IMPORTANT POINTS
1. Under Section 138 of the Negotiable Instrument Act it is only the drawer of the cheque who can be prosecuted.
2. Under Section 138 of the N.I. Act, 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.

Headnote:(a) Negotiable Instruments Act 1881- Sections 138 and 141 -Under Section 138 of the N.I. Act, it is only the drawer of the cheque who can be prosecuted- The appellant and her husband are Land Aggregators and Developers- The respondent is a company engaged in the business of land development and constructions, the respondent-Company agreed for the development of the land jointly with the appellant herein and her husband- In that connection the husband of the appellant issued a cheque for a sum of Rs. 25 crores from their joint account in favour of the respondent- When the said cheque was deposited by the respondents in their bank, the same was dishonoured due to "insufficient funds"- The respondent after serving statutory notice filed complaint against the appellant and her husband under Sections 138 and 141 of the Negotiable Instruments Act-The learned Metropolitan Magistrate issued process against the appellant and her husband- The appellant filed petition under Section 482 Cr. P.C. in the High Court for quashing the complaint urging that since she has not issued/signed the cheque, she cannot be prosecuted and as such her prosecution was not sustainable-The High Court rejected the petition filed under Section 482 Cr. P.C- Hence, this appeal by the appellant by way of special leave- The Supreme Court allowed the appeal- Held, that it is only the "drawer" of the cheque who can be made liable for the penal action under the provisions of the N.I. Act- Criminal liability on account of dishonour of a cheque primarily falls on the drawer- Under Section 138 of the N.I. Act, it is only the drawer of the cheque who can be prosecuted- In the case on hand, admittedly, the appellant is not a drawer of the cheque and she has not signed the same- A copy of the cheque was brought to notice of the Court, though it contains name of the appellant and her husband, the fact remains that her husband alone put his signature- In addition to the same, a 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-Under Section 138 of the N.I. Act, 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 culpability attached to dishonour of a cheque can, in no case "except in 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 under Section 138 of the Act. (Para 23).

Judgement Key Points

Certainly. Based on the provided legal document, the key points are as follows:

Under Section 138 of the Negotiable Instruments Act, criminal liability for the dishonour of a cheque primarily rests with the "drawer" of the cheque. Only the individual who has issued and signed the cheque can be prosecuted under this section (!) (!) .
In cases involving joint accounts, a joint account holder cannot be held liable unless the cheque has been signed by all account holders. The act of issuing a cheque from a joint account does not automatically implicate all account holders; each must sign the cheque for them to be liable (!) (!) .
The criminal offence under Section 138 is strictly interpreted, and the liability does not extend vicariously to other persons associated with the drawer unless specific statutory provisions, such as Section 141, apply. Vicarious liability generally requires clear statutory backing, which is not present in the context of joint account holders unless they are signatories (!) (!) (!) .
The process of issuing a cheque and the subsequent criminal proceedings are dependent on the actual signing of the cheque by the person alleged to be the drawer. Mere association or ownership of the account does not establish criminal liability unless the individual has signed the cheque (!) (!) .
The legal interpretation emphasizes that only the person who has issued and signed the cheque can be prosecuted for dishonour under Section 138. This ensures that criminal liability is assigned accurately and not extended beyond the actual signatory (!) (!) (!) .
The proceedings against individuals who have not signed the cheque or are not the drawer should be quashed, as they do not meet the criteria for criminal liability under the relevant section. Proper legal procedures require that only those who have issued the cheque are prosecuted (!) (!) .
The law does not support vicarious liability for cheque dishonour in the absence of specific statutory provisions. Therefore, liability cannot be extended to persons merely because they are associated with the account or the transaction unless they are the signatory (!) (!) .
The procedural aspect underscores that the initiation of criminal proceedings must be based on the actual facts of issuance and signing of the cheque. Any proceedings initiated against non-signatories or non-drawers are liable for quashing (!) (!) .

