Section 138 liability cannot be fastened on a person who did not sign the dishonoured cheque.

The complainant purchased a vehicle from M/s Shashank Auto Pvt. Ltd. and alleged that an excess amount of ₹1,15,867 was paid.

A cheque for the alleged refund, dated 26 September 2015 and bearing the company seal, was issued in favour of the complainant. The cheque was dishonoured on 17 October 2015 with the endorsement “Payment stopped by drawer”.

The complainant alleged that the petitioner, Shanti Swarup Sharma, had signed the cheque using the name “Shakti Swarup Sharma” with an intention to deceive him.

The petitioner denied issuing or signing the cheque and contended that Shanti Swarup Sharma and Shakti Swarup Sharma were different persons; he further claimed that he had no connection with the relevant company or its management.

The Additional Chief Judicial Magistrate-IV, Sitamarhi, took cognizance under Section 138 of the Negotiable Instruments Act by order dated 1 February 2016. The petitioner sought quashing of that order.

1. Whether criminal proceedings under Section 138 of the Negotiable Instruments Act could be maintained against the petitioner when he was not the signatory or drawer of the dishonoured cheque.

2. Whether the petitioner’s use of an alleged alias in the bail application and vakalatnama, by itself, was sufficient to fasten criminal liability upon him for the cheque dishonour.

3. Whether continuation of the prosecution against the petitioner constituted an abuse of the process of the court.

Section 138 of the Negotiable Instruments Act imposes criminal liability in relation to the dishonour of a cheque upon the drawer, subject to the statutory requirements.

The court relied on Modi Cements Ltd. v. Kuchil Kumar Nandi , (1998) 3 SCC 249, and M.M.T.C. Ltd. v. Medchl Chemicals & Pharma (P) Ltd. , (2002) 1 SCC 214, for the principle that dishonour following a “payment stopped” instruction may fall within the scope of Section 138, but liability must still be assessed in accordance with the statutory conditions.

The court also relied on Pepsi Foods Ltd. v. Special Judicial Magistrate , (1998) 5 SCC 749, for the principle that issuance of process is a serious judicial act and requires application of mind to whether the ingredients of the alleged offence are prima facie satisfied.

The court treated the petitioner’s status as a non-signatory to the cheque as decisive.

Since the cheque was allegedly issued and signed by “Shakti Swarup Sharma,” and the petitioner asserted that he was “Shanti Swarup Sharma,” the essential connection between the petitioner and the dishonoured cheque was not established on the materials considered by the court.

The mere fact that the petitioner was described by an alias in the bail application and vakalatnama did not, without more, prove that he had signed or issued the cheque.

Although the complainant alleged impersonation and fraudulent intent, the court concluded that such allegations could not sustain prosecution under Section 138 against a person who was not the cheque’s signatory or drawer.

Accordingly, continuation of the proceeding was found to be an abuse of the process of the court.

The order dated 1 February 2016 taking cognizance in Complaint Case No. 2016 of 2015 was quashed, and the criminal miscellaneous application was allowed.