Writ petition dismissed. Holding that a person who is neither a drawer nor a signatory of the cheque cannot be held vicariously liable under Sections 138 and 141 of the Negotiable Instruments Act, regardless of their role in managing the business or providing a guarantee.
Petition dismissed with no order as to costs.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
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SAS
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CRIMINAL APPELLATE JURISDICTION
CRIMINAL WRIT PETITION NO.2260 OF 2013
Arvind S.Chheda,
Karta of Arvind S.Chheda H.U.F., through his constituted attorney Mukesh Lalji Bhatia
..Petitioner.
V/s.
Mr.Sandesh Shukla with Rajmani Verma i/b. Navdeep Vara & Associate for the petitioner.
Mr.S.A.Jabber i/b. Bilas Jadhav for respondent No.1.
Mr.Naresh Pradhan for respondent No.2.
Mr. H.J. Dedhia, APP for the respondent-State.
CORAM: NITIN W.SAMBRE, J.
DATE : MARCH 8, 2018
ORAL ORDER
This petition is by original complainant questioning the
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order dated October 22, 2012 passed by the learned Additional Sessions Judge, Greater Mumbai in Criminal Revision Application No.6/2012 quashing the complaint for an offence punishable under section 138 of the Negotiable Instruments Act, 1881 ('the N.I. Act' for short) against respondent No.2.
In a complaint case No.5004001-SS-11 initiated by the petitioner for an offence punishable under section 138 and 141 of the N.I.Act against the respondents before the learned Metropolitan Magistrate, 50th Court Vikhroli, Mumbai order of isuance of process on September 23, 2011 came to be passed.
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is impugned in the present petition at the behest of the petitionercomplainant.
(i) Accused No.1 is the proprietor of the concerned;
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(ii) The accused No.2 is not a signatory to the cheque and as such, there is no vicarious liability, (iii) even if accused No.2 is a signatory to the memorandum of understanding, she cannot be proceeded against in view of the firm being a proprietory concern.
a) That both the accused have joint and several liability towards repayment of cheque amount, as documents speaks of participation of even accused No.2 in the transaction in question. Attention of this Court is invited to the acknowledgement of outstanding loan executed by accused persons on August 27, 1997, bill of exchange and deed of guarantee of same date, which were executed by accused No.2 and also consent terms executed between the complainant and accused in the case in 2005 before the Metropolitan Magistrate, 50th Court, Vikhorli, Mumbai, etc.;
b) The learned Additional Sessions Judge ought not to
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have interfered in the order;
c) He would also try to rely on the provisions of section 141 of the N.I. Act particularly Explanation (a), which reads thus :-
“ Explanation – For the purposes of this section,(a) 'company' means any body coroporate and includes a firm or other association of individuals; ”
d) According to him, body of individual in the present case consists of respondent Nos.1 and 2 – accused persons and that being so, the ingredients of section 141 of N.I. Act are satisfied. He submits that the order impugned to the extent of dismissal of the complaint against accused No.2 is liable be quashed and set aside.
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be passed in the petition in the facts and circumstances of the case.
of the complaint and other materials on record are as under :-
(i) The petitioner through an authorised constituted attorney has filed complaint against respondent No.1 who is a proprietor of the firm, who is alleged to have taken loan from the petitioner and the cheque issued towards repayment was dishonoured.
of the petitioner that respondent No.2 stood as guarantor for the respondent No.1 and was helping in managing the day to day business. Even if she has signed as a guarantor on certain documents, respondent No.2 can be held vicariously responsible
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for the alleged offence under the N.I. Act being neither a signatory to the cheque nor was responsible in law for such dishonour of cheque. In support of above findings, appropriate support can be drawn from the judgment of the Apex Court in the matter of Mrs.Aparna A.Shah V/s. M/s. Sheth Developers Pvt. Ltd. & Anr.1 wherein in paragraphs 22 and 23, it is observed thus :-
“ 22. In the light of the above discussion, we hold that under Section 138 of the 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 our notice, 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.
23. We also hold that 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 said principle is an exception to Section 141 of the N.I. Act which would have no application in the case on hand. The
1 A.I.R. 2013 Supreme Court 3210
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proceedings filed under Section 138 cannot be used as an arm twisting tactics to recover the amount allegedly due from the appellant. It cannot be said that the complainant has no remedy against the appellant but certainly not under Section 138. 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. Even the High Court has specifically recorded the stand of the appellant that she was not the signatory of the cheque but rejected the contention that the amount was not due and payable by her solely on the ground that the trial is in progress. It is to be noted that only after issuance of process, a person can approach the High Court seeking quashing of the same on various grounds available to him. Accordingly, the High Court was clearly wrong in holding that the prayer of the appellant cannot even be considered. Further, the High Court itself has directed the Magistrate to carry out the process of admission / denial of documents. In such circumstances, it cannot be concluded that the trial is in advanced stage.”
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liable being neither a proprietor nor signatory to the cheque.
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be inferred from the record that respondent Nos.1 and 2 at any time before have acted as body of individuals.
( NITIN W.SAMBRE, J. )
3 issues framed by the court
Whether a person who is not a drawer of the cheque and not a signatory thereof can be held vicariously liable under Section 138 of the Negotiable Instruments Act.
Whether provisions of Section 141 of the Negotiable Instruments Act can be invoked to prosecute a non-signatory spouse of the actual drawer in a proprietary concern.
Whether the High Court is divested of jurisdiction to consider the proceedings against the accused who is not a signatory of the cheque.
Colour shows how this judgement treated each authority
Shah vs. Sheth Developers Pvt. Ltd.Referred¶51
Mrs.Aparna A.Shah V/s. M/s. Sheth Developers Pvt. Ltd. & Anr.
2 provisions across 1 enactments
Arvind S. Chheda
Bhuvnesh D. Sampat
Mrs. Hiral B. Sampat
State of Maharashtra
Nitin W.ambre
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
