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IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH
Harkesh Manuja, J.
Nikhil Goyal & Others - Petitioners - Appellant
Versus
Harish Gaba & Others - Respondents - Respondent
CRM-M-51446 of 2019
Decided On : 12-07-2023
Negotiable Instruments Act - Liability of HUF members - Section 138 of the Negotiable Instruments Act, 1881 - [Arpit Jhanwar vs. Kamlesh Jain rep. By its Power of Attorney Agent and Manager D. Lalit Kumar, Central Bank of India v. Asian Global Ltd., Ramanlal Bhailal Patel v. State of Gujarat, Dr. G. Ramakrishna Reddy v. State of Andhra Pradesh, Ram Gulam Chaudhury v. State of Bihar, Jagdish Rai Agarwal and others v. State of Andhra Pradesh and other, The Dadasaheb Rawal Co-op v. Ramesh, Vinod Kumar Arora & Ors. vs M/S. Rohit Advertising Service, Tribhovan Das Haribhai Tamboli v. Gujarat Revenue Tribunal and Ors.]
Fact of the Case:
The complaint was filed under Section 138 of the Negotiable Instruments Act, 1881 against the Hindu Undivided Family (HUF) and its members for dishonoring a cheque issued for a borrowed amount. The petitioners, who were members of the HUF, sought to quash the complaint and summoning order, claiming that only the Karta of the HUF should be held liable.
Finding of the Court:
The court found that the liability of the HUF on the dishonored cheque remained, even in the absence of the Karta, and could devolve on its members or the new Karta. It held that the petitioners could be summoned as accused based on the complaint's specific allegations against them and the uncertain course of action of the HUF.
Issues: The issues revolved around the liability of HUF members under Section 138 of the Act, the absence of the Karta, and the specific role of the petitioners in the complaint.
Ratio Decidendi: The court relied on precedents to establish that the liability of the HUF could devolve on its members or the new Karta in the absence of the original Karta. It emphasized that the power under Section 482 Cr.P.C. should be exercised in exceptional cases only and that quashing the proceedings at that stage would make the complainant remediless.
Final Decision: The petition to quash the complaint and summoning order was dismissed, and the court upheld the summoning of the petitioners as accused.
HARKESH MANUJA, J.
1. By way of present petition filed under Section 482 Cr.P.C., prayer has been made for quashing of complaint dated 26.03.2018 bearing case CIS No. NACT-705 of 2018, titled as "Harish Gaba vs. M/s Atul Goyal & sons HUF and others" as well as order of learned JMIC, Panipat, passed on 20.07.2018 whereby the petitioners have been summoned under Section 138 of the Negotiable Instruments Act, 1881 (for short, "the Act").
2. As per the complaint, facts of the case are that respondent No.3 is a Hindu Undivided Family (for short ‘HUF’) of the petitioners and respondent No.4 is Karta, indulged in the business of Handloom & Textile and looking after its day-to-day affairs; whereas petitioner No.3 is wife and petitioner Nos.1 & 2 are sons of respondent No.4. It has been stated in the complaint that on account of family relations, respondent No.1/complainant was approached by accused persons and requested to pay Rs.10,00,000/- for personal necessities of their business who accordingly transferred Rs. 10,00,000/- on 18.05.2017 vide RTGS. In the month of January 2018, respondent No.1 approached respondent No.4 and requested to return the borrowed amount. Thereafter, he issued a cheque bearing No.000174 dated 20.01.2018 for an amount of Rs. 10,00,000/- and on its presentation by respondent No.1 on 22.01.2018, it was dishonoured vide memo dated 23.01.2018 with remarks "FUNDS INSUFFICIENT". However, accused persons requested complainant/respondent No.1 to present the said cheque again on 01.02.2018 as they were facing financial crises. When the complainant/ respondent No 1 again presented the said cheque, it was again dishonoured vide memo dated 03.02.2018 with remarks "FUNDS INSUFFICIENT". Subsequently, complainant/ respondent No.1 through his counsel served a demand notice dated 17.02.2018 under section 138/142 of the Act and on receiving no response, a complaint dated 26.03.2018 was filed under Section 138 of the Act not only against the HUF/respondent No.3 and its Karta/respondent No.4, but also against petitioner Nos. 1 to 3 who were the members of the HUF. In pursuance of this complaint, summoning order dated 20.07.2018 was passed by learned Chief Judicial Magistrate, Panipat.
3. By way of present petition, the aforesaid complaint as well as summoning order have been impugned by the petitioners.
4. At the outset, it has been pointed out by learned counsel for the petitioners that respondent No.4/ Atul Goyal is missing since 03.11.2017 and a suicide note in this regard was found upon which an FIR was registered; but after investigation, the police filed untrace report.
5. Learned counsel for the petitioners contends that as per the averments in the complaint, the business of said HUF was being looked after by Atul Goyal being the Karta and he was responsible for day-to-day business and conduct of the affairs of the same; whereas the petitioners were member of the HUF by birth and not by Will. He places reliance on a judgment of Madras High Court in “Arpit Jhanwar vs. Kamlesh Jain rep. By its Power of Attorney Agent and Manager D. Lalit Kumar”, reported as 2013 (5) RCR (Civil) 414, to contend that in case of issuance of cheque by the karta of any HUF in discharge of liability of the HUF, only the karta can be held liable and other members cannot be held to be vicariously liable. He further contends that the summoning order is also not speaking one as no ground is made out to summon the petitioners when they were merely members of the HUF. In support of this contention, he also places reliance upon:
ii. "Ramanlal Bhailal Patel v. State of Gujarat" reported as 2008 AIR (SC) 1246
iii. "Dr. G. Ramakrishna Reddy v. State of Andhra Pradesh" reported as 2018(3) Crimes 591
iv. "Ram Gulam Chaudhury v. State of Bihar" reported as 2001(4) Crimes 16
6. On the other hand, learned State counsel submits that no relief has been prayed for against the State in the prese
The liability of a Hindu Undivided Family (HUF) on a dishonored cheque can devolve on its members or the new Karta in the absence of the original Karta, and the power under Section 482 Cr.P.C. should....
A joint account holder cannot be prosecuted under Section 138 of the N.I. Act unless they are also a signatory on the cheque; prosecution of a non-drawer constitutes an abuse of process.
A complaint under Section 138 must contain specific averments to establish vicarious liability; mere title or position is insufficient for liability. Absence of allegations against an accused leads t....
A person can only be prosecuted under Section 138 of the Negotiable Instruments Act if the cheque is drawn by them on an account maintained by them for the discharge of a debt or liability. Joint lia....
Under Section 138 of the Negotiable Instruments Act, only the drawer of the cheque can be prosecuted, and joint account holders who are not signatories to the cheque cannot be held liable for a disho....
For vicarious liability under Section 141 of the Negotiable Instruments Act, specific averments regarding a director's involvement in company affairs are essential; mere directorship is insufficient.
The main legal point established in the judgment is the application of vicarious liability principles in determining the liability of officers of a company in respect of dishonour of a cheque.
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