Joint Account Holder Who Is Not Signatory To Dishonoured Cheque Not Liable U/S 138 NI Act: Allahabad High Court
The Bench quashed proceedings against an accused citing absence of vicarious liability in personal joint accounts.
Justice Sandeep Jain, Allahabad High Court
The Allahabad High Court has reaffirmed that a joint account holder cannot be prosecuted for the dishonour of a cheque under Section 138 of the Negotiable Instruments Act, 1881 unless they are a signatory to the instrument.
The Court clarified that the statutory fiction of vicarious liability under Section 141 of the Act is restricted to companies, partnership firms, and associations of individuals, and cannot be extended to rope in private individuals who have not signed the cheque in question.
Justice Sandeep Jain summarising the precents on the subject-matter, observed, “…it is evident that Section 141 of the N.I. Act, which deals with vicarious liability, is applicable only to companies and partnership firms and not to individuals. Consequently, joint bank account holders cannot be prosecuted unless they are signatories to the dishonoured cheque”.
Advocate O.P. Rai appeared for the applicant and Advocate S.K. Dubey appeared for the respondent.
The facts involved a complaint filed by Hari Om Pathak, who alleged that he advanced a loan totalling ₹8,00,000 to Rahul Thind for business purposes. To repay the debt, Thind issued two cheques from a joint account held with the applicant, Madhu Singh.
Both cheques were dishonoured with the remark account closed, however, despite a statutory notice, the amount remained unpaid, leading to a complaint against both Thind and Singh under Sections 138 and 141 NI Act and Section 420 IPC.
The trial court at Ghaziabad issued a summoning order on July 03, 2006, requiring both accused to face trial specifically under Section 138 NI Act. Madhu Singh challenged this order before the High Court through an application under Section 482 CrPC, contending that as a non-signatory, she could not be held criminally liable.
The Bench relying on the Supreme Court precedents such as Aparna A. Shah v. Sheth Developers Pvt. Ltd. & Another (2013) 8 SCC 71, Jugesh Sehgal v. Shamsher Singh Gogi (2009) 14 SCC 683 and Alka Khandu Avhad v. Amar Syamprasad Mishra & Another (2021) 4 SCC 675, noted that Section 141 only applies to corporate entities.
It held that two private individuals do not constitute an association of individuals under the Act, since Madhu Singh had not signed the cheques, the primary requirement of being a drawer was not met, and no specific role in the transaction was attributed to her beyond the joint nature of the account.
“…Therefore, in light of the settled legal position, the applicant Madhu Singh, not being a signatory to the cheques, cannot be held liable for the offence under Section 138 of the N.I. Act. Moreover, a perusal of the complaint reveals that the allegations are primarily directed against Rahul Thind, and no specific role has been attributed to the applicant Madhu Singh, except that she is jointly and severally liable to repay the loan. Even on this ground, no prima facie case is made out against her. In view of the aforesaid facts and legal position, this Court is of the considered opinion that the trial court erred in summoning the applicant Madhu Singh to face trial under Section 138 of the N.I. Act. The summoning order, to that extent, is unsustainable in law and is liable to be quashed”, the Bench observed.
Accordingly, the Court allowed the application and quashed the proceedings insofar as they related to Madhu Singh. The Court further directed that the trial against the signatory, Rahul Thind, shall continue in accordance with the law.
Cause Title: Madhu Singh v. State of U.P. and Others (Neutral Citation: 2026:AHC:104853)
Appearances:
Applicant: O.P. Rai, Advocate.
Respondent: S.K. Dubey, Advocate.