Punjab-Haryana High Court
Minni Kumari vs State Of Haryana And Another on 5 February, 2026
IN THE HIGH COURT OF PUNJAB & HARYANA
AT CHANDIGARH
139
CRM-M-3078-2026 (O&M).
Reserved On: 21.01.2026.
Pronounced On: 05.02.2026.
Uploaded On: 17.02.2026.
Minni Kumari
...Petitioner(s)
VERSUS
State of Haryana and another
...Respondent(s)
CORAM: HON'BLE MR. JUSTICE VINOD S. BHARDWAJ
PRESENT: Mr. Ujwal Anand, Advocate for the petitioner(s).
*****
VINOD S. BHARDWAJ, J.
The instant petition has been filed under section 528 of the
Bharatiya Nagarik Suraksha Sanhita, 2023 seeking setting aside of complaint
dated 14.01.2020 registered as NACT No. 13 of 2020 titled as Shri Ram
Transport Finance Co. Ltd. vs Minni Kumari filed by respondent no.2,
whereby proceedings under Section 138 of the Negotiable Instruments Act,
1881 have been initiated against the petitioner as well as the summoning order
dated 01.02.2020 through which the petitioner has been summoned to appear
in the said case.
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FACTS
2. The gravamen of the Petitioner’s case is that the impugned
proceedings arise out of a misuse of security cheques obtained at the
time of extending a loan facility. As per the version set out in the
complaint, Respondent No. 2 company is engaged in the business of
financing and leasing. The Petitioner allegedly approached Respondent
No. 2 for availing a vehicle loan in respect of a vehicle bearing Model
ZT-35. In pursuance thereof, a loan agreement dated 01.10.2013 was
executed between the parties and a sum of Rs. 42,39,000/- was
disbursed to the Petitioner. It is further stated in the complaint that,
towards discharge of her liability, the Petitioner issued cheque bearing
No. 502209 dated 27.11.2019 for an amount of Rs. 25,38,877/- drawn
on HDFC Bank Limited, Vasundhara Branch, Ghaziabad, Uttar
Pradesh, in favour of Respondent No. 2. Upon presentation, the said
cheque was returned unpaid with the endorsement “insufficient funds”
vide return memo dated 05.12.2019. Consequent thereto, after sending
the legal notice, the instant complaint under Section 138 of the
Negotiable Instruments Act, 1881 was filed and the summoning order
dated 01.02.2020 was issued.
ARGUMENTS FOR THE PETITIONER
3. Counsel for the petitioner contends that the petitioner’s husband
carries on business under the name and style of M/s Square
Construction Private Limited, a partnership firm comprising of her
husband – Manjot Kumar Singh and one Manoj Yaduvanshi as partners.
The said partnership firm purchased a Drilling Rig (ZT-35A) from
Rosewood Projects Private Limited vide invoice dated 06.03.2010 for
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consideration of Rs. 57,14,286/-. For the purchase of the said machine,
a loan was obtained from Respondent No. 2 in the year 2010, as the
equipment was required for the firm’s business operations. He submits
that at the time of availing the said loan, Respondent No. 2 obtained
several cheques as security from the partnership firm and further also
required the husband of the Petitioner to furnish blank cheques from his
personal account, which was a joint account held with the Petitioner. It
is submitted that the signatures of the Petitioner were also obtained on
certain blank documents forming part of the loan transaction and that
she was either made a guarantor or her signatures and cheques were
taken merely as security and she was never a borrower in her individual
capacity. Counsel contends that the petitioner had no role whatsoever
in the day-to-day affairs of the partnership firm and that the loan in
question was availed exclusively for the business of the firm and that
Respondent No. 2 neither furnished a copy of the loan agreement to the
partners nor annexed the same with the complaint.
4. He further contends that the husband of the Petitioner regularly
paid the monthly instalments and that a substantial portion of the loan
amount stood repaid. Towards the end of the year 2019, the partnership
firm suffered financial losses, whereupon the partners requested
Respondent No. 2 to repossess the machinery and adjust the outstanding
amount, a majority of the loan having already been paid. In the year
2020, owing to the outbreak of the COVID-19 pandemic and the
nationwide lockdown imposed under the Disaster Management Act,
2005, the business operations of the firm came to a standstill. Upon
relaxation of the restrictions imposed by the Government, the
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partnership firm resumed operations and decided to return the vehicle
against which the loan had been availed. On 25.12.2022, the said
vehicle was handed back to Respondent No. 2 for adjustment and
waiver of the outstanding loan amount and a receipt acknowledging the
return of the vehicle was issued by Respondent No. 2.
