A person named as a guarantor in a loan agreement cannot be prosecuted as an accused in a case under Section 138 of the Act.

1. This is a petition under Section 482 CrPC for quashing the criminal complaint against the petitioner pending in the court of M.M. under Section 138, N.I.Act (hereinafter referred to as ‘Act’) wherein the petitioner was summoned vide order dated 20.8.2009.

2. The complaint was filed against the petitioner under Section 138 of NI Act and in paragraph 2 thereof it was alleged as under :-

“That the accused approached for loan on Short term basis from the complainant company. The complainant company had granted a loan to the accused. The said loan was granted as per the terms and condition of Hire Purchase Agreement No.167/680 under the said agreement. The complainant financed the accused as desired by it, incumbent however upon its paying the EMI stipulated as payable in the agreement.”

3. It was also alleged that the accused in order to fulfill the contractual obligation and fulfill the terms and conditions of the agreement and in part payment of legal debt [loan installment and other charges payable in the agreement due to the complainant issued a cheque dated 14.5.2009 for Rs.3663165/- and the said cheque on presentation was got dishonoured on account of insufficiency of funds.

4. The petitioner has challenged the complaint mainly on the ground that the said cheque was given as security, she being a guarantor of the agreement that was executed between the respondent and M/s Rama Dairy Products Limited. It is also urged that the cheque in question was blank and was given in August, 2007 and the figure and date have been inserted by the respondent. The challenge is also made on the ground that there was no notice of demand addressed to her by the respondent bank.

5. I have heard learned counsel for the petitioner and also the respondent and perused the record.

6. Reliance has been placed by the respondent on S.T.P. Limited Vs. Usha Paints and Decorators, III (2007) BC 193; V.S. Yadav Vs. Reena, 2010 [4] JCC [NI] 323; I.C.D.S. Ltd. Vs. Beemna Shaber and another, AIR 2002 SC 3014 and Umaswamy Vs. K.N. Kamanath, III (2007) BC 211 to substantiate that the liability of the guarantor is co-extensive with that of the principal debtor. The above cited judgments relied upon by the respondent are not applicable to the present case as the issue before this court is not regarding the question of guarantor’s liability, but whether the petitioner could be prosecuted as main accused on the allegation that she had taken loan vide the aforesaid agreement and whether the complaint against the petitioner as accused is maintainable or not. After analysis of material placed on record, it is evident that in the loan agreement executed between M/s. Rama Dairy Products Ltd. and the respondent bank, the petitioner was only named as a guarantor. In the said agreement, she has been not only mentioned as guarantor, but, she has signed at various places as guarantor of the said loan agreement. There is no dispute regarding the liability of the guarantor under the Act.

7. M/s Rama Dairy Products Limited was a legal entity which was undisputedly different than the petitioner. The petitioner has been arrayed as an accused in her individual capacity and not as a director of M/s Rama Dairy Products Limited. The respondent seems to have forgotten that the petitioner was not the lonee but a guarantor and that the cheque in question that was given by her was not in discharge of her primary liability towards any loan, but was given by her as a guarantor of the loan agreement. From all this, it appears that the complainant bank was itself not clear and the allegations which were set up against the petitioner are vague and inconsistent. A person named as a guarantor in the loan agreement, cannot be prosecuted as an accused in a case under Section 138 of the Act.

7. In view of my above discussion, the petition is allowed and the complaint is quashed as being bad in law.

8. Petition stands disposed of.