Andhra Pradesh High Court - Amravati

M.Kalpana vs Balaji Finance on 20 January, 2023

 THE HONOURABLE SRI JUSTICE K. SREENIVASA REDDY

           CRIMINAL PETITION NO.3667 of 2019

ORDER:-

        This Criminal Petition, under Section 482 of the Code

of Criminal Procedure 1973, is filed by A2 in C.C.No.97 of

2018 pending on the file of the Spl. Judicial Magistrate of

First    Class,   Mobile   Court,   Chittoor,     to   quash   the

proceedings in the above Calendar Case.

2.      Brief facts of the case are as follows;

        The respondent No.1 herein filed complaint for the

offence punishable under Section 138 of the Negotiable

Instruments Act, 1881 (for short „the N.I. Act‟) in the Court

below against A1 and A2, who are husband and wife

respectively. A2 is the petitioner herein. It is the case of the

complainant/respondent No.1 herein that both A1 and A2

have jointly availed loans from it, on various dates from

13.9.2010 to 08.9.2012 to a tune of Rs.30,00,000/-

(Rupees Thirty Lakhs only) in total and for the repayment of

the same, they have executed a demand promissory note on

08.9.2012. On demand for repayment, the Accused No.1

who is the husband of A2 the petitioner herein issued a

cheque for Rs.32,50,000/- (Rupees Thirty Two Lakhs Fifty

Thousand only) drawn from their joint account maintained

in Karoor Vysya Bank Limited on 12.8.2015. The said

cheque when was presented by the complainant (R1 herein)

in its bank for collection on 09.10.2015 for the second time,

after it was returned unpaid earlier, it is once again

returned with an endorsement "funds insufficient". Later

after complying with the essential conditions of Section 138

of the Negotiable Instruments, Act, the complainant filed

the complaint against the petitioner (A2) and her husband

(A1) for the offence punishable under Section 138 of the

Negotiable Instruments Act, 1881 (for short „the N.I. Act‟).

The learned Magistrate by taking cognizance of the offence

punishable under Section 138 of the N.I. Act registered the

case in C.C.No.97 of 2018 and issued summons to the

petitioner (A2) and her husband (A1).

3. Aggrieved by the order of issuing summons by taking

cognizance of the offence punishable under Section 138 r/w

142 of the N.I. Act by the learned Magistrate against the

petitioner herein, this quash petition is filed.

4. The main ground urged for the petitioner is that she

is not signatory to the cheque, which was dishonoured and

she also did not issue the said cheque and therefore the

complaint as well as Calendar Case Proceedings are not

maintainable against her.

5. Heard the learned counsel for the petitioner, learned

counsel for the respondent No.1 and the learned Special

Assistant Public Prosecutor for the respondent No.2.

6. Learned counsel for the petitioner contended that even if

accepted the entire accusations are true, the offence under

Section 138 of the N.I. Act is not attracted as against the

petitioner herein for the reason that the petitioner is not a

signatory to the dishonoured cheque. According to the

complaint filed before the learned trial Court, it is A1

therein that issued the cheque but not the petitioner

herein. Therefore, Section 138 of the N.I. Act is not

attracted in this case since it reads that the person who

issues the cheque for discharge of a legally enforceable debt

alone would be liable for punishment if the said cheque is

dishonoured. Therefore, he prays to quash the proceedings

against the petitioner herein.

7. Learned counsel for the respondent No.1 submitted that

the cheque dishonoured in this case was though signed by

A1 who is none else than husband of the petitioner herein

(A2), but it was towards discharge of a debt borrowed jointly

by both the accused. It is also contended that the cheque

was drawn from out of a joint account maintained by both

the accused and as such in view of Section 141 of the N.I.

Act, they come under the expression the „other association

of individuals‟ found in the above provision. Therefore, both

A1 and A2 who are the husband and wife respectively can

be prosecuted and there is no illegality in proceeding

against them under Section 138 of the N.I. Act by the

learned trial Court. Hence, he prays to dismiss the petition.

8. Perused the record and considered the submissions

made by both the learned counsel.

9. Section 138 of the Negotiable Instruments Act,

1881, reads as follows;

[ 138 Dishonour of cheque for insufficiency, etc., of funds in the account. --Where any cheque drawn by a person on an account maintained by him with a banker for 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, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provisions of this Act, be punished with imprisonment for 19 [a term which may be extended to two years], or with fine which may extend to twice the amount of the cheque, or with both: Provided that nothing contained in this section shall apply unless--

(a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;

(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, 20 [within thirty days] of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and

(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of

the cheque, within fifteen days of the receipt of the said notice.

Explanation.-- For the purposes of this section, "debt or other liability" means a legally enforceable debt or other liability.]

