2022 (5) TMI 746 - HC - Indian Laws

Bank not liable for cheque dishonour under Section 138 NI Act - Court quashes proceedings.

The High Court allowed the petitions filed by HDFC Bank's branches, quashing criminal proceedings against the bank and its Branch Managers. The Court held ... Dishonor of Cheque - Bank has been made as party - Liability of bank in case of dishonor of cheque - Vicarious liability of the partner - Section 138 read with Section 142 of the Negotiable Instruments Act, 1881 - HELD THAT:- What can be observed is that for an offence under Section 138 to be made out a cheque has to be issued by the account holder under his name and signature. It is clear that only the holder of the account on which the cheque is drawn can be made liable and such culpability cannot be extended to others except as provided under Section 141 N.I. Act which deals with offences by and on behalf of the company or partnership, where the signatory to the cheque may be a Director of the company or a Partner of a partnership firm. In the present case, the petitioner/HDFC Bank has been made a party by the complainant/respondent No. 1 where no role can be attributed to the bank as far as the issuance or the dishonour of the cheque in question is concerned. The bank is only the custodian of the money of the customers and has to comply with the instructions of such customers. In case of insufficiency of funds, the bank is only to report the same and as such, cannot by any stretch of the imagination be liable for any act of the customer who has issued the cheque which was later dishonoured. Viewed thus, this Court finds that the learned Judicial Magistrate First Class, Shillong has failed to appreciate the facts and the provisions of law and has unnecessarily put the petitioner to great hardship by issuing of process. The petitions under consideration finds merit before this Court and the same is accordingly allowed. Issues:Petitions under Section 482 Cr.P.C. to quash criminal proceedings against HDFC Bank and its Branch Managers for alleged dishonour of cheques.Analysis:1. Background: Two petitions filed by HDFC Bank Ltd. Mawlai Nonglum Branch and HDFC Bank Ltd. Shillong Branch against a common order dated 16.12.2020 by the JMFC, Shillong regarding cheque bouncing complaints.2. Complaint and Allegations: Respondent filed a complaint under Section 138 NI Act against another party for a cheque of Rs. 1,00,000 dated 27.10.2020. The cheque was presented and funds transferred but later reversed by the bank.3. Criminal Proceedings: Respondent filed a complaint against the accused parties, including the HDFC Bank branches, leading to summons being issued by the JMFC.4. Petitioners' Grievance: Petitioners approached the High Court seeking to quash the criminal proceedings, arguing they had no connection to the dispute and should not be parties to it.5. Legal Arguments: Petitioners argued that Section 138 NI Act was not applicable to them and cited a Supreme Court case in support of their stance.6. Court's Consideration: The Court noted the complaint was primarily under Section 138 NI Act and analyzed the essential elements of the offence under this section.7. Legal Interpretation: The Court examined the provisions of Section 138 NI Act, emphasizing that liability under this section is limited to the drawer of the cheque.8. Precedent Analysis: Referring to a Supreme Court case, the Court reiterated that only the signatory of the cheque can be held liable under Section 138 NI Act.9. Bank's Role: The Court emphasized that the bank, being a custodian of funds, cannot be held responsible for the dishonour of a cheque issued by a customer.10. Court's Finding: The Court found that the JMFC had erred in including the bank as a party without proper legal basis, causing undue hardship to the petitioners.11. Legal Precedent: Quoting a Supreme Court observation, the Court highlighted the need for careful scrutiny before summoning accused parties in criminal cases.12. Judgment: The Court allowed the petitions, quashing the proceedings against HDFC Bank in the case and directing further action against the accused individual only.13. Disposition: Both petitions were disposed of by the common judgment and no costs were awarded in the matter.