5. Counsel submits that the Petitioner came to know of the criminal
proceedings instituted against her, only in the year 2025, when she
learnt of the complaint under Section 138 of the Negotiable Instruments
Act, 1881 pending before the Court of the Judicial Magistrate First
Class, Samalkha, Panipat. Pursuant thereto, the Petitioner appeared
before the said Court on 11.09.2025 and was admitted to bail. It is
submitted that the petitioner was neither served with a legal notice as
contemplated under proviso (b) to Section 138 of the Negotiable
Instruments Act, 1881, nor was she aware of the filing of the complaint.
It is also contended that the complaint does not disclose as to how she
was personally liable or connected with the alleged transaction. Copies
of the paper book were obtained by her only on 08.12.2025 and that she
could not be served at the initial stage owing to the restrictions imposed
during the COVID-19 pandemic and she acquired knowledge of the
proceedings at a much later point in time.
6. Counsel vehemently contends that the Judicial Magistrate First
Class, Samalkha, Panipat, lacks the territorial jurisdiction to entertain
and proceed with the present complaint. It is submitted that the
complaint has been instituted by Respondent No. 2 before the learned
Judicial Magistrate First Class, Samalkha, Panipat, solely on the
premise that the cheque in question was presented at Samalkha.
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However, the law mandates that territorial jurisdiction in complaints
under Section 138 of the Negotiable Instruments Act, 1881 vests with
the court within whose jurisdiction the bank branch of the payee, where
the cheque is presented for collection, is situated. In the present case,
the payee maintains its bank account with Standard Chartered Bank,
CMS, New Delhi, and not at Samalkha, Panipat.
7. It is argued that the cheque was presented with the banker of the
complainant, namely Standard Chartered Bank, Samalkha, District
Panipat, for encashment and was returned unpaid with the remark
“insufficient funds” vide bank return memo dated 05.12.2019. The
cheque in question as well as the return memo further demonstrate that
the cheque was drawn on a bank situated at New Delhi. The Petitioner
maintains her bank account with HDFC Bank at Ghaziabad, New Delhi,
while Respondent No. 2 maintains its account with Standard Chartered
Bank, CMS, New Delhi. Thus, in view of the aforesaid admitted facts
the territorial jurisdiction to entertain the complaint lies with the
competent court at New Delhi, where the payee maintains its bank
account and not with the learned Judicial Magistrate First Class,
Samalkha, Panipat, merely because the cheque was presented there.
Reliance in this regard is placed on the judgment of Hon’ble Supreme
Court in Prakash Chimanlal Sheth v. Jagruti Keyur Rajpopat (2025
INSC 897), decided on 25.07.2025, wherein it has been held that
jurisdiction is determined by the location of the bank branch of the
payee where the cheque is presented for collection. Counsel submits
that applying the said principle to the facts of the present case, the
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proceedings instituted before the Judicial Magistrate First Class,
Samalkha, Panipat, are liable to be held as without jurisdiction.
8. Counsel further contends that no vicarious criminal liability can
be fastened upon the Petitioner under Section 141 of the Negotiable
Instruments Act, 1881, inasmuch as the essential preconditions for
invoking the said provision are wholly absent in the present case.
Vicarious liability in criminal law does not arise merely on account of
an alleged civil liability; rather, it can be attracted only where the
company or partnership firm is the principal offender and the person
sought to be proceeded against is shown to be in charge of and
responsible for the conduct of the business of such entity at the relevant
time. It is submitted that the Petitioner is the wife of one Manjot Kumar
Singh, who is stated to be a partner of M/s Square Construction Private
Limited. The Petitioner is neither a partner of the said firm nor involved
in its day-to-day affairs or management. The vehicle/machinery in
question, for which the loan was availed, was purchased in the name of
the partnership firm and not in the individual name or capacity of the
Petitioner. The assertions made in the complaint and the statutory
demand notice, to the effect that the Petitioner approached Respondent
No. 2 for availing the loan, are ex facie false and misleading. In fact, it
was the partners of the firm who obtained the loan from Respondent
No. 2. It is submitted that, in the present proceedings, neither the
partnership firm nor its partners have been arrayed as accused. In the
absence of the firm being impleaded and prosecuted as the principal
offender, the question of fastening vicarious liability upon the Petitioner
does not arise. The Respondent No. 2 has deliberately chosen to
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implicate only the wife of one of the partners, while consciously
omitting the firm and the actual borrowers, thereby rendering the
complaint legally untenable. Sub-section (1) of Section 141 of the
Negotiable Instruments Act, 1881, expressly provides that where an
offence under Section 138 is committed by a company, the company as
well as every person who, at the time the offence was committed, was
in charge of and responsible to the company for the conduct of its
business, shall be deemed to be guilty of the offence. While the
expression “every person” is undoubtedly wide, it is well settled that a
person who does not satisfy the twin requirements of being “in charge
of” and “responsible to the company for the conduct of its business”
cannot be proceeded against under Section 141 of the Act. In this
regard, reliance is placed on the judgment of National Small Industries
Corporation Limited v. Harmeet Singh Paintal and Another, (2010) 3
SCC 330, wherein the Supreme Court has held that specific averments
are mandatory in the complaint to disclose how and in what manner the
accused was in charge of and responsible for the conduct of the business
of the company or firm. Counsel contends that the complaint is
conspicuously silent as regards any specific role attributable to the
Petitioner in the affairs of the partnership firm. Neither any averment
has been made explaining the capacity in which the Petitioner is alleged
to have acted nor is there any assertion demonstrating that she was in
charge of or responsible for the conduct of the business of the firm at
the relevant time. Even the allegation that the machinery was purchased
by the Petitioner is factually incorrect and unsupported by any material.
