The High Court of Judicature for Rajasthan at Jodhpur has refused to quash criminal proceedings against a woman who acted as a guarantor for her husband’s loan, affirming that a separate cheque issued as security creates an independent liability under the Negotiable Instruments Act, 1881. The ruling clarifies that the prior conviction and sentencing of a principal borrower do not automatically extinguish the liability of a guarantor if they have personally issued a cheque in connection with the same financial transaction.

Justice Sunil Beniwal, presiding over the matter, dismissed the petition filed by Manglesh Kanwar, who sought the cancellation of proceedings and acquittal in a case involving the dishonour of a cheque. The petitioner had argued that as the primary borrower, her husband, had already served his sentence for the defaulted loan, further prosecution against her as a guarantor was redundant and legally unsustainable. The court, however, maintained that the legal culpability of a guarantor, when initiated through the issuance of a personal cheque, remains subject to the scrutiny of the trial court regardless of the principal debtor’s status.

Independent Nature of Guarantor Liability

The case originated from a loan transaction between the petitioner’s husband, Dheeraj Singh Chauhan, and Royal Finance. The husband borrowed sums of ₹1,00,000 and ₹1,10,000 in 2015, for which he issued a cheque for the total amount of ₹2,10,000. To guarantee the repayment, Manglesh Kanwar also issued a cheque of the same amount from her own bank account. When both cheques were dishonoured due to insufficient funds, the finance firm initiated criminal complaints against both individuals under Section 138 of the Negotiable Instruments Act.

Counsel for the petitioner contended that the cheque issued by her was merely a security instrument and did not represent an independent, legally enforceable debt. The defence further argued that because the husband had been convicted in December 2019 and had already served his six-month prison sentence, the underlying debt had been satisfied, making the continuation of the trial against the wife a form of double recovery. Reliance was placed on previous judicial pronouncements to suggest that a guarantor cannot be held criminally liable for a debt originally incurred by another party.

The court rejected this interpretation, noting that the expression "any debt or other liability " in the Negotiable Instruments Act is sufficiently broad to encompass liabilities arising from guarantees. Justice Beniwal observed, "A cheque issued by a guarantor is not excluded from the ambit of Section 138 of the Act of 1881 merely because the underlying transaction was undertaken by the principal debtor ." The court further clarified that while the principle of double recovery is a valid concern, the mere fact of the husband’s imprisonment does not automatically prove that the debt has been fully liquidated or recovered, leaving the issue for the trial court to determine based on evidence.

Procedural Hurdles and Trial Status

The procedural history of the case was significantly complicated by the petitioner’s extended absence from court. Following the initial summons, she failed to appear for hearings due to reported matrimonial discord and relocation to her parental home. This resulted in the trial court declaring her an absconder and issuing a standing warrant. It was only after she eventually surrendered and obtained bail that her trial resumed. By the time the current petition reached the High Court, the matter had already reached an advanced stage, with the complainant having been cross-examined and the petitioner’s statement under Section 313 of the Code of Criminal Procedure having been recorded.

The respondent argued that the petitioner’s attempt to challenge the order of accusation after a delay of nearly five years was an attempt to avoid the impending conclusion of the trial. The High Court concurred with this assessment, highlighting that the trial court had followed proper procedure in stating the substance of the accusation in accordance with Section 251 of the Code of Criminal Procedure. The Court emphasized that it would not exercise its inherent powers under Section 482 of the Code—or the corresponding provisions of the Bharatiya Nagarik Suraksha Sanhita—to prematurely terminate proceedings that are already at the stage of final arguments.

Addressing Claims of Double Recovery

A critical aspect of the ruling was the Court’s distinction between criminal liability for dishonoured instruments and the underlying recovery of funds. While the petitioner argued that the husband’s completed sentence should insulate her from further prosecution, the High Court held that the two liabilities are distinct in the eyes of the law. The court acknowledged that while a complainant cannot recover the same debt more than once, any payments made by the husband must be verified and accounted for by the trial court during its final judgment.

The Court held that the petitioner’s status as a guarantor, and the characterization of her cheque as security, did not furnish sufficient grounds to invalidate the trial. The judgment provides a clear pathway for the petitioner to present her arguments regarding the nature of the transaction and the extent of the alleged debt directly to the Magistrate. By dismissing the petition, the court effectively directed the trial court to complete the proceedings, allowing the accused to raise all available legal defences in the trial court’s final assessment.

The matter remains pending before the Special Metropolitan Magistrate (N.I. Act Cases), where the parties are expected to conclude final arguments. The petitioner retains the right to present her evidence and arguments concerning the enforceability of the cheque and the history of payments made by her husband, ensuring that the trial court considers the merits of the case in its entirety before reaching a verdict.