Joint Account Holder Who Didn't Sign The Dishonoured Cheque Cannot Be Prosecuted Under Section 138 NI Act: Punjab & Haryana High Court

"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." Punjab and Haryana High Court, in a significant ruling, held that a joint account holder cannot be criminally prosecuted under Section 138 of the Negotiable Instruments (NI) Act if they are not the signatory of the dishonoured cheque.

A bench of Justice N.S. Shekhawat observed that penal liability under the NI Act is strictly confined to the actual drawer of the cheque, regardless of any joint civil liability for the underlying debt.

The respondent had filed a criminal complaint against the petitioner and his wife over the dishonour of a cheque amounting to Rs. 14,00,000, which was allegedly issued to discharge a friendly loan. Although the cheque was drawn on a joint bank account maintained by the couple, it was signed exclusively by the wife. The trial court summoned both the husband and wife, and the Sessions Court later dismissed the husband's revision petition, reasoning that the cheque was issued to discharge a joint legal liability.

The primary question before the court was whether a person who is merely a joint account holder, but not a signatory to the dishonoured cheque, can be prosecuted for an offence under Section 138 of the Negotiable Instruments Act. The court was also called upon to determine whether a petition under Section 482 of the Code of Criminal Procedure (CrPC) is maintainable to quash such proceedings after the dismissal of a revision petition by the Sessions Court.

Liability Fastened Only On The Drawer

The court thoroughly examined the statutory framework of Section 138 read with Section 7 of the Negotiable Instruments Act, which defines a "drawer". It noted that the plain and unambiguous language of the statute makes it apparent that only the drawer of the cheque can be prosecuted if they fail to make the payment after receiving the statutory notice. The bench emphasized that the liability strictly attaches to the person who makes and signs the instrument.

Joint Civil Liability Does Not Imply Criminal Culpability

Rejecting the lower courts' reasoning regarding joint civil liability, the bench clarified that Section 138 does not speak about joint liability for individuals. Relying on the Supreme Court's decision in Alka Khandu Avhad v. Amar Syamprasad Mishra, the court reiterated that a person might be jointly liable to pay a civil debt, but they cannot be criminally prosecuted unless they actually signed the cheque in question.

No Vicarious Liability For Individual Account Holders

The court extensively quoted the Supreme Court's ruling in Mrs. Aparna A. Shah v. M/s Seth Developers Pvt. Ltd., which firmly established that in the case of individual joint accounts, the concept of vicarious liability is inapplicable. The bench highlighted that the exception provided under Section 141 of the NI Act applies only to companies and firms, and cannot be used as an arm-twisting tactic to prosecute an individual's spouse merely because they share a bank account.

Section 482 CrPC Power Available Despite Revision Bar

Addressing the respondent's objection regarding the maintainability of the petition under Section 482 CrPC following the dismissal of a first revision petition, the court found no merit in the argument. The bench relied on the recent Supreme Court judgment in Saroj Pandey v. Govt. of NCT of Delhi to explain the broad scope of the High Court's inherent powers to prevent abuse of process.

Inherent Powers To Prevent Miscarriage Of Justice

The court observed that merely because a second revision is barred under Section 397(3) of the CrPC, it does not extinguish the High Court's inherent powers under Section 482. The bench emphasized that the High Court remains fully justified in interfering with orders that lead to a miscarriage of justice, exercising its paramount power of continuous superintendence over subordinate courts.

"Only because a revision petition is maintainable, the same by itself, in our considered opinion, would not constitute a bar for entertaining an application under Section 482 of the Code."

In light of these settled legal principles, the High Court allowed the petition, concluding that the husband could never be prosecuted for the cheque drawn exclusively by his wife from their joint account. The court accordingly quashed the criminal complaint, the summoning order, and all subsequent proceedings insofar as they related to the petitioner.

Date of Decision: 23 July 2024