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9. Counsel submits that merely because the Petitioner is alleged to
have stood as a guarantor for the loan transaction, or because her
signatures appear on the cheque drawn on a joint account held with her
husband, she cannot be subjected to criminal prosecution in isolation.
It is submitted that the liability arising under the Partnership Act, 1932
as well as the Indian Contract Act, 1872 is purely civil in nature. Such
civil liabilities cannot be elevated to criminal culpability and vicarious
criminal liability under Section 141 of the Negotiable Instruments Act,
1881 cannot be fastened upon the Petitioner. It is further submitted that
vicarious liability under sub-section (1) of Section 141 of the
Negotiable Instruments Act can be attracted only where the person
sought to be proceeded against was, at the relevant time, in overall
control of and responsible for the day-to-day affairs of the business of
the company or firm. In this context the Hon’ble Supreme Court, in
Standard Chartered Bank v. State of Maharashtra and Others, 2016
(2) RCR (Cri) 778 has held that a complaint under Section 138 of the
Negotiable Instruments Act is not maintainable in the absence of the
company being made a party to the proceedings. Applying the said
settled principle to the facts of the present case, the complaint filed by
Respondent No. 2, having been instituted without impleading the
partnership firm as an accused, is legally untenable.
10. Counsel contends that at the time of availing the loan facility,
Respondent No. 2 had obtained several cheques from the partnership
firm as security and had also procured cheques from the personal
account of the husband of the Petitioner, which was a joint account held
by the Petitioner and her husband. The cheque in question forms part of
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139 CRM-M-3078-2026 (O&M)such security cheques. The Respondent No. 2 has misused the said
security cheques and the amount claimed in the demand notice is neither
legally due nor payable by the Petitioner, either in her individual
capacity or on behalf of the partnership firm. It is also submitted that
the demand notice itself is vitiated on account of containing false and
misleading assertions. The Respondent No. 2 has demanded a sum of
Rs. 25,38,877/-. However, the notice is conspicuously silent as to the
basis or computation of the said amount. Neither the demand notice nor
the complaint discloses any particulars or break-up explaining how the
said figure was arrived at or what amount, if any, was outstanding
against the partnership firm. He contends that in the absence of any
disclosure regarding the computation of the alleged liability renders the
demand vague and arbitrary. A demand notice under Section 138 of the
Negotiable Instruments Act must clearly specify the legally enforceable
debt or liability sought to be recovered. It is thus contended that the
initiation and continuation of the criminal proceedings against the
Petitioner are illegal and liable to be quashed.
CONCLUSION
11. I have heard the counsel appearing on behalf of the petitioner and
have gone through the documents and judgments appended with the
present petition.
12. At the outset, it would be apposite to refer to the relevant
provisions of the Negotiable Instruments Act, 1881, which are extracted
hereinbelow: –
138. Dishonour of cheque for insufficiency, etc., of funds in the
account.–Where any cheque drawn by a person on an account
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139 CRM-M-3078-2026 (O&M)maintained by him with a banker for payment of any amount of
money to another person from out of that account for the
discharge, in whole or in part, of any debt or other liability, is
returned by the bank unpaid, either because of the amount of
money standing to the credit of that account is insufficient to
honour the cheque or that it exceeds the amount arranged to be
paid from that account by an agreement made with that bank,
such person shall be deemed to have committed an offence and
shall, without prejudice to any other provision of this Act, be
punished with imprisonment for a term which may extend to two
years, or with fine which may extend to twice the amount of the
cheque, or with both:
Provided that nothing contained in this section shall apply
unless–
(a) the cheque has been presented to the bank within a period of
six months from the date on which it is drawn or within the period
of its validity, whichever is earlier;
(b) the payee or the holder in due course of the cheque, as the
case may be, makes a demand for the payment of the said amount
of money by giving a notice in writing, to the drawer of the
cheque, within thirty days of the receipt of information by him
from the bank regarding the return of the cheque as unpaid; and
(c) the drawer of such cheque fails to make the payment of the
said amount of money to the payee or as the case may be, to the
holder in due course of the cheque within fifteen days of the
receipt of the said notice.
