2021 (3) TMI 381 - SC - Indian Laws

Supreme Court clarifies joint liability in cheque bounce cases

Alka Khandu Avhad Versus Amar Syamprasad Mishra & Anr.

The Supreme Court allowed the appeal, quashing the criminal complaint against the appellant under Section 138 r/w Section 141 of the Negotiable ... Dishonor of Cheque - scope of the term 'other association of individuals' in case of a joint liability of two or more persons - applicability of Section 141 of the NI Act - discharge of legal liability or not - whether the appellant herein, original accused No. 2 can be prosecuted for the offence punishable under Section 138 r/w Section 141 of the NI Act? - HELD THAT:- 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. 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 any body 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 criminal complaint against the appellant for the offence punishable under Section 138 read with Section 141 of the NI Act is hereby quashed and set aside - Appeal allowed - decided in favor of appellant. Issues:- Appellant's challenge to the judgment dismissing the application under Article 226 of the Constitution to quash a complaint under the Negotiable Instruments Act.- Applicability of Section 138 r/w Section 141 of the NI Act to the appellant.- Interpretation of joint liability in the context of the offense under Section 138 of the NI Act.- Analysis of the High Court's decision to refuse to quash the criminal complaint against the appellant.Detailed Analysis:1. The appellant challenged the High Court's decision dismissing the application under Article 226 of the Constitution to quash a complaint under the Negotiable Instruments Act. The complaint was for offenses under Section 138 r/w Section 141 of the NI Act. The original complainant, a practicing advocate, filed a complaint against the appellant and her husband for non-payment related to legal services. The High Court refused to quash the complaint, leading to the present appeal.2. The appellant argued that she should not be prosecuted under Section 138 of the NI Act as she was not the signatory to the dishonored cheque, and the account in question was not joint. The appellant contended that Section 141 of the NI Act should not apply as the cheque was issued by a private individual, not a company.3. The original complainant argued that the liability was joint, as the complainant represented both accused parties. The Trial Court issued summons against the appellant, finding a prima facie case. The High Court upheld this decision, citing joint liability for the debt related to legal services.4. The Supreme Court analyzed Section 138 of the NI Act, emphasizing that the signatory of the cheque must be the person maintaining the account, and the cheque must be for the discharge of a debt or liability. The Court clarified that joint liability does not automatically implicate all parties unless the account is jointly maintained, and the accused is a signatory to the cheque.5. Regarding Section 141 of the NI Act, the Court rejected the argument that two private individuals could be considered an 'other association of individuals' akin to a company. The Court ruled that Section 141 does not apply to individual liabilities, even if joint, without a corporate structure involved.6. Consequently, the Supreme Court allowed the appeal, quashing the criminal complaint against the appellant under Section 138 r/w Section 141 of the NI Act. The pending complaint in the Metropolitan Magistrate's Court was also set aside, deeming it an abuse of process of law.This detailed analysis covers the appellant's challenge, the interpretation of liability under the NI Act, and the Court's reasoning in quashing the criminal complaint.