Supreme Court: If a cheque from joint a/c bounces, liability is on person signing cheque

The Supreme Court has held that in case of issuance of cheque from joint accounts, only the person who signs the cheque can be prosecuted in a cheque bouncing case under Section 138 of the Negotiable Instruments Act. The other joint account members cannot be held culpable unless the cheque has been signed by them also. As per the apex court, the proceedings filed under Section 138 cannot be used as an arm twisting tactics to recover the amount allegedly due from the appellant.

The court clarified that the culpability attached to dishonour of a cheque can, in no case except in case of Section 141 of the N.I. Act (offences by companies), be extended to those on whose behalf the cheque is issued. This Court reiterates that it is only the drawer of the cheque who can be made an accused in any proceeding under Section 138 of the Act.

Distinguishing Individual and Company:

The court distinguished b/w individuals and companies and held that Section 141 of the N.I. Act is an instance of specific provision that in case an offence under Section 138 is committed by a company, the criminal liability for dishonor of a cheque will extend to the officers of the company. In case of the company, the officers of the company, who are accountable for the acts done in the name of the company, can be made accused for the acts which result in criminal action being taken against the company.

Month: Current Affairs - July, 2013