2021 (7) TMI 115 - HC - Indian Laws

Dishonor of Cheque - prosecution against the person who signed the cheque or the person who has authorized the signatory - - Insufficiency of funds - criminal proceedings initiated against these petitioners No. 1 and 2 or not - HELD THAT - The complaint filed by the complainant before the trial Court makes it clear that it was the accused No. 1 who issued the Cheque in question towards legally recoverable debt due by accused Nos. 1 and 2. Similar contention is taken in the legal notice that was issued immediately after dishonor of the Cheque. Complainant in his sworn statement before the trial Court stated similar facts that it was accused No. 1 only who signed the Cheque. Of course, it is stated that accused No. 1 was authorized to maintain and sign the joint account on which the Cheque in question was drawn. Therefore, it is clear that even though the Cheque in question pertains to a joint account of accused Nos. 1 and 2 it was signed only by accused No. 1 and not by accused No. 2. The law on the point is made very clear. When accused No. 1 alone signed the Cheque in question, even though it is stated that accused No. 2 had authorized accused No. 1 to sign the Cheque, will not make her liable for the offence punishable under Section 138 of the N.I. Act. It is only accused No. 1 who signed the Cheque and issued in favour of the complainant and therefore, he can be prosecuted before the trial Court. Petition allowed in part.

Summary

Issues Involved:
Petition to quash criminal proceedings under Section 138 of the Negotiable Instrument Act, 1881 against accused Nos. 1 and 2 based on a joint account and Cheque issuance.

Detailed Analysis:

1. Issue of Joint Account Liability:
The petitioners, accused Nos. 1 and 2, sought to quash criminal proceedings under Section 138 of the Negotiable Instrument Act, 1881. The respondent/complainant alleged that accused Nos. 1 and 2, who had a joint account, failed to repay a loan resulting in a Cheque issued by accused No. 1 being dishonored. The trial Court took cognizance of the offence against both accused. The main contention was whether both accused could be prosecuted based on a joint account despite only one accused signing the Cheque.

2. Arguments and Legal Precedents:
The counsel for the petitioners argued that as per the complaint, legal notice, and sworn statements, only accused No. 1 signed the Cheque, making accused No. 2 not liable for prosecution. Reference was made to the decision in Aparna A. Shah vs. Sheth Developers (P) Ltd., emphasizing that only the signatory of the Cheque can be prosecuted. On the contrary, the respondent's counsel argued that since the joint account belonged to both accused, both could be prosecuted.

3. Judicial Analysis and Decision:
After examining the documents and arguments, the Court referred to the Supreme Court's decision in Aparna A. Shah case. The Court held that in cases of joint accounts, all account holders must sign the Cheque for prosecution under Section 138 of the N.I. Act. As accused No. 1 alone signed the Cheque, accused No. 2 could not be prosecuted solely based on the joint account. Therefore, the Court partially allowed the petition, quashing the criminal proceedings against petitioner No. 2, while maintaining the proceedings against petitioner No. 1.

4. Conclusion:
The judgment clarified the legal principle that joint account holders cannot be prosecuted under Section 138 of the N.I. Act unless all holders sign the Cheque. In this case, since only one accused signed the Cheque despite the joint account, the Court quashed the proceedings against the second accused. This decision upholds the requirement of individual signatures for joint account holders in Cheque-related prosecutions under the Negotiable Instrument Act.