Dishonour of Cheque – Criminal liability – Joint Account holder -Drawer of cheque alone can be prosecuted: Negotiable Instruments Act section 138.

M/s. Sheth Developers P. Ltd. is the respondent a company engaged in the business of land development and constructions. Aparna A. Shah (the appellant) and Ashish Shah, her husband, are the land aggregators and developers and are the owners of certain lands in and around Panvel.

According to the appellant, in January, 2008 since the company was interested in developing a Township Project and a special economic Zone (SEZ) project in and around Panvel. The Broker, introduced them to the appellant and her husband as the land owners holding huge land in Panvel.

The respondent company agreed for the development of the said land jointly with the appellant herein and her husband. The appellant and her husband agreed for the same upon the entrustment of a token amount of Rs. 25 crore with an understanding between the parties that the said amount would be returned if the project is not materialise. Agreeing the same, the respondent company issued a cheque of Rs. 25 crore. However, for various reasons, the proposed joint venture did not materialise and it was claimed by the appellant herein that the whole amount of Rs. 25 crore was spent in order to meet the requirements of the initial joint venture in the manner as requested by the respondent company.

According to the appellant, again the respondent company expressed interest to start a new project. With regard to the same, the respondent Company approached the appellant herein and her husband and informed that they are not having sufficient securities to enable the bank to grant the facility and the bank is to show receivales in writing. Therefore, on an understanding between the respondent and the appellant, a cheque of Rs.25 crores was issued by the husband of the appellant from their joint account. It is the case of the appellant that in breach of the aforesamentioned understanding, on 05-02-2009, the respondent deposited the cheque with IDBI bank at Cuffe Parade, Mumbai and the said cheque was dishonoured due to “insufficient funds”.

On Complaint filed by the Respondent against the appellant the case was registered by the Magistrate the court held that u/s. 138 of the Act, it is only the drawer of the cheque who can be prosecuted. In the present case, the appellant is not a drawer of the cheque and she has not signed the same. A copy of the cheque brought to the notice of the Supreme Court though contains the name of the appellant and her husband, the fact remains that her husband alone put his signature. In addition to the same, bare reading of the complaint as also the affidavit of examination in chief of the complainant and a bare look at the cheque would show that the appellant has not signed the cheque. In case of issuance of cheque from 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. The said principle is an exception to section 41 of the N.I. Act which would have no application in the case on hand. The proceedings filed u/s. 138 cannot be used as an arm twisting tactics to recover the amount allegedly due from the appellant. It cannot be said that the complaint has no remedy against the appellant but certainly not u/s. 138. The culpability attached to dishonor of a cheque can, in no case “except in a case of section 141 of the N.I. Act” be extended to those on whose behalf the cheque is issued. This court reiterates that it is only the drawer of the cheque who can be made an accused in any proceeding u/s. 138 of the Act. Thus, criminal proceedings against appellant quashed.