Excerpt
The Supreme Court in a judgement dated 8 March 2021, observed that even in the case of joint liability, under Section 138 of the Negotiable Instrument Act, a person other than the person who had drawn the cheque on an account held by him could not be prosecuted for the offence.
Facts of the Case
In this case, Respondent no. 1 was a practising advocate and a partner in a solicitor firm in Mumbai, who had filed a criminal complaint against the Appellant and her husband for the offence punishable under Section 138 r/w Section 141 of Negotiable Instruments Act. The Respondent’s case was that the accused approached her in a legal matter where she helped them in preparing replies, a notice of motion, filing vakalatnama etc. and then raised a professional bill of legal work done for the accused in the legal matter. The Appellant’s husband handed over a post-dated cheque of the amount Rs. 8,62,000 drawn from Union Bank of India. Later, when the Respondent presented the cheque in the bank, it was returned to him unpaid on the account of insufficient funds.
Thereafter, the Respondent served the accused with the legal notice to pay the amount within 15 days, which was duly served. The Appellant neither responded to that legal notice nor made the payment. Thereafter, the Respondent filed the complaint against the Appellant and her husband for the offence punishable under Section 138 r/w Section 141 of the NI Act.
Thereafter the Appellant filed a criminal writ petition in High Court to quash a criminal complaint filed against her on the ground that she was neither the signatory of the cheque nor was having a joint account and therefore she could not be prosecuted for the offence u/s 138 of the NI act. However, the Respondent’s case was that it was the joint liability of both accused persons.
Pleadings Before the Court
The learned Counsel on behalf of the Appellant submitted that the dishonoured cheque was given by her partner, not the Appellant, and the account in question was not a joint account, and the Appellant was neither the signatory to the cheque nor the cheque was drawn from the Appellant’s bank account, so the Appellant could not be charged for the NI Act’s Section 138 offence. Also, the requirements of Section 138 of the NI Act were not met, so the criminal complaint against the appellant should have been dismissed by the High Court. It was further submitted that even Section 141 of the NI Act would not apply in this case because the cheque was written by a private person.
On the other hand, the learned counsel on behalf of the Respondent submitted that as the complainant represented both the accused, the responsibility to pay the debt against the professional bill was a mutual liability, and as a result, Section 141 of the NI Act should apply, as rightly observed and held by the High Court. It was further submitted that the High Court correctly declined to quash the appeal because the cheque was given to discharge both the accused’s legal liability and her husband issued the cheque after that.
Court’s Observation
The bench of the Supreme court comprising Justices DY Chandrachud and MR Shah observed that an individual might have been jointly liable to pay the debt, but because the bank account was jointly maintained and as he was a signatory to the check, he could not be prosecuted.
It was further observed that “Other association of individuals” could not be described as two private individuals. As a result, there was no basis for invoking Section 141 of the NI Act against the claimant, since the liability was an individual liability (which might include joint liabilities), rather than an offence committed by a business, corporate, firm, or another group of individuals. The Appellant was not a director or a partner in any of the firms that submitted the cheque in this case. As a result, even the Appellant could not be found guilty under Section 141 of the NI Act.
Court’s Judgement
The supreme court ruled that the High Court made a serious mistake in not rejecting the lawsuit against the Appellant for a violation of Section 138 r/w Section 141 of the NI Act. As a result, the criminal complaint lodged against the Appellant for an offence punishable under Section 138 r/w Section 141 of the NI Act could be considered as an abuse of process of law, and it should be quashed and dismissed. The Supreme Court, therefore, quashed the complaint against the Appellant and set aside the order of the High court.
Case Name: Alka Khandu Avhad vs. Amar Syamprasad Misra [CrA 258 of 2021]
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