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xxx xxx xxx xxx xxx xxx xxx
141. Offences by companies.–(1) If the person committing an
offence under Section 138 is a company, every person who, at the
time the offence was committed, was in charge of, and was
responsible to the company for the conduct of the business of the
company, as well as the company, shall be deemed to be guilty of
the offence and shall be liable to be proceeded against and
punished accordingly:
Provided that nothing contained in this sub-section shall render
any person liable to punishment if he proves that the offence was
committed without his knowledge, or that he had exercised all
due diligence to prevent the commission of such offence.
[Provided further that where a person is nominated as a Director
of a company by virtue of his holding any office or employment
in the Central Government or State Government or a financial
corporation owned or controlled by the Central Government or
the State Government, as the case may be, he shall not be liable
for prosecution under this chapter.]
(2) Notwithstanding anything contained in sub-section (1), where
any offence under this Act has been committed by a company and
it is proved that the offence has been committed with the consent
or connivance of, or is attributable to, any neglect on the part of,
any director, manager, secretary or other officer of the company,
such director, manager, secretary or other officer shall also be
deemed to be guilty of that offence and shall be liable to be
proceeded against and punished accordingly.
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Explanation.–For the purposes of this section, —
(a) “company” means any body corporate and includes a
firm or other association of individuals; and
(b) “director”, in relation to a firm, means a partner in the
firm.”
xxx xxx xxx xxx xxx xxx xxx
142. Cognizance of offences.–[(1)] Notwithstanding anything
contained in the Code of Criminal Procedure, 1973 (2 of
1974),–
(a) no court shall take cognizance of any offence punishable
under Section 138 except upon a complaint, in writing, made by
the payee or, as the case may be, the holder in due course of the
cheque;
(b) such complaint is made within one month of the date on which
the cause of action arises under clause (c) of the proviso to
[Provided that the cognizance of a complaint may be taken by the
Court after the prescribed period, if the complainant satisfies the
Court that he had sufficient cause for not making a complaint
within such period.]
(c) no court inferior to that of a Metropolitan Magistrate or a
Judicial Magistrate of the first class shall try any offence
punishable under Section 138.]
[(2) The offence under Section 138 shall be inquired into and
tried only by a court within whose local jurisdiction,–
(a) if the cheque is delivered for collection through an account,
the branch of the bank where the payee or holder in due course,
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139 CRM-M-3078-2026 (O&M)as the case may be, maintains the account, is situated; or
(b) if the cheque is presented for payment by the payee or holder
in due course, otherwise through an account, the branch of the
drawee bank where the drawer maintains the account, is
situated.
13. Section 142(2)(a) of the Negotiable Instruments Act, 1881, governs the
question of territorial jurisdiction in prosecutions under Section 138 where
the cheque is delivered for collection through an account. The provision
lays down that the offence shall be inquired into and tried only by a court
within whose local jurisdiction the branch of the bank where the payee or
holder in due course maintains the account is situated, provided the cheque
is delivered for collection through that account.
14. At the outset, it is necessary to delineate the character of the defect
arising from non-compliance with Section 142(2)(a) of the Negotiable
Instruments Act. The provision regulates territorial jurisdiction and
identifies the particular court within whose local limits the complaint under
Section 138 is to be inquired into and tried. It does not concern the inherent
subject-matter jurisdiction of the criminal court. The offence under Section
138 remains triable by a Judicial Magistrate First Class or a Metropolitan
Magistrate, as the case may be. Thus, in the present case, the court which
has taken cognizance is not a court lacking competence to try offences
under the Act; rather, it is a court which may have, at best, erroneously
assumed territorial jurisdiction. The same may, pave way for other
remedies in law, if so advised, but do not make out a case for quashing.
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15. At this juncture, it would also be necessary to make a reference to
Section 460 and Section 462 of the Code of Criminal Procedure, 1973,
which is extracted hereunder for ready reference:
460. Irregularities which do not vitiate proceedings.–If any
Magistrate not empowered by law to do any of the following
things, namely:–
(a) to issue a search-warrant under section 94;
xxx xxx xxx
(e) to take cognizance of an offence under clause (a) or clause
(b) of sub-section (1) of section 190;
(f) to make over a case under sub-section (2) of section 192;
xxx xxx xxx
462. Proceedings in wrong place.–No finding, sentence or
order of any Criminal Court shall be set aside merely on the
ground that the inquiry, trial or other proceedings in the course
of which it was arrived at or passed, took place in a wrong
sessions division, district, sub-division or other local area,
unless it appears that such error has in fact occasioned a failure
of justice.
