Supreme Court to examine non-signatory joint-account holder’s prosecution in dishonoured cheque

Supreme Court to examine non-signatory joint-account holder’s prosecution in dishonoured cheque

The petitioners had argued that the Madras High Court refused to quash the proceedings and stated the issue be decided in trial

The Supreme Court has agreed to examine whether a non-signatory to a dishonoured cheque can be prosecuted for being a joint account holder.

In the K Venkidapathy & Anr vs KS Senathypathy case, a bench of Justice KM Joseph and Justice BV Nagarathna issued a notice on a petition challenging proceedings for the dishonour of a cheque due to insufficient funds against the issuer's joint account holder, who was not a signatory to the cheque.

The order said, "Issue notice confined to the special leave petition filed by the second petitioner only in the application for condonation of delay as well as in the special leave petition. List on 21 April 2023.”

The petition arose as a result of the Madras High Court order refusing to quash proceedings in the case on the ground that the petitioners had not disputed the cheque and the issue ought to be decided in trial.

The plea said, "Without going into the merits of the matter, the high court dismissed the petition on the ground that all the contentions raised by the petitioner are a matter of trial.”

The first petitioner in the case is the owner of a cotton mill, while the second petitioner is his daughter