Joint Account Holder Who Signs Cheque Cannot Escape Section 138 NI Act Liability: Karnataka High Court

"When the judgment of the Trial Court and the Appellate Court not suffers from its legality and correctness, the question of entertaining the revision petition does not arise." Karnataka High Court, in a significant ruling, held that a joint account holder who signs and issues a cheque cannot escape criminal liability under Section 138 of the Negotiable Instruments Act, 1881, by raising unsubstantiated defences regarding financial capacity and unexamined third-party transactions.

A single-judge bench of Justice H.P. Sandesh observed that once the execution of a registered sale agreement and the issuance of a cheque are established, the statutory presumption under the NI Act operates against the accused unless displaced by cogent rebuttal evidence.

The dispute arose out of a registered sale agreement executed in April 2015, wherein the accused agreed to sell property to the complainant for a total consideration of Rs. 7,20,000 and received substantial advance payments. As the sale transaction failed to materialize despite time extensions, the parties agreed on a refund incorporating a penal clause, leading to the issuance of a Rs. 12,00,000 cheque by the accused. When the cheque was presented for encashment, it was dishonoured due to insufficient funds, prompting the complainant to institute criminal proceedings under Section 138 of the NI Act read with Section 200 of the CrPC. The trial court convicted the accused, and the first appellate court subsequently dismissed her appeal alongside an application filed under Section 391 of the CrPC for the production of additional bank statements.

The primary question before the High Court was whether concurrent findings of conviction under Section 138 of the NI Act suffered from any legal infirmity warranting interference in revisional jurisdiction. The court was also called upon to determine the tenability of defences regarding the validity of a joint account cheque, the financial capacity of the complainant, and the rejection of additional evidence at the appellate stage.

Revisional Scope Is Extremely Limited

The high court underscored that the scope of a criminal revision petition under Section 397 read with Section 401 of the CrPC is strictly confined to rectifying patent illegality, perversity, or miscarriage of justice. Reappreciating evidence as a court of second appeal is impermissible unless the concurrent findings of the lower courts suffer from gross legal errors.

"If any miscarriage of justice in appreciating the evidence, then the revisional jurisdiction can be exercised."

Registered Agreement And Statutory Presumption

The court observed that the execution of the registered sale agreement under Ex.P.5 and subsequent receipt endorsements under Exs.P.6 to 8 stood proved as the accused failed to send the disputed signatures to a handwriting expert. The bench noted that the failure to substantiate alternative theories involving third parties like Ningamma and Jyothi left the statutory presumption under Section 138 unrebutted.

"If that was the case, what made the accused to execute the document is not substantiated."

Joint Account Liability And Dishonour Reason

Addressing the contention regarding a joint account cheque, the court reiterated that a joint account can be operated by either holder, and the signatory alone is liable to be prosecuted under Section 138 of the NI Act. Distinguishing precedents cited by the petitioner where cheques were dishonoured for "exceeds arrangement" against printed limits, the bench noted that the subject cheque was dishonoured for "funds insufficient," rendering those judgments inapplicable.

"The person who has issued the cheque could be prosecuted for the offence under Section 138 of the NI Act."

No Arbitrary Invocation Of Section 391 CrPC

The high court endorsed the appellate court’s rejection of the application seeking to produce additional bank statements during the appeal. Relying on the Supreme Court ruling in Ajit Sinh Chehugi Rathod v. State of Gujarat, the bench held that parties cannot invoke Section 391 of the CrPC to cure their own lack of due diligence during the trial without assigning valid reasons.

"No explanation is given by the accused what prevented her from producing those documents before the Trial Court."

Financial Capacity Satisfactorily Proved

The bench dismissed arguments questioning the complainant's financial capacity based on his salary, noting that documentary evidence including bank statements, experience certificates, and RTC extracts of immovable properties conclusively established independent sources of income. Furthermore, postal acknowledgments confirmed proper statutory notice service under Section 27 of the General Clauses Act.

Finding no perversity or legal infirmity in the judgments rendered by the courts below, the Karnataka High Court dismissed the criminal revision petition. The ruling reinforces the sanctity of negotiable instruments and curtails the practice of raising vague, eleventh-hour defences to defeat Section 138 prosecutions.

Date of Decision: 07 August 2026