16. A perusal of the above reflects that Section 460 lays down an important
principle of criminal procedure i.e. not every mistake committed by a
judicial officer should automatically nullify the entire proceeding. The law
recognizes that certain errors, if committed in good faith, ought not to result
in the collapse of the process.
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17. Clause (e) of Section 460 specifically deals with cases where a
Magistrate, who is not legally empowered to take cognizance of an offence
under clause (a) or clause (b) of Section 190(1), nevertheless takes
cognizance erroneously but in good faith. The section clearly provides if a
Magistrate mistakenly assumes jurisdiction and takes cognizance under
Section 190(1)(a) or (b), but does so honestly and without mala fides, the
proceedings are protected and do not automatically become void. This
provision is further strengthened by Section 462 of the CrPC, which lays
down that no finding, sentence or order shall be set aside merely because
the proceedings were conducted in the wrong territorial area, unless it is
shown that such error has in fact resulted in a failure of justice.
18. In Purshottam Jethanand v. The State of Kutch, AIR 1954 SC 700,
the Hon’ble Supreme Court held that where a Magistrate, though not
empowered, takes cognizance of an offence under Section 190(1)(a) or (b)
of the Code of Criminal Procedure, such defect does not ipso facto vitiate
the proceedings. It was observed that the irregularity stands cured by virtue
of Section 529 of the Code of Criminal Procedure, 1868 (corresponding to
Section 460 of the Code of Criminal Procedure, 1973), provided that the
act was done in good faith and no prejudice has been caused to the accused.
It was further held that even if an objection is raised regarding the
Magistrate’s competence at a later stage, the defect would be deemed cured
if the Magistrate had bona fide assumed the existence of such power while
taking cognizance and no failure of justice has resulted therefrom.
19. Thus, for Section 460(e) to apply, three essential conditions must be
satisfied: first, the act in question must fall within the category mentioned
in the provision, such as taking cognizance under Section 190(1)(a) or (b);
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second, the Magistrate must have acted erroneously, meaning that he did
not in fact possess the legal authority to take cognizance; and third, the act
must have been done in good faith. If these requirements are fulfilled, the
defect is treated as curable.
20. Further, in Willie (William) Slaney v. State of Madhya Pradesh, AIR
1956 SC 116, a Constitution Bench of the Hon’ble Supreme Court
elucidated the scope of Section 529 of the Code of Criminal Procedure,
1898 (corresponding to Section 460 of the Code of Criminal Procedure,
1973) and held that in cases falling within the ambit of the said provision,
the irregularities enumerated therein do not vitiate the proceedings and the
question of prejudice becomes immaterial. It was observed as under: –
14. We now proceed to examine the relevant Sections of the
Code, Chapter 45 deals generally with irregular proceedings.
There are certain irregularities which do not vitiate the
proceedings. They are set out in Section 529. No question of
prejudice arises in this class of case because the section states
categorically that they shall not vitiate the proceedings. Certain
other irregularities are treated as vital and there the proceedings
are void irrespective of prejudice. These are set out in Section
530. A third class is dealt with in Sections 531, 532, 533, 535,
536(2) and 537. There, broadly speaking, the question is whether
the error has caused prejudice to the accused or, as some of the
sections put it, has occasioned a failure of justice. The examples
we have given are illustrative and not exhaustive. What we are
seeking to demonstrate is that the Code has carefully classified
certain kinds of error and expressly indicates how they are to be
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dealt with. In every such case the Court is bound to give effect to
the express commands of the legislature: there is no scope for
further speculation. The only class of case in which the Courts
are free to reach a decision is that for which no express provision
is made.
21. Now, adverting to the facts of the present case, it is evident that JMIC,
Samalkha took cognizance of the offence under Section 190(1)(a) of the
Code and proceeded to issue summons, even though he was not empowered
to do so in view of Section 142(2)(a) of the Negotiable Instruments Act.
However, I am of the opinion that such an error squarely falls within the
scope of Section 460(1)(e) of the CrPC. The defect relates to the act of
taking cognizance under Section 190(1)(a) and provided it was done in
good faith, it constitutes a curable irregularity rather than a nullity.