10. The essential ingredient of Section 138 of the N.I. Act

is that the cheque drawn should be in discharge of some

debt or liability. A plain reading of the aforesaid provision

goes to show that a person who is signatory to the cheque

and the cheque drawn by that person on account

maintained by him and the cheque issued for the discharge

of either whole or in part, of any legally enforceable debt or

other liability and the said cheque has been returned by the

bank unpaid, then such person can be said to have

committed the offence under Section 138 of the N.I.Act. It is

pertinent to mention here that Section 138 of the N.I. Act

does not speak about the joint liability. Apropos unless

both the persons are liable to pay debt jointly, they cannot

be prosecuted except when they maintained joint account

and they both have drawn the cheque duly signed by them

if it is dishonoured.

11. The Explanation appended to Section 138 of the

Negotiable Instruments Act, 1881 gives the meaning of the

expression "debt or other liability" for the purpose of

Section 138. This expression means a legally enforceable

debt or other liability. Section 138 treats dishonoured

cheque as an offence, if the cheque has been issued in

discharge of any debt or other liability. The Explanation

leaves no manner of doubt, that to attract an offence under

Section 138, there should be a legally enforceable debt or

other liability subsisting on the date of the drawal of the

cheque. In other words, drawal of the cheque in discharge

of an existing or past debt or liability is sine qua non for

bringing an offence under Section 138 of the N.I. Act. If a

cheque is issued as an advance payment for purchase of

the goods and for any reason purchase order is not carried

to its logical conclusion either because of its cancellation or

otherwise, and material or goods for which purchase order

was placed is not supplied, the cheque cannot be held to

have been drawn for an existing debt or liability. The

payment by cheque in the nature of advance payment

indicates that at the time of drawal of cheque, there was no

existing liability.

12. Learned counsel for the petitioner relied upon the

judgment of the Hon‟ble Supreme Court in ALKA KHANDU

AVHAD VS AMAR SYAM PRASAD MISHRA AND ANOTHER

1, wherein it is held,

"Therefore, a person who is the signatory to the cheque and the cheque is drawn by that person on an account maintained by him and the cheque has been issued for the discharge, in whole or in part, of any debt or other liability and the said cheque has been returned by the bank unpaid, such person can be said to have committed an offence. Section 138 of the NI Act does not speak about the joint liability. 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. A person might have been jointly 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.

(2021) 4 Supreme Court Cases 675

Section 141 of the NI Act is relating to the offence by companies and it cannot be made applicable to the individuals. Learned counsel appearing on behalf of the original complainant has submitted that "Company" means anybody corporate and includes, a firm or other association of individuals and therefore in case of a joint liability of two or more persons it will fall within "other association of individuals" and therefore with the aid of Section 141 of the NI Act, the appellant who is jointly liable to pay the debt, can be prosecuted. The aforesaid cannot be accepted. Two private individuals cannot be said to be "other association of individuals". Therefore, there is no question of invoking Section 141 of the NI Act against the appellant, as the liability is the individual liability (may be a joint liabilities), but cannot be said to be the offence committed by a company or by it corporate or firm or other associations of individuals. The appellant herein is neither a Director nor a partner in any firm who has issued the cheque. Therefore, even the appellant cannot be convicted with the aid of Section 141 of the NI Act. Therefore, the High Court has committed a grave error in not quashing the complaint against the appellant for the offence punishable under Section 138 r/w Section 141 of the NI Act. The criminal complaint filed against the appellant for the offence

punishable under Section 138 r/w Section 141 of the NI Act, therefore, can be said to be abuse of process of law and therefore the same is required to be quashed and set aside."

13. Learned counsel for the petitioner also relied upon

another the judgment of Hon‟ble Apex Court in Aparna A.

Shah Vs. M/s Sheth Developers Pvt., Ltd., and another 2,

wherein it is held,

22) In the light of the above discussion, we hold that under Section 138 of the Act, it is only the drawer of the cheque who can be prosecuted. In the case on hand, admittedly, the appellant is not a drawer of the cheque and she has not signed the same. A copy of the cheque was brought to our notice, though it contains name of the appellant and her husband, the fact remains that her husband alone put his signature. In addition to the same, a bare reading of the complaint as also the affidavit of examination-in- chief of the complainant and a bare look at the cheque would show that the appellant has not signed the cheque.

