2021 (6) TMI 1002 - HC - Indian Laws

Signatory Requirement in Cheque Bounce Cases: High Court Clarifies

The High Court considered whether proceedings under Section 138 of the Negotiable Instruments Act could be maintained if the applicant was not the ... Dishonor of Cheque - proceeding under Section 482 of the Code of Criminal Procedure - adjudication of this Court is that if the applicant is not a signatory to the subject cheque then would a proceeding under Section 138 lie against him? - Section 141 of the NI Act - HELD THAT:- 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 8 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. The impugned judgment and order dated 21.08.2019 passed by the High Court refusing to quash 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 - this Court is of the considered opinion that the proceedings under Section 138 of the Negotiable Instruments Act cannot be permitted to continue against the present applicant. Appeal allowed - decided in favor of appellant. Issues:Initiation of proceedings under Section 138 of the Negotiable Instruments Act based on a disputed signature on a cheque.Analysis:The High Court heard arguments from both sides regarding the initiation of proceedings under Section 138 of the Negotiable Instruments Act against the applicant. The applicant claimed not to have signed the cheque in question, thus disputing liability. The applicant relied on a Supreme Court decision where a similar complaint was quashed due to the absence of the accused's signature on the dishonored cheque.The respondent, represented by Ms. Rana, defended the proceedings, arguing that the issue of the applicant's signature on the cheque should be addressed during trial and not at the pre-trial stage. It was contended that as the cheque was issued to discharge a liability as per an agreement between the parties, the applicant could not evade responsibility by denying the signature on the cheque.The main question before the Court was whether proceedings under Section 138 could be maintained if the applicant was not the signatory of the cheque. Citing the Supreme Court decision, the Court highlighted the essential conditions for prosecution under Section 138, emphasizing that the signatory of the cheque must have drawn it on their account for the discharge of a debt. The Court clarified that individual liability, even if joint, does not fall under Section 141 of the NI Act applicable to companies.The Court referenced the Supreme Court judgment, which held that if the accused was not a signatory to the cheque and not part of the firm issuing the cheque, the proceedings could not be sustained. In this case, since it was established that the applicant had not signed the cheque, the Court found no legal basis to continue the proceedings under Section 138.Considering the undisputed fact that the applicant did not sign the cheque and the legal impediment to proceeding with the case, the Court invoked its jurisdiction under Section 482 of the Code of Criminal Procedure to quash the complaint. Consequently, the Court quashed the criminal case under the Negotiable Instruments Act against the applicant, ruling in favor of the applicant and setting aside the proceedings initiated against them.