22. The next contention advanced on behalf of the Petitioner that no
vicarious criminal liability can be fastened upon her under Section 141 of
the Negotiable Instruments Act, 1881 is wholly untenable and is liable to
be rejected at the threshold. The submission proceeds on a fundamentally
flawed premise that the Petitioner is sought to be prosecuted merely by
reason of her matrimonial relationship with one of the partners of the firm
or on account of a civil liability emanating from a loan transaction. The
record, however, unmistakably demonstrates that the prosecution is
founded not on any derivative or remote liability, but on the Petitioner’s
own conscious and voluntary act of issuing and signing the cheque in
question. The averments contained in the complaint read thus: –
“2. That the accused had approached the complainant at its
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139 CRM-M-3078-2026 (O&M)assistance of a vehicle Model ZT-35 and requested to approve
loan for vehicle and on the requests of the accused, the
complainant agreed for financial assistance to the accused. The
complainant agreed to give loan to the accused and an loan &
Guarantee agreement was executed between the complainant
and the accused on 01/10/2013 vide Loan Cum Hypothecation
Agreement bearing No. SEF054310010001 and the complainant
disbursed a loan amount of Rs. 42,39,000/- as vehicle loan to the
accused.
3. That as per Loan Agreement dated 01/10/2013, the accused
had agreed to repay the above said loan amount to the
complainant in equated monthly installments.
4. That the accused has running loan account the complainant
and the accused for discharging his aforesaid legal loan liability
issued and handed over a cheque bearing No. 502209 dated
27/11/2019 for Rs. 25,38,877/- drawn on HDFC Bank Ltd.,
Branch Vasundhara Ghaziabad, UP-201012 in favour of the
complainant as a part payment with assurance that the said
encashed on its presentation.
5. That as per assurance of the accused, the complainant
presented the said cheque with its banker i.e. Standard Charted
Bank, Samalkha, Distt. Panipat-132101 for encashment but the
returned back unpaid by banker of the accused with the remark,
“Insufficient Funds” vide Bank return memo dated 05/12/2019.”
23. It is evident from the allegations levelled in the complaint that the
petitioner is not only a co-borrower in the loan account for purchase of
machinery, even though for the partnership firm, she is also the guarantor
and had issued the cheques in such capacity, from the joint account with
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her husband who is not only a borrower but also a partner in the partnership
firm.
24. It is also undisputed that the cheque in question was drawn from a joint
bank account maintained by the Petitioner along with her husband and that
the said cheque bears the signature of the Petitioner. The liability sought to
be enforced through the complaint under Section 138 of the Negotiable
Instruments Act does not flow from the internal arrangements of the
partnership firm or from the inter se rights and obligations of the partners,
but from the statutory consequences attached to the issuance of a cheque
which, upon presentation, has been dishonoured. The moment the
Petitioner affixed her signature on a cheque drawn on a joint account as a
guarantor and co-borrower, towards discharge of a liability, she assumed
direct and personal statutory responsibility for the payment represented
thereby. Such liability cannot be diluted on a plea that the Petitioner was
not involved in the day-to-day affairs of the partnership firm. A person who
signs and issues a cheque, even if as a guarantor/co-borrower of a loan is
directly liable under Section 138 of the Act, irrespective of whether the
underlying transaction pertains to a partnership firm or was on account of
a personal obligation.
25. Further, under the Indian Contract Act, 1872, the liability of a guarantor
is co-extensive with that of the principal debtor, unless otherwise provided
by the contract. A person who undertakes such liability cannot evade
responsibility by subsequently characterising the same as purely “civil” in
nature, when the statutory ingredients of a criminal offence under Section
138 of the Negotiable Instruments Act stand prima facie satisfied. The
offence under Section 138 is a distinct statutory offence, and the civil
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character of the underlying transaction neither effaces nor eclipses the
criminal accountability that arises upon the dishonour of a cheque issued
towards a legally enforceable debt or liability. The relevant provisions of
the Contract Act, 1872, are extracted as under:
126. “Contract of guarantee”, “surety”, “principal debtor” and
“creditor”.–A “contract of guarantee” is a contract to perform the
promise, or discharge the liability, of a third person in case of his
default. The person who gives the guarantee is called the “surety”;
the person in respect of whose default the guarantee is given is
called the “principal debtor”, and the person to whom the
guarantee is given is called the “creditor”. A guarantee may be
either oral or written.
127. Consideration for guarantee.–Anything done, or any promise
made, for the benefit of the principal debtor, may be a sufficient
consideration to the surety for giving the guarantee.
128. Surety’s liability.–The liability of the surety is co-extensive
with that of the principal debtor, unless it is otherwise provided by
the contract.
26. Viewed thus, the attempt of the Petitioner to avoid liability by invoking
the doctrine of absence of vicarious liability is clearly misconceived. The
Petitioner’s accountability in the present case flows directly from her status
as a surety and have issued a cheque in discharge of liability of principal
debtor by issuing a cheque from the joint account and being signatory to
the cheque, coupled with the obligations imposed by the Negotiable
Instruments Act. The contention raised on her behalf is, therefore, devoid
of merit and cannot be sustained.
