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2026 Supreme(Online)(P&H) 8045
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH
Vinod S. Bhardwaj, J
Minni – Appellant
Versus
State of Haryana – Respondent
CRM-M-3078-2026 (O&M)
For the Appellants/Petitioners: Ujwal Anand
A signatory of a cheque, including a guarantor, is directly liable under Section 138 of the Negotiable Instruments Act. This is personal liability, not vicarious liability under Section 141, making the impleadment of the principal debtor unnecessary. Territorial jurisdiction errors are curable irregularities under the CrPC.
Headnote:(A) Negotiable Instruments Act, 1881 - Sections 138, 141 and 142(2)(a) - Code of Criminal Procedure, 1973 - Sections 460 and 462 - Indian Contract Act, 1872 - Sections 126, 127 and 128 - Territorial jurisdiction - Error in assuming jurisdiction is a curable irregularity under Section 460(e) of the Code of Criminal Procedure, provided it was done in good faith, and does not ipso facto vitiate proceedings unless it occasions a failure of justice under Section 462 of the Code of Criminal Procedure. (Paras 14, 17, 21)
(B) Negotiable Instruments Act, 1881 - Section 138 vs Section 141 - Liability of drawer/signatory - A person who signs and issues a cheque from a joint account as a guarantor or co-borrower assumes direct and personal statutory responsibility under Section 138. Such liability is distinct from vicarious liability under Section 141; therefore, the complaint is maintainable even without impleading the principal borrower or partnership firm. (Paras 24, 27, 31)
(C) Negotiable Instruments Act, 1881 - Section 138 - Security Cheques and Demand Notice - A cheque issued as security attracts the rigours of Section 138 if presented towards a subsisting legally enforceable debt. A statutory demand notice is valid if sent to the correct address; a detailed break-up or computation of the amount is not mandatory for the notice to be legally sufficient at the summoning stage. (Paras 34, 35, 36)
Facts of the case:
The petitioner sought to quash proceedings under Section 138 of the Negotiable Instruments Act initiated upon the dishonour of a cheque issued from a joint account. The cheque was provided as security for a vehicle loan availed by a partnership firm. The petitioner, acting as a guarantor/co-borrower, challenged the proceedings on grounds of lack of territorial jurisdiction, absence of vicarious liability as she was not a partner, non-impleadment of the partnership firm, and alleged defects in the demand notice.
Findings of Court:
The court found that the territorial jurisdiction error was a curable irregularity. It further held that the petitioner's liability was direct and personal as the signatory of the cheque, not vicarious. The court also ruled that the security nature of the cheque and the lack of detailed computation in the notice did not invalidate the criminal proceedings.
Issues: 1. Whether the lack of territorial jurisdiction under Section 142(2)(a) of the Negotiable Instruments Act renders the proceedings void or is a curable error. 2. Whether a guarantor/co-borrower who signs a cheque can seek protection under Section 141 by claiming a lack of involvement in the firm's management. 3. Whether the non-impleadment of a partnership firm is fatal to a complaint against an individual drawer of a cheque. 4. Whether a security cheque and a demand notice lacking a detailed computation are sufficient to initiate prosecution.
Ratio Decidendi: Territorial jurisdiction under the Negotiable Instruments Act is regulatory, and errors are cured by Sections 460 and 462 of the Code of Criminal Procedure if done in good faith. Liability under Section 138 is fastened upon the drawer of the cheque personally; when the accused is the signatory, the liability is direct, not vicarious, rendering the impleadment of the firm unnecessary. Security cheques mature for presentation upon the failure to repay the loan, and a demand notice is valid so long as it demands the cheque amount.
Result: the instant petition is dismissed.
VINOD S. BHARDWAJ, J.
1. The instant petition has been filed under section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023 seeking setting aside of complaint dated 14.01.2020 registered as NACT No. 13 of 2020 titled as Shri Ram Transport Finance Co. Ltd. vs Minni Kumari filed by respondent no.2, whereby proceedings under Section 138 of the Negotiable Instruments Act, 1881 have been initiated against the petitioner as well as the summoning order dated 01.02.2020 through which the petitioner has been summoned to appear in the said case.
FACTS
2. The gravamen of the Petitioner’s case is that the impugned proceedings arise out of a misuse of security cheques obtained at the time of extending a loan facility. As per the version set out in the complaint, Respondent No. 2 company is engaged in the business of financing and leasing. The Petitioner allegedly approached Respondent No. 2 for availing a vehicle loan in respect of a vehicle bearing Model ZT-35. In pursuance thereof, a loan agreement dated 01.10.2013 was executed between the parties and a sum of Rs. 42,39,000/- was disbursed to the Petitioner. It is further stated in the complaint that, towards discharge of her liability, the Petitioner issued cheque bearing No. 502209 dated 27.11.2019 for an amount of Rs. 25,38,877/- drawn on HDFC Bank Limited, Vasundhara Branch, Ghaziabad, Uttar Pradesh, in favour of Respondent No. 2. Upon presentation, the said cheque was returned unpaid with the endorsement “insufficient funds” vide return memo dated 05.12.2019. Consequent thereto, after sending the legal notice, the instant complaint under Section 138 of the Negotiable Instruments Act, 1881 was filed and the summoning order dated 01.02.2020 was issued.
ARGUMENTS FOR THE PETITIONER
3. Counsel for the petitioner contends that the petitioner’s husband carries on business under the name and style of M/s Square Construction Private Limited, a partnership firm comprising of her husband - Manjot Kumar Singh and one Manoj Yaduvanshi as partners. The said partnership firm purchased a Drilling Rig (ZT-35A) from Rosewood Projects Private Limited vide invoice dated 06.03.2010 for consideration of Rs. 57,14,286/-. For the purchase of the said machine, a loan was obtained from Respondent No. 2 in the year 2010, as the equipment was required for the firm’s business operations. He submits that at the time of availing the said loan, Respondent No. 2 obtained several cheques as security from the partnership firm and further also required the husband of the Petitioner to furnish blank cheques from his personal account, which was a joint account held with the Petitioner. It is submitted that the signatures of the Petitioner were also obtained on certain blank documents forming part of the loan transaction and that she was either made a guarantor or her signatures and cheques were taken merely as security and she was never a borrower in her individual capacity. Counsel contends that the petitioner had no role whatsoever in the day-to-day affairs of the partnership firm and that the loan in question was availed exclusively for the business of the firm and that Respondent No. 2 neither furnished a copy of the loan agreement to the partners nor annexed the same with the complaint.
4. He further contends that the husband of the Petitioner regularly paid the monthly instalments and that a substantial portion of the loan amount stood repaid. Towards the end of the year 2019, the partnership firm suffered financial losses, whereupon the partners requested Respondent No. 2 to repossess the machinery and adjust the outstanding amount, a majority of the loan having already been paid. In the year 2020, owing to the outbreak of the COVID-19 pandemic and the nationwide lockdown imposed under the Disaster Management Act, 2005, the business operations of the firm came to a standstill. Upon relaxation of the restrictions imposed by the Government, the partnership firm resumed operations and decided to return the vehic
