The Madras High Court in the case of M.Jaishankar Vs. M/s.Sree Gokulam
Chits and Finance Corporation Private Limited
, decided recently on 04
December 2020, has answered the question as to whether prosecution under
section 138 of Negotiable Instruments Act, 1881 can be initiated against a
wife, whose cheque given in discharge of her husband's liability gets
The brief facts of the case are that the Respondent had initiated a
prosecution under Section 138 of the NI Act against the Petitioner & his
wife. The Petitioner had joined some chit groups floated by the Respondent
and was given chit amounts, towards which, he issued some cheques as
security. The Petitioner defaulted on the repayment of the chits and he
along with his wife came for settlement. His wife issued a cheque in favour
of the Respondent.
However, on presentation the said cheque was returned unpaid with the
endorsement 'payment stopped by the drawer'. The Petitioner did not make the
payment in response to the statutory demand notice and accordingly the
Respondent initiated proceedings u/s 138 of NI Act against the Petitioner &
his wife. The Court heard the matter in details and finally held thus:
It is trite that if a cheque is issued by a person in discharge of the
liability of another person and if the cheque is dishonoured, the person,
who issued the cheque can be prosecuted under Section 138 of the NI Act.
Just because Jaishankar (A1) was the beneficiary of the loan, he cannot be
prosecuted under Section 138 of the NI Act for the dishonour of the cheque
issued by his wife Nagalakshmi (A2).
The Court also observed that the said cheque was not issued from the bank
account of any juristic entity for invoking vicarious liability provisions
viz. Section 141 of the NI Act. Accordingly, the High Court quashed the
prosecution against the Petitioner Jaishankar (A1).
The Court directed his wife, Nagalakshmi (A2), to appear before the Judicial
Magistrate Court and file a bail petition under Section 436 Cr.P.C. and
execute a bond for a sum of Rs.10,000/- with two sureties. The Court also
directed her to cooperate in the expeditious disposal of the case and not to
adopt any dilatory tactics. The Court also directed that she shall
cross-examine the witnesses on the day they are examined-in-chief as held by
the Supreme Court in Vinod Kumar vs. State of Punjab
It is relevant that the issue of prosecution of the surety or the guarantor
under the provisions of the Negotiable Instruments Act stands finally
settled by the Apex Court in ICDS Ltd. v. Beena Shabeer and Anr
wherein the Apex Court held thus:
The language, however, has been rather specific as regards the intent of the
legislature. The commencement of the Section stands with the words Where
. The above noted three words are of extreme significance, in
particular, by reason of the user of the word any
the first three
words suggest that in fact for whatever reason if a cheque is drawn on an
account maintained by him with a banker in favour of another person for the
discharge of any debt or other liability, the highlighted words if read with
the first three words at the commencement of Section 138, leave no manner of
doubt that for whatever reason it may be, the liability under this provision
cannot be avoided in the event the same stands returned by the banker
The legislature has been careful enough to record not only discharge in
whole or in part of any debt but the same includes other liability as well.
This aspect of the matter has not been appreciated by the High Court,
neither been dealt with or even referred to in the impugned judgment.
The issue as regards the co-extensive liability of the guarantor and the
principal debtor, in our view, is totally out of the purview of Section 138
of the Act, neither the same calls for any discussion therein. The language
of the Statute depicts the intent of the law-makers to the effect that
wherever there is a default on the part of one in favour of another and in
the event a cheque is issued in discharge of any debt or other liability
there cannot be any restriction or embargo in the matter of application of
the provisions of Section 138 of the Act:
and other liability
are the two key expressions
which stands as clarifying the legislative intent so as to bring the factual
context within the ambit of the provisions of the Statute. Any contra
interpretation would defeat the intent of the legislature.
The High Court, it seems, got carried away by the issue of guarantee and
guarantor's liability and thus has overlooked the true intent and purport of
Section 138 of the Act. The judgments recorded in the order of the High
Court do not have any relevance in the contextual facts and the same thus
does not lend any assistance to the contentions raised by the respondents.
It is to be noted, however, that both the parties during the course of
arguments have made elaborate submissions on Sections 126 and 128 of the
Contract Act, but in our view, by reason of the specific language used by
the legislature, question of consideration of the matter from the point of
view of another Statute would not arise, neither we would like to express
any view since that may have some effect as regards the merits.