23) We also hold that under Section 138 of the N.I. Act, in case of issuance of cheque from joint accounts, a joint account holder cannot be

(2013) 8 SCC 71

prosecuted unless the cheque has been signed by each and every person who is a joint account holder. The said principle is an exception to Section 141 of the N.I. Act which would have no application in the case on hand. The proceedings filed under Section 138 cannot be used as an arm twisting tactics to recover the amount allegedly due from the appellant. It cannot be said that the complainant has no remedy against the appellant but certainly not under Section 138. The culpability attached to dishonour of a cheque can, in no case "except in case of Section 141 of the N.I. Act" be extended to those on whose behalf the cheque is issued. This Court reiterates that it is only the drawer of the cheque who can be made an accused in any proceeding under Section 138 of the Act. Even the High Court has specifically recorded the stand of the appellant that she was not the signatory of the cheque but rejected the contention that the amount was not due and payable by her solely on the ground that the trial is in progress. It is to be noted that only after issuance of process, a person can approach the High Court seeking quashing of the same on various grounds available to him. Accordingly, the High Court was clearly wrong in holding that the prayer of the appellant cannot even be considered. Further, the High Court itself has directed the Magistrate to carry out the process of

admission/denial of documents. In such circumstances, it cannot be concluded that the trial is in advanced stage."

14. This Court also noticed a judgment of Telangana High

Court in KODAM DANALAKSHMI VS STATE OF

TELANGANA 3, wherein it is held,

" In Mrs. Aparna A. Shah's case (2 supra), cited by the learned counsel for petitioner/A.2, the Hon'ble Apex Court took the view that under Section 138 of the N.I. Act, it is only the drawer of the cheque who can be proceeded. In the said case, the husband had drawn the cheque on the account, which was being jointly maintained by him and his wife. The Hon'ble Supreme Court held that in case of issuance of a cheque from joint account, a joint account holder cannot be prosecuted unless the cheque has been signed by each and every person who has a joint account holder. The Hon'ble Supreme Court observed as follows:

"Para 23 : We also hold that under Section 138 of the N.I. Act, in case of issuance of cheque from joint accounts, a joint account holder cannot be prosecuted unless the cheque has been signed by each and every person who is a joint account holder. The said principle is an

3 2021 SCC Online TS 1431

exception to Section 141 of the N.I. Act which would have no application in the case on hand. The proceedings filed under Section 138 cannot be used as an arm twisting tactics to recover the amount allegedly due from the appellant. It cannot be said that the complainant has no remedy against the appellant but certainly not under Section 138. The culpability attached to dishonour of a cheque can, in no case "except in case of Section 141 of the N.I. Act" be extended to those on whose behalf the cheque is issued. This Court reiterates that it is only the drawer of the cheque who can be made an accused in any proceeding under Section 138 of the Act. Even the High Court has specifically recorded the stand of the appellant that she was not the signatory of the cheque but rejected the contention that the amount was not due and payable by her solely on the ground that the trial is in progress. It is to be noted that only after issuance of process, a person can approach the High Court seeking quashing of the same on various grounds available to him. Accordingly, the High Court was clearly wrong in holding that the prayer of the appellant cannot even be considered. Further, the High Court itself has directed the Magistrate to carry out the process of admission/denial of

documents. In such circumstances, it cannot be concluded that the trial is in advanced stage." In the instant case, it is evident from the entire material placed on record, particularly, the complaints filed by the respondent No. 2/complainant under Section 138 of N.I. Act r/w Sec.200 Cr.P.C, the petitioner/A.2 is merely a joint account holder and she is not the signatory to the subject cheques. On the other hand, it is culled out from the record that though the account relating to the disputed cheques is a joint account, only one signature, which appears to be of A.1, are seen on those disputed cheques. Penal provisions should be construed strictly, but not in a routine/casual manner. The words used in Section 138 of N.I. Act that "such person shall be deemed to have committed an offence" refers to a person who has drawn the cheque, but not any other person, except the contingencies mentioned under Section 141 of the N.I. Act. In view of the same, the submission made by the learned counsel for the petitioner/A.2 that the petitioner/A.2, who is a mere joint account holder but not a signatory to the subject cheque, cannot be proceeded under Section 138 of N.I. Act, merits consideration, inasmuch as a joint account holder cannot be prosecuted, unless and until he/she is a signatory to the subject

cheque. Further, the commencement of the trial in the subject C.Cs cannot be a ground to continue the proceedings against the petitioner/A.2. The Courts below erred in taking cognizance against the petitioner/A.2, particularly, when she is not a signatory to the disputed cheques. So the contentions raised on behalf of the respondents do not merit consideration. In view of these circumstances, when no ingredients under Section 138 of N.I. Act are made out against the petitioner/A.2, continuation of the subject proceedings against the petitioner/A.2 is abuse of process of law. Therefore, the proceedings in the subject C.Cs against the petitioner/A.2, are liable to be quashed."

15. The contention of the learned counsel for the

respondent No.1 is squarely answered by the Hon‟ble Apex

Court in the above referred cases and hence no further

discussion is required.

16. Thus, in this case, though the dishonoured cheque

was said to be drawn from the joint account of both the

accused, it was signed only by A1 and not by the petitioner

herein who is A2 in the complaint before the trial Court.

Hence, the petitioner cannot be proceeded with for the

offence under Section 138 of the N.I.Act by the

complainant/R1 herein.

17. When the basic ingredients of the offence are missing