SC - Can A Joint Account Holder Be Held Responsible For A bounced cheque, Under The Section 138 NI Act?

Last week, the Supreme Court decided to examine whether someone who did not sign a bounced cheque can be held responsible if they are a joint account holder. Justices KM Joseph and BV Nagarathna formed a panel and sent a notice to the defendants in a case where a joint account holder was being prosecuted for bouncing a cheque due to insufficient funds, even though they did not sign the cheque. 

This petition was filed after the Madras High Court refused to dismiss the case, stating that the matter of the bounced cheque needed to be settled during the trial since the defendants did not dispute the cheque. 

The case involves a cotton mill owner as the first petitioner and his daughter as the second petitioner. In 2016, the respondent lodged a complaint against both under Section 138 of the Negotiable Instruments Act, relating to a loan payment of ₹20 lakhs. Even though the daughter was not a signatory to the check, she was accused of being present when the respondent received the money from their joint account. A post-dated check was subsequently bounced, which included the interest amount given by the petitioners.

In 2018, the petitioners approached the High Court, requesting that proceedings before a Coimbatore Magistrate be dismissed, claiming that there was no loan involved. The High Court declined to review the substance of the case and rejected the petition in January of this year. As a result, the case has now been appealed before the top court.

The petitioners contended that the order was in contradiction with the law as established by the highest court. They supported their argument by referring to the ruling in the R Kalyani v Janak C Mehta case, which emphasized that it is the primary responsibility of superior courts to ensure that an innocent person is not unjustly persecuted or humiliated based on a false accusation. 

As a result, they insisted that the High Court should have taken into account the significant legal issues involved.

Although the Supreme Court rejected the father's plea, it decided to examine the daughter's appeal because she had not signed the cheque.