Non-Signatory To Cheque From Joint Account Cannot Be Prosecuted Under NI Act: Madras High Court

The Madras High Court on 3 March held that a joint account holder cannot be prosecuted under Section 138 of the Negotiable Instruments Act unless they have signed the cheque in question.

Justice G. K. Ilanthiraiyan quashed cheque dishonour proceedings against G. Revathi, a co-accused, pending before the Judicial Magistrate, Puducherry, while directing that the trial continue against the other accused. He held:

“In the case on hand, admittedly the second respondent herein alone signed the cheque and issued in favour of the first respondent. Further, two private individuals cannot be said to be other association of individuals. Therefore, there is no question of invoking provisions under Section 141 of NI Act as the liability is an individual liability and cannot be said to be an offence committed by a company or by it corporate or firm or other associations of individuals.”

Revathi filed a petition seeking to quash the proceedings initiated against her in a cheque dishonour complaint. The complainant alleged that Revathi and the co-accused jointly borrowed Rs. 18 lakh for business and personal expenses and issued cheques from a joint account for repayment.

When the complainant presented the cheques for encashment, the bank dishonoured them due to insufficient funds, prompting initiation of proceedings under Section 138 of the Negotiable Instruments Act.

Revathi contended that, although the authorities had named her as an accused, she had not signed the cheques and was unaware of their issuance. She further stated that she had separated from the co-accused before the transaction and had issued a public notice disclaiming liability for any transactions undertaken by him.

She also argued that, despite sending a reply to the statutory notice, the authorities initiated proceedings against her without considering her response.

The Court observed that authorities can prosecute a person under Section 138 of the Negotiable Instruments Act in the case of a joint account only if the person has signed the cheque. Since Revathi had not signed the cheques in question, the Court held that the authorities could not sustain the proceedings against her.

Accordingly, the Court quashed the proceedings against Revathi and directed the trial court to continue the case against the other accused in accordance with law.

For Petitioner: Advocate K Selvaraj