Legal Proceedings Under Section 138 of the Negotiable Instruments Act Against N. Mamatha Nagesh Terminated Due to Lack of Jurisdiction and Vicarious Liability
In a landmark judgment delivered on May 8, 2026, the Calcutta High Court, presided over by Justice Uday Kumar, quashed the criminal proceedings against N. Mamatha Nagesh, who was embroiled in a cheque bounce case despite being a legal stranger to the transaction. The case revolved around a disputed cheque issued by a sole proprietorship owned by her husband, which was dishonored due to insufficient funds.
Mamatha Nagesh was implicated in the proceedings initiated by Inditrade Fincorp Limited under Section 138 of the Negotiable Instruments Act, 1881. The crux of the prosecution was an attempt to hold her liable due to her marital relationship with the proprietor, G.V. Nagesh, despite her non-signatory status on the dishonored cheque.
Justice Kumar meticulously examined the legal underpinnings of the case, emphasizing the strict in personam nature of liability under Section 138. He ruled that criminal liability cannot be extended to individuals who are neither the drawer nor the signatory of the cheque. The judgment clarified that the petitioner, Mamatha Nagesh, had no connection to the bank account from which the cheque was issued, rendering her prosecution a manifest failure of justice.
Moreover, the judgment addressed the inapplicability of vicarious liability under Section 141 of the Negotiable Instruments Act to sole proprietorships, highlighting that such liability is reserved for corporate entities with distinct legal identities. The court found that the description of the entity as a "proprietorship/partnership" was a strategic misrepresentation aimed at extending liability beyond its legal confines.
Justice Kumar further noted procedural lapses, including the failure of the magistrate to conduct a mandatory inquiry under Section 202 of the Cr.P.C. (corresponding to Section 225 of the Bharatiya Nagarik Suraksha Sanhita, 2023) before issuing process against a resident outside the territorial jurisdiction. This oversight constituted a jurisdictional error that vitiated the proceedings.
The court also identified a fundamental defect in the statutory demand notice, which demanded a sum vastly different from the cheque amount, thus failing to meet the legal requirements necessary for sustaining a prosecution under Section 138.
The judgment concluded that the proceedings were initiated for purposes of extra-legal coercion rather than a bona fide pursuit of justice, warranting quashing of the case against Mamatha Nagesh. The court directed the trial to proceed against the remaining accused without influence from this decision.
Bottom line:-
Quashing of proceedings under Section 138 of the Negotiable Instruments Act against a non-signatory spouse who is neither the drawer of the cheque nor the account holder, and the inapplicability of vicarious liability to sole proprietorships.
Statutory provision(s): Negotiable Instruments Act, 1881 Sections 138, 141; Bharatiya Nagarik Suraksha Sanhita, 2023 Section 225; Code of Criminal Procedure, 1973 Section 202; General Clauses Act, 1897 Section 27; Indian Evidence Act, 1872 Section 114.
N. Mamatha Nagesh v. State of West Bengal, (Calcutta) : Law Finder Doc id # 2895252
