Court rules that non-signatory joint account holders cannot be held liable under Section 138 of the Negotiable Instruments Act.
In a significant ruling, the Madras High Court has quashed the proceedings against G. Revathi, a joint account holder, who was charged under Section 138 of the Negotiable Instruments Act, 1881, for cheque dishonour. The court held that liability under Section 138 is confined to the drawer of the cheque, and a joint account holder who has not signed the cheque cannot be prosecuted for its dishonour.
The case involved a transaction where G. Revathi and her husband, the second respondent, borrowed Rs. 18,00,000 from the complainant, B. Anil Kumar Jain. The cheques issued for repayment were dishonoured due to insufficient funds. Importantly, the cheques were signed solely by Revathi's husband, without her knowledge or consent.
Revathi's counsel, Mr. K. Selvaraj, argued that his client should not be held liable as she had not signed the cheques. Furthermore, Revathi had publicly disassociated herself from any financial transactions made by her husband through a public notice. The court recognized these submissions and noted precedents, including a Supreme Court ruling in Aparna A. Shah v. Sheth Developers Private Limited, affirming that non-signatory joint account holders are not liable under Section 138.
Justice G.K. Ilanthiraiyan emphasized that the liability for cheque dishonour is individual and cannot be extended to joint account holders unless they have signed the cheque. The court also clarified that the provisions of Section 141, dealing with offences by companies or associations, do not apply in this context.
Consequently, the court quashed the proceedings against Revathi while directing the trial to continue against her husband, the signatory of the cheque.
Bottom Line:
Under Section 138 of the Negotiable Instruments Act, 1881, a joint account holder cannot be prosecuted for cheque dishonour unless the cheque has been signed by that specific joint account holder.
Statutory provision(s): Negotiable Instruments Act, 1881 Sections 138, 141
G. Revathi v. B. Anil Kumar Jain, (Madras) : Law Finder Doc id # 2877936