It is apposite to refer to Jugesh Sehgal v. Shamsher Singh Gogi
wherein the Apex Court reiterated the aforesaid principle and held thus:
Considering the language used in Section 138 and taking note of background
agreement pursuant to which a cheque is issued by more than one person, we
are of the view that it is only the “drawer
” of the cheque who can be
made liable for the penal action under the provisions of the N.I. Act. It is
settled law that strict interpretation is required to be given to penal
It is germane to refer to the dictum of the Apex Court in M/s.Aparna A.Shah
v. M/s.Sheth Developers Pvt. Ltd. and another, wherein the Apex Court
reiterating the principle that the drawer of the cheque could alone be
prosecuted held 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 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.”
It is relevant to refer to the case of Delhi High Court in Gita Berry v.
Genesis Educational Foundation
, the petitioner therein was wife and
she filed a petition under Section 482 of the Code seeking quashing of the
complaint filed under Section 138 of the N.I. Act. The case of the
petitioner therein was that the offence under Section 138 of the Act cannot
be said to have been made out against her only on the ground that she was a
joint account holder along with her husband.
It was pointed out that she has neither drawn nor issued the cheque in
question and, therefore, according to her, the complaint against her was not
maintainable. The Court pointing out that nothing was elicited from the
complainant to the effect that the petitioner was responsible for the cheque
in question, quashed the proceedings insofar as the petitioner therein.
In almost similar circumstances the Punjab & Haryana High Court in Smt.
Bandeep Kaur v. S. Avneet Singh
 held that in case the drawer of a
cheque fails to make the payment on receipt of a notice, then the provisions
of Section 138 of the Act could be attracted against him only. Learned
single Judge further held that though the cheque was drawn to a joint bank
account which was to be operated by anyone, i.e., the petitioner or by her
husband, but the controversial document is the cheque, the liability
regarding dishonouring of which can be fastened on the drawer of it. The
Court accepted the plea of the petitioner and quashed the proceedings
against her and permitted the complainant to proceed further against others.
It would be trite to refer to the Apex Court in Dalmia Cement (Bharat)
Ltd vs M/S Galaxy Trades & Agencies Ltd
 which observed thus:
The law relating to negotiable instrument is the law of commercial world
legislated to facilitate the activities in trade and commerce making
provision of giving sanctity to the instruments of credit which could be
deemed to be convertible into money and easily passable from one person to
another. In the absence of such instruments, including a cheque, the trade
and commerce activities, in the present day would, are likely to be
adversely affected as it is impracticable for the trading community to carry
on with it the bulk of the currency in force. The negotiable instruments are
in fact the instruments of credit being convertible on account of legality
of being negotiated and are easily passable from one hand to another.
To achieve the objectives of the Act, the legislature has, in its wisdom,
thought it proper to make such provisions in the Act for conferring such
privileges to the mercantile instruments contemplated under it and provide
special penalties and procedure in case the obligations under the
instruments are not discharged.
The laws relating to the Act are, therefore, required to be interpreted in
the light of the objects intended to be achieved by it despite there being
deviations from the general law and the procedure provided for the redressal
of the grievances to the litigants. Efforts to defeat the objectives of law
by resorting to innovative measures and methods are to be discouraged, lest
it may affect the commercial and mercantile activities in a smooth and
healthy manner, ultimately affecting the economy of the country.
Thus, the Court in such cases has to examine & analyse whether the effort of
the accused in such a case is to defeat the objectives of law by resorting
to innovative and strange measures. Such attempt on the part of the parties
must be discouraged and put to an end to by the Court. It is the bounden
duty of the Court to curb such attempts of the parties who deviate the
objectives of law contemplated Under Section 138 of the Negotiable
Instruments Act. It is no longer Res Integra that a spouse is not liable for
the dishonour of cheque issued by his/her spouse u/s 138 of NI Act, 1881.
If a person is not a signatory to the cheque, no liability can be fastened
upon him/her for the dishonour of the cheque u/s 138 of the Negotiable
Instruments Act. It is also abundantly clear that the ruse/ device created
by the accused by issuing cheque of the spouse to avoid prosecution is not
sustainable and the Courts would not come to the rescue of the offenders who
try to circumvent law by resorting to innovative methods.
Written By: Inder Chand Jain
- Crl.O.P.No.2016 of 2016 and Crl.M.P.No.1007 of 2016
- (2015) 3 SCC 220
- 2002(6) SCC 426
- (2009) 14 SCC 683
- AIR 2013 SC 3210
- 151 (2009) DLT 155
- AIR 2008 (NOC) 1301
- 2001(6) SCC 463
Ph no: 8279945021, Email: [email protected]
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