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TMI BlogJOINT LIABILITY IN CHEQUE DISHONOR CASESX X X X Extracts X X X X X X X X Extracts X X X X ..... JOINT LIABILITY IN CHEQUE DISHONOR CASES - By: - Mr. M. GOVINDARAJAN - Other Topics - Dated:- 23-8-2021 - - Prosecution Section 138 of the Negotiable Instruments Act, 1881 ( Act for short) provides for penalties in case of dishonor of certain cheques for insufficiency of funds in the Accounts. Section 138 of the Act provides that a person can be prosecuted if the following conditions are satisfied- that the cheque is drawn by a person and on account maintained by him with a banker; 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 the said cheque is returned by the bank unpaid, either because of the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Joint liability Joint liability arises when the default is made by more than one person in the issue of cheque. In such cases the accounts should be in the name of more than one person. Such persons ought to be the signatories of the cheque. Then only the liability will be joint. However Section 138 of the Act does not speak about the joint liability in cheque dishonor. Supreme Court order In ALKA KHANDU AVHAD VERSUS AMAR SYAMPRASAD MISHRA ANR. [2021 (3) TMI 381 - SUPREME COURT] the Supreme Court decided the joint liability in cheque dishonor cases. The respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent, in the present appeal, is an Advocate. He is a partner in a solicitor firm in Mumbai. One husband and wife approached the Advocate in relation to litigation. The Advocate assisted them in preparing replies and notice of motion, conference, coordinating with Counsel, filing vakalatnamas and appearing through advocates office and also as counsel in summary suit. The Advocate raised a bill as his professional bills to the couple for a sum of ₹ 8,62,000/-. The husband handed over to the Advocate a post dated cheque dated 15.03.2016. The said cheque was presented by the Advocate but the same was dishonored with remarks funds insufficient . The Advocate, then filed a complaint served a legal notice dated 21.05.2016 callin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g upon the couple to pay the amount of ₹ 862000/- within 15 days from the date of receipt of the said notice. The said notice was duly served upon them. But they did not reply to the notice or make the amount demanded. Therefore the Advocate filed a complaint against both the husband and wife before the Metropolitan Magistrate, 43 rd Court, Brivali, Mumbai for the offences committed by them under section 138 of the Act. Against this wife, the appellant herein, filed a criminal writ petition in the High Court to quash the criminal complaint filed against her. The main ground taken by her was that the appellant was neither a signatory to the cheque dishonored nor there was a joint bank account. Therefore the appellant can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be prosecuted for the offence punishable under section 138 of the Act. The Advocate complainant contended before the High Court that it was the joint liability of both accused to pay the professional fees as the complainant represented both the accused and therefore, consideration section 141 of the Act, the appellant is also liable for the offence punishable under section 138 of the Act. The High Court refused to quash the criminal complaint against the appellant. Therefore the present appeal has been field before the Supreme Court by the appellant. The appellant submitted the following before the Supreme Court- The dishonored cheque was issued by her husband and not by her and even the account in question was not a j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oint account. She was neither a signatory to the cheque nor the cheque was drawn from the bank account of the appellant. The appellant cannot be prosecuted for the offence under Section 138 of the Act. The ingredients of Section 138 of the Act are not satisfied and therefore the High Court ought to have quashed the criminal complaint against the appellant. In the facts and circumstances of the case, even section 141 of the Act shall not be applicable as the cheque was issued by a private individual. The respondent, complainant to the criminal case, contended the following before the Supreme Court- The liability to pay the debt towards the professional bill was the joint liability of both the accused as he repre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sented both the accused and therefore the High Court rightly refused to quash the criminal complaint. When the trial court issued the summons against the appellant for the offence after having coming to the conclusion that a prima facie case has been made out, the High Court has rightly refused to quash the criminal complaint. The cheque was issued toward discharge of legal liability of both the accused. The Supreme Court heard the submissions of both the sides. The Supreme Court observed the following- The dishonored cheque was issued by the husband of the appellant. The dishonored cheque was drawn from the bank account of the husband of the appellant. The cheque was signed by the husband of the appellant. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore the appellant is neither the signatory to the cheque nor the dishonored cheque was drawn from her bank account. The account in question is not a joint account. On the facts and circumstances of the case, the Supreme Court decided to consider the question as to whether the appellant can be prosecuted for the offence punishable under section 138 read with section 141 of the Act. The Supreme Court analyzed the provisions of section 138 and 141 of the Act. The Supreme Court observed that according to section 138 of the Act, a person who is the signatory to the cheque and the cheque is drawn by that person on an account maintained by him and cheque has been issued for the discharge, in whole or in part, of any debt or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other liability and the said cheque has been returned by the bank unpaid, such person can be said to have commented an offence under section 138 of the Act. Section 138 of the Act does not speak about the joint liability. Even in case of 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 Act. A person might have been 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. The Supreme Court further observed that section 141 of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is relating to the offence by companies and it cannot be made applicable to the individuals. In case of joint liability of two or more persons it will fall within other association of individuals . The appellant cannot be prosecuted in this aspect also. Therefore there is no question of invoking section 141 of the Act in the appellant s case. The Supreme Court held that the High Court has committed a grave error in not quashing the complaint against the appellant. It can be said that it is the abuse of process of law and therefore it is liable to be quashed and set aside. The Supreme Court also quashed the complaint pending before the Metropolitan Magistrate filed by the complainant. - - Scholarly articles for knowledge sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring authors experts professionals Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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