Criminal liability under Section 138 NI Act is strictly confined to the drawer of the cheque.

The respondent filed a criminal complaint under Section 138 of the Negotiable Instruments Act, 1881, against the petitioner and her son.

The respondent alleged that after paying Rs. 10,00,000 as an advance for a property purchase, the petitioner declined the sale.

Consequently, the petitioner’s son issued a cheque for the refund, which was returned unpaid due to "insufficient funds".

Despite a legal notice, the amount remained unpaid, leading the Trial Court to issue a summoning order dated 15.12.2021 against both the son and the petitioner.

The petitioner moved the High Court under Section 482 of the CrPC to quash the proceedings, contending she was neither a signatory to the cheque nor the owner of the bank account from which it was drawn.

1. Whether a person who is neither the signatory of the cheque nor the holder of the bank account from which the cheque is issued can be held criminally liable under Section 138 of the NI Act.

Section 138 of the Negotiable Instruments Act, 1881, which mandates that a cheque must be drawn by a person on an account maintained by them for the discharge of a debt.

Alka Khandu Avhad v. Amar Syamprasad Mishra (2021) 4 SCC 675, which established that criminal liability under Section 138 is strictly confined to the "drawer" of the cheque; even in cases of joint liability, a person cannot be prosecuted unless they are a signatory and the account is maintained by them.

The Court observed that the essential ingredients of Section 138 were not satisfied regarding the petitioner.

It noted that the respondent’s own case admitted the cheque was issued by the petitioner's son from his individual account to discharge the liability.

The petitioner was neither a signatory nor a joint account holder.

The Court reasoned that criminal liability is personal and strictly restricted to the drawer of the instrument.

Applying the ratio from Alka Khandu Avhad, the Court determined that the Trial Court acted in a mechanical manner by summoning the petitioner, as she had no legal role in the issuance or dishonor of the cheque.

The High Court allowed the petition and quashed the criminal complaint (CC NI Act No. 26009/2021) and the summoning order dated 15.12.2021 insofar as they pertained to the petitioner.

All subsequent proceedings emanating from the complaint against the petitioner were set aside.