These points collectively clarify that under Section 138 of the Negotiable Instruments Act, criminal liability is confined to the individual who has issued and signed the cheque, and proceedings against others, such as joint account holders who have not signed the cheque, are not sustainable.

JUDGMENT

P.Sathasivam,J.

1) Leave granted.

2) This appeal is directed against the final judgment and order dated 24.09.2010 passed by the High Court of Judicature at Bombay in Criminal Writ Petition No. 1823 of 2010 whereby the High Court partly allowed the petition filed by the appellant herein.

3) Brief facts:

a) M/s Sheth Developers Private Ltd.-the respondent herein is a company incorporated under the provisions of the Companies Act, 1956 having its registered office at 11, Vora Palace, M.G. Road, Kandivali (West), Mumbai and is engaged in the business of land development and constructions. Aparna A. Shah (the appellant herein) and Ashish Shah, her husband, are the Land Aggregators and Developers who have been in the said business for the last 15 years and are the owners of certain lands in and around Panvel.

b) 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, Dist. Raigad, Maharashtra, one Virender Gala of Mahavir Estate Agency - the Broker, introduced them to the appellant herein and her husband as the land owners holding huge land in Panvel. The appellant represented to the Company that the said land was ideal for the development of a Township Project and a Special Economic Zone (SEZ) and also that they have no financial means and capacity to develop the same single handedly. It was further represented that they were also looking for a suitable person, interested in developing the said land jointly with them.

(c) On believing the above said representations, the respondent-Company agreed for the development of the said land jointly with the appellant herein and her husband. When the respondent-Company requested for inspection of the title documents in respect of the said land, the appellant and her husband agreed for the same upon the entrustment of a token amount of Rs. 25 crores with an understanding between the parties that the said amount would be returned if the project is not materialize. Agreeing the same, the respondent-Company issued a cheque of Rs. 25 crores in favour of the appellant herein and her husband. However, for various reasons, the proposed joint venture did not materialize and it was claimed by the appellant herein that the whole amount of Rs. 25 crores was spent in order to meet the requirements of the initial joint venture in the manner as requested by the respondent-Company.

(d) According to the appellant, again the respondent-Company expressed interest to start a new project and to take financial facilities from their bank in order to submit a tender for the purchase of a mill land. 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 receivables 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 aforementioned 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”.

e) On 18.02.2009, a statutory notice under Section 138 of the Negotiable Instruments Act, 1881 (in short ‘the N.I. Act”) was issued to the appellant and her husband asking them to repay the sum of Rs. 25 crores. On 06.03.2009, the appellant and her husband jointly replied mentioning the circumstances in which the said cheque was issued with the supporting letters.

f) On 04.04.2009, a complaint was filed against the appellant and her husband in the Court of the Metropolitan Magistrate, Dadar, Mumbai and the same was registered as Case No. 1171-SS of 2009. By order dated 20.04.2009, process was issued against them.

g) On 12.01.2010, the appellant and her husband f

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2013 Supreme(SC) 539

IN THE SUPREME COURT OF INDIAP. SATHASIVAM AND JAGDISH SINGH KHEHAR, JJ.Mrs. Aparna A. Shah - Appellant(s)VersusM/s Sheth Developers Pvt. Ltd. & Anr. - Respondent(s)CRIMINAL APPEAL No. 813 OF 2013 (Arising out of S.L.P. (Crl.) No. 9794 of 2010)Decided on: 01-07-2013

Cases Referred (6)

IN THE SUPREME COURT OF INDIA
P. SATHASIVAM AND JAGDISH SINGH KHEHAR, JJ.
Mrs. Aparna A. Shah - Appellant(s)
Versus
M/s Sheth Developers Pvt. Ltd. & Anr. - Respondent(s)
CRIMINAL APPEAL No. 813 OF 2013 (Arising out of S.L.P. (Crl.) No. 9794 of 2010)
Decided on: 01-07-2013