Only drawer of cheque liable under Section 138 NI Act. Applicant not signer, not liable. Case against husband proceeds.

The court held that under Section 138 of the Negotiable Instruments Act, only the drawer of the cheque can be prosecuted. As the applicant did not sign the cheque but only the loan agreement, she could not be held liable. The proceedings against the applicant were quashed, directing the case to proceed only against the husband, who issued the dishonored cheque. The court allowed the application, making the rule absolute in favor of the applicant.

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Issues Involved:
1. Whether the applicant, who did not sign the cheque, can be held responsible under Section 138 of the Negotiable Instruments Act.
2. Interpretation of Section 138 of the Negotiable Instruments Act regarding joint account holders.
3. Applicability of vicarious liability under Section 141 of the Negotiable Instruments Act.

Issue-wise Detailed Analysis:

1. Whether the applicant, who did not sign the cheque, can be held responsible under Section 138 of the Negotiable Instruments Act:

The applicant sought quashing of the proceedings of Criminal Case No. 1746 of 2014 under Section 482 of the Code of Criminal Procedure, 1973. The applicant's husband issued a cheque that was dishonored due to insufficient funds. The primary question was whether the applicant, who did not sign the cheque, could be held liable under Section 138 of the Negotiable Instruments Act. The court noted that the applicant had signed the loan agreement but not the cheque itself. Citing the Supreme Court decision in Mrs. Arpana A. Shah v. M/s. Sheth Developers Pvt. Ltd. and another, AIR 2013 SC 3210, the court emphasized that only the "drawer" of the cheque could be made liable for penal action under Section 138. The court reiterated that strict interpretation is required for penal statutes, and the applicant, not being the drawer, could not be held liable.

2. Interpretation of Section 138 of the Negotiable Instruments Act regarding joint account holders:

The court examined the ingredients necessary to constitute an offense under Section 138, as outlined in previous judgments such as Jugesh Sehgal v. Shamsher Singh Gogi (2009) 14 SCC 683. The court emphasized that only the person who has drawn the cheque can be deemed to have committed an offense under Section 138. The court also noted that in the case of 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. This principle was supported by various High Court decisions, including those of the Madras, Delhi, and Punjab and Haryana High Courts.

3. Applicability of vicarious liability under Section 141 of the Negotiable Instruments Act:

The court discussed the concept of vicarious liability, particularly under Section 141 of the Negotiable Instruments Act, which extends liability to officers of a company in cases where the company itself is the drawer of the cheque. The court clarified that this vicarious liability does not extend to individuals who are not signatories of the cheque, even if they are joint account holders or have signed related agreements. The court cited several Supreme Court rulings, including S.K. Alagh v. State of Uttar Pradesh and others (2008) 5 SCC 662, to support this interpretation. The court concluded that the applicant could not be held vicariously liable for the dishonor of the cheque issued by her husband.

Conclusion:

The court concluded that under Section 138 of the Negotiable Instruments Act, it is only the drawer of the cheque who can be prosecuted. Since the applicant did not sign the cheque, she could not be held liable. The proceedings against the applicant were quashed, and the court directed that the case should proceed only against the co-accused, i.e., the husband of the applicant. The application was allowed, and the rule was made absolute to the aforesaid extent.

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