband and she had full information of the transaction.

The Hon’ble High Court referred to the case of Alka Khandu Avhad vs. Amar Syamprasad Mishra and ors AIR 2021 SC 1616 wherein the Hon’ble Supreme Court held that “On a fair reading of Section 138 of the NI Act 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 honor the cheque or that it exceeds the amount arranged to be paid from that account. 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 offense. Section 138 of the NI Act does not speak about joint liability. Even in the case of joint liability, in the 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 offense 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.

Additionally, the Hon’ble High Court observed that it is evident from the entire material placed on record, particularly, the complaints filed by the respondent No.2/complainant under Section 138 of N.I. Act r/w Sec.200 Cr. P.C, the petitioner/A.2 is merely a joint account holder and she is not the signatory to the subject cheques. Only one cheque which appears to be of the husband of the appellate is seen on those disputed cheques. Penal provisions should be construed strictly, but not in a routine/casual manner.

Finally, the Hon’ble High Court allowed the appeal and quashed the proceedings on the appellate A-2.  

Click Here To Read Judgment

Judgment Reviewed by: Rohan Kumar Thakur

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