Recently, the Allahabad High Court has held that a joint bank account holder cannot be prosecuted under Section 138 of the Negotiable Instruments Act merely because the cheque was issued from a joint account, if the person had not signed the cheque. Justice Sandeep Jain passed the ruling while allowing a petition seeking quashing of criminal proceedings initiated in a cheque dishonour case.
According to the case, the Complainant alleged that a loan amount was advanced for business purposes and, towards repayment, two cheques were issued from a joint bank account. However, both cheques were dishonoured after the bank reported that the account had been closed. Following this, proceedings under Section 138 of the Negotiable Instruments Act were initiated against both account holders.
Before the High Court, it was argued that although the account was jointly maintained, the dishonoured cheques had been signed only by one account holder and not by the applicant seeking quashing of proceedings. It was further contended that Section 141 of the NI Act dealing with vicarious liability applies only to companies and firms, and not to individual joint account holders.
Relying upon multiple Supreme Court judgments, the Court reiterated that criminal liability under Section 138 NI Act can only be imposed upon the “drawer” of the cheque, namely the person who signed and issued it.
The Court observed that “Joint bank account holders cannot be prosecuted unless they are signatories to the dishonoured cheque.” The Court further noted that apart from a general allegation of joint liability for repayment of the loan, no specific role had been attributed to the applicant in the complaint.
Accordingly, the High Court quashed the summoning order and criminal proceedings against the non-signatory joint account holder while clarifying that proceedings against the cheque signatory would continue in accordance with law
Case Title: Madhu Singh v. State of U.P. and Others
Case No.: APPLICATION U/S 482 No. - 19215 of 2007
Coram: Hon’ble Mr. Justice Sandeep Jain
Read Judgment @Latestlaws.com
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