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27. The next contention advanced on behalf of the Petitioner that the
complaint under Section 138 of the Negotiable Instruments Act, 1881 is
vitiated for want of impleadment of the partnership firm as an accused is
misconceived and devoid of merit. The argument rests on an erroneous
mixing of vicarious liability under Section 141 of the Act with direct
liability arising under Section 138 thereof. The present proceedings are not
founded upon the principle of vicarious liability alone, but upon the
Petitioner’s own act of issuing and signing the cheque which has admittedly
been dishonoured. It is well settled that the sine qua non for the offence
under Section 138 of the Negotiable Instruments Act is the drawing of a
cheque by a person on an account maintained by her, the presentation of
such cheque for discharge of a legally enforceable debt or liability and its
subsequent dishonour. Where the accused is herself the drawer and
signatory of the cheque, criminal liability under Section 138 is direct and
personal. In such a situation, the absence of the partnership firm as an
accused does not render the complaint legally untenable.
28. The mandate of Section 141 of the Negotiable Instruments Act, 1881,
comes in play when the offence is committed by the Company/Firm. The
expression “offence” used under Section 141 of the Negotiable Instruments
Act, 1881 is in the context of dishonour of the cheque and not ‘non-payment
of liability.’ While the default is non-payment of borrowed amount is
undisputedly by the partnership firm, however, the Negotiable Instruments
Act, 1881, only has to consider about who is the drawer of the cheque and
whether such cheque was drawn in discharge of a legally enforceable
liability or not. Once the above test is satisfied, the drawer of cheque
renders himself liable to be prosecuted. The petitioner being surety,
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becomes liable to discharge liability enforceable against the principal
debtor.
29. The submission that the Petitioner is sought to be prosecuted merely
because she stood as a guarantor or because her signatures appear on a
cheque drawn on a joint account cannot be accepted as a legally sustainable
defence. The act of signing of a loan agreement or a co-borrower and
signing a cheque from personal account as a surety is not a passive or
mechanical act. It is a conscious representation to the payee that the drawer
stands as a surety and undertakes to honour the payment. Once the cheque
is dishonoured, the statutory consequences under Section 138 follow,
subject to proof at trial. The Petitioner cannot avoid prosecution by
claiming that the underlying transaction was connected to a partnership
firm or that her liability was only civil in nature.
30. The reliance placed on the Partnership Act, 1932 and the Indian
Contract Act, 1872 to contend that the liability is purely civil is equally
misplaced. It is trite in law that while the underlying transaction may give
rise to civil rights and consequences inter se amongst the petitioners, the
partners and contracting parties, the dishonour of a cheque issued towards
discharge of such liability attracts an independent statutory offence under
Section 138 of the Negotiable Instruments Act. The criminality arises not
from the partnership arrangement or the contract of guarantee, but from the
dishonour of the cheque upon presentation. The enforceability of the civil
rights inter se amongst parties and other partners does not eclipse the
criminal liability statutorily engrafted under the Act.
31. The argument based upon Section 141 of the Negotiable Instruments
Act is also misconceived. Section 141 comes into play where the company
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or firm commits the offence but liability is sought to be extended
vicariously to persons in charge of and responsible for the conduct of its
business. In the present case, the Petitioner is not sought to be prosecuted
as a person connected with the firm for an offence by the firm, but as the
drawer and signatory of the cheque itself. Consequently, the requirement
of impleading the firm as a principal accused does not arise in the facts of
the present case.
32. The reliance placed on the decision of the Supreme Court is also clearly
distinguishable. The said decisions dealt with the prosecution of officers of
a company on the basis of vicarious liability, in the absence of the company
being arrayed as an accused even though cheques had been issued for the
Company. The ratio of the said judgments has no application to a case
where the accused is herself the drawer of the cheque and is sought to be
prosecuted for her own act under Section 138 of the Negotiable Instruments
Act.
33. In view of the foregoing discussion, I am of the opinion that the non-
impleadment of the partnership firm does not render the complaint against
the Petitioner unsustainable. The contention raised on behalf of the
Petitioner is, therefore, rejected.
34. The next contention advanced on behalf of the Petitioner assailing the
statutory demand notice issued under proviso (b) to Section 138 of the
Negotiable Instruments Act, 1881 is equally devoid of merit and cannot be
accepted. Upon a perusal of the record and the settled legal position, this
Court finds no substance in the plea that the complaint is vitiated either on
account of non-service of notice or due to any alleged defect in its contents.
At the outset, it must be emphasised that the issuance of a demand notice
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under proviso (b) to Section 138 is a condition precedent for launching
prosecution. What is required is that the notice be sent to the correct address
of the drawer by registered post or other recognised modes. Once such
dispatch is established, the presumption of due service arises by virtue of
Section 27 of the General Clauses Act, 1897 and Section 114 of the Indian
Evidence Act, 1872, unless the contrary is proved. In the present case, the
record reflects that the demand notice was duly dispatched to the address
of the Petitioner as disclosed in the loan documents and the complaint. The
mere allegation of an incorrect pin code, without anything more is
insufficient to rebut the statutory presumption of service.
