The Court rules that liability under Section 138 of the Negotiable Instruments Act is strictly limited to the signatory drawer of the cheque.
In a significant ruling, the Allahabad High Court has quashed the proceedings against Madhu Singh, a joint account holder, in a cheque dishonour case under Section 138 of the Negotiable Instruments Act, 1881. The court, presided by Justice Sandeep Jain, delivered the judgment on May 6, 2026, clarifying that liability for cheque dishonour is confined solely to the drawer of the cheque, who must be the signatory.
The case involved allegations against Madhu Singh and Rahul Thind, her friend, for dishonouring two cheques amounting to Rs. 8,00,000 issued from their joint account. The cheques were issued by Rahul Thind alone, who assured repayment of loans extended by the complainant, Hari Om Pathak. Upon presentation, the cheques were returned unpaid due to the closure of the account.
Madhu Singh challenged the summoning order issued by the trial court, arguing that she was not the signatory to the cheques and thus, not liable under Section 138. Her counsel cited several Supreme Court judgments, including Aparna A. Shah v. Sheth Developers Pvt. Ltd., which uphold that joint account holders cannot be prosecuted unless they are signatories to the dishonoured cheque.
Justice Jain, agreeing with the submissions, emphasized that vicarious liability under Section 141 of the Negotiable Instruments Act applies only to companies and not to individual account holders. The court observed that the allegations in the complaint were primarily directed against Rahul Thind, with no specific role attributed to Madhu Singh.
In light of these observations, the High Court quashed the proceedings against Madhu Singh, stating that the trial court erred in summoning her to face trial under Section 138. However, the proceedings against Rahul Thind will continue as per law.
This judgment reinforces the legal position that only the drawer of the cheque, who is also the signatory, can be held liable for its dishonour, thereby protecting joint account holders from unwarranted prosecution.
Bottom line:-
Under Section 138 of the Negotiable Instruments Act, liability for dishonour of cheque is strictly limited to the drawer of the cheque. Joint account holders cannot be prosecuted unless they are signatories to the dishonoured cheque.
Statutory provision(s): Section 138, Section 141 of the Negotiable Instruments Act, 1881
Madhu Singh v. State of U.P., (Allahabad) : Law Finder Doc id # 2894499
