Madras HC | If wife issues a cheque to discharge husband’s liability and it gets dishonoured, can the wife be prosecuted under S. 138 NI Act? HC answers

Madras High Court: P.N. Prakash, J., decided a criminal original petition addressing an issue with regard to an offence under Section 138 of Negotiable Instruments Act, 1881.

Sree Gokulam Chits and Finance Corporation Private Limited initiated prosecution in the Court of Judicial Magistrate for the offence under Section 138 of the Negotiable Instruments Act, 1881 against Jaishankar (A1) and Nagalakshmi (A2).

Gokulam’s case was that Jaishankar (A1) joined some chit groups floated by them and became a subscriber. Jaishankar was given chit amounts towards which, he issued some cheques as security while so, Jaishankar defaulted on the repayment of the chits and when Jaishankar was informed that legal action would be taken against him, he and his wife came for settlement. His wife issued cheque, which on presentation at the bank was returned unpaid with endorsement “payment stopped by the drawer”.

Gokulam after the above incident issued a statutory demand notice and on non-completion of the said demand, Gokulam initiated a prosecution under Section 138 of the NI Act against them.

Decision

Bench noted that the impugned cheque in the present case was issued by the accused 2, i.e. Nagalakshmi from her personal bank account in discharge of the debt of her husband Jaishankar (A1).

Court added that the said cheque was not issued from the bank account of any juristic entity for invoking vicarious liability provisions viz. Section 141 of the NI Act.

If a cheque is issued by a person in discharge of the liability of another person and if the cheque is dishonored, the person, who issued the cheque can be prosecuted under Section 138 NI Act.

 High Court stated that just because Jaishankar (A1) was the beneficiary of the loan, he could not be prosecuted under Section 138 of the NI Act for the dishonour of the cheque issued by his wife Nagalakshmi (A2).

Hence, in view of the above discussion, Court while partly allowing the petition issued the following directions:

  • Prosecution against Jaishankar (A1) quashed.
  • Nagalakshmi was asked to appear before the Judicial Magistrate.
  • Nagalakshmi shall file a bail petition and cooperate in the expeditious disposal of the case without adopting any dilatory tactics.
  • If Nagalakshmi absconds, a fresh FIR can be registered under Section 229 A.

[M. Jaishankar v. Sree Gokulam Chits and Finance Corpn. (P) Ltd., 2020 SCC OnLine Mad 5550, decided n 04-12-2020]

3 comments

  • This Judgment is correct. When an Individual has signed the cheque from her own bank account maintained in her individual name only, the question of prosecuting her husband, although a beneficiary, does not arise under Section 138.

  • But the original suit is in the name of the A1, hence prosecution against A1 can be cancelled. Both A1 and A2 should be prosecuted to recover the money. Otherwise, there is no value for the cheque bounce law itself. THINK RIGHT ACT RIGHT.

    • Section 138 applies only to Signatories of a Cheque except when the Cheque is issued on by and on behalf of Company or Partnership Firm or some other incorporated entity.
      The considerations in a civil suit are ofcourse wider.

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