Joint Account-Holder Cannot Be Prosecuted U/S 138 Negotiable Instruments Act If He Has Not Signed The Cheque: Delhi HC

The petitioner and respondent were friends for about 15 years. The petitioner allegedly took a friendly loan of Rs.20,00,000/- from the respondent, promising to repay it once her financial crisis was over.

A Bench of Justice Manoj Kumar Ohri held, “in the present case, Section 141 of the NI Act is not attracted as the offence is not committed by a company. The petitioner has been impleaded in her individual capacity. The liability under Section 138 NI Act arises on account of dishonour of cheque issued for the discharge, in whole or in part of any debt or other liability. Further, for initiation of prosecution under Section 138 NI Act, a prior statutory notice is mandatorily required to be given to the drawer, to make good the payment of the amount mentioned in the cheque and only when the drawer receives a notice and fails to make the payment within the time provided by the Statute, does the dishonour become an offence.”

The loan was given through a cheque, which was later dishonored due to "stop payment."

Advocate Mohit Chaudhary appeared for the Petitioner and Advocate Sanjay Gupta appeared for the Respondent.

The respondent sent a statutory demand notice under Section 138 of the NI Act, but the petitioner claimed not to have received it and denied any knowledge of the complaint until November 2022.

The petitioner denied the receipt of any summons and claimed that the subject cheque was issued by her late husband. She argued that the complaint was not maintainable as the cheque did not bear her signature.

The Court discussed the legal conditions for prosecution under Section 138 of the NI Act and emphasized the importance of a prior statutory notice.

The Court observed that the complaint must fail due to a fundamental issue: the subject cheque was signed only by the petitioner's late husband, not by the petitioner herself. The Court added, “The subject cheque, copy of which has been placed on record, was signed only by petitioner’s late husbandArvind Gupta. Although it is conceded that the cheque was issued from an account jointly in the name of the Arvind Gupta and Neeta Gupta (petitioner herein) however, it is a matter of fact that the said cheque is not signed by the petitioner.”

The Court cited previous Supreme Court judgments to support the argument that in the case of joint accounts, a joint account holder cannot be prosecuted unless the cheque is signed by every joint account holder.

The Court concluded that the criminal complaint against the petitioner was an abuse of process of law and orders the quashing of the complaint. The petition was allowed, and the pending application was disposed of as infructuous.

Cause Title: Neeta Gupta v. Suman Anand

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