Cheque dishonour liability cannot be fastened on non-partners and non-signatories; prosecution was quashed.

Criminal proceedings under Section 138 of the Negotiable Instruments Act against persons who were neither partners of the firm nor signatories to the cheque were found unsustainable. The complaint showed that the cheque was issued by the authorised signatory, while the petitioners lacked the basic legal attributes needed to fasten liability for the alleged offence. On that basis, the HC held that continuation of the prosecution would be an abuse of process and that the threshold for exercise of inherent jurisdiction under Section 482 of the Code of Criminal Procedure was met. The proceedings against the petitioners were quashed.

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Issues: Whether criminal proceedings under Section 138 of the Negotiable Instruments Act, 1881 could be quashed under Section 482 of the Code of Criminal Procedure, 1973 against persons who were neither partners of the firm nor signatories to the cheque.

Analysis: The petitioners were admittedly not partners of the partnership firm and were not signatories to the cheque in question. The complaint itself disclosed that the cheque had been issued by the authorised signatory of the firm, while the petitioners were sought to be proceeded against despite the absence of the basic legal attributes required to fasten liability for the alleged offence. In such circumstances, continuation of the prosecution would amount to abuse of the process of Court and would not satisfy the threshold for sustaining proceedings in exercise of inherent jurisdiction.

Conclusion: The prosecution against the petitioners under Section 138 of the Negotiable Instruments Act, 1881 was held unsustainable and was quashed.

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