35. The plea that the cheque in question was a “security cheque” and that
its alleged misuse vitiates the demand notice is also untenable. It is now
well settled by the Supreme Court in the judgment of Sripati Singh v. State
of Jharkhand, (2022) 18 SCC 614 that even a cheque issued as security, if
presented towards a subsisting legally enforceable debt or liability and
dishonoured, attracts the rigours of Section 138 of the Negotiable
Instruments Act. The characterisation of the cheque as a security cheque
does not, by itself, render the demand notice invalid or non est. The relevant
extract thereof reads thus :
21. A cheque issued as security pursuant to a financial transaction
cannot be considered as a worthless piece of paper under every
circumstance. “Security” in its true sense is the state of being safe and
the security given for a loan is something given as a pledge of payment.
It is given, deposited or pledged to make certain the fulfilment of an
obligation to which the parties to the transaction are bound. If in a
transaction, a loan is advanced and the borrower agrees to repay the
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amount in a specified time-frame and issues a cheque as security to
secure such repayment; if the loan amount is not repaid in any other
form before the due date or if there is no other understanding or
agreement between the parties to defer the payment of amount, the
cheque which is issued as security would mature for presentation and
the drawee of the cheque would be entitled to present the same. On such
presentation, if the same is dishonoured, the consequences
contemplated under Section 138 and the other provisions of the NI Act
would flow.
22. When a cheque is issued and is treated as “security” towards
repayment of an amount with a time period being stipulated for
repayment, all that it ensures is that such cheque which is issued as
“security” cannot be presented prior to the loan or the instalment
maturing for repayment towards which such cheque is issued as
security. Further, the borrower would have the option of repaying the
loan amount or such financial liability in any other form and in that
manner if the amount of loan due and payable has been discharged
within the agreed period, the cheque issued as security cannot
thereafter be presented. Therefore, the prior discharge of the loan or
there being an altered situation due to which there would be
understanding between the parties is a sine qua non to not present the
cheque which was issued as security. These are only the defences that
would be available to the drawer of the cheque in a proceeding initiated
under Section 138 of the NI Act. Therefore, there cannot be a hard-and-
fast rule that a cheque which is issued as security can never be
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presented by the drawee of the cheque. If such is the understanding a
cheque would also be reduced to an “on demand promissory note” and
in all circumstances, it would only be a civil litigation to recover the
amount, which is not the intention of the statute. When a cheque is
issued even though as “security” the consequence flowing therefrom is
also known to the drawer of the cheque and in the circumstance stated
above if the cheque is presented and dishonoured, the holder of the
cheque/drawee would have the option of initiating the civil proceedings
for recovery or the criminal proceedings for punishment in the fact
situation, but in any event, it is not for the drawer of the cheque to
dictate terms with regard to the nature of litigation.
(Emphasis supplied)
36. The argument that the amount claimed in the demand notice is not
legally due or that the Respondent No. 2 failed to furnish a detailed break-
up or computation of the sum of Rs. 25,38,877/-, also fails to impress this
Court. The statutory requirement under proviso (b) to Section 138 is that
the notice must make a demand for payment of the cheque amount within
the prescribed period. So long as the notice clearly demands payment of the
amount covered by the dishonoured cheque, the requirement of law stands
satisfied. Legal presumption which flows from an instrument is that the
amount mentioned therein is acknowledged as payable. Even though such
presumption is rebuttable, however, the said stage has not come. The
burden is to be discharged during trial and merely a prima facie case is
required to be shown for summoning of an accused. The liability that had
crystallised on the date of presentation of the cheque is a matter of evidence
and cannot be adjudicated at this stage. Any dispute with regard to the
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correctness or quantum of liability is a matter to be adjudicated during trial
and does not render the notice invalid. At the stage of considering the
maintainability of the complaint, the Court is only required to see whether
the foundational requirements of Section 138 have been prima facie
complied with, which, in the present case, stand duly satisfied.
37. Consequently, the initiation and continuation of the criminal
proceedings against the Petitioner cannot be faulted on the ground of any
alleged defect in the statutory demand notice, and no case for interference
is made out.
38. In view of the above, the instant petition is dismissed.
39. Ordered Accordingly.
40. All pending misc. applications, if any, stand disposed of.
February 05, 2026. (VINOD S. BHARDWAJ)
raj arora JUDGE
Whether speaking/reasoned : Yes/No
Whether reportable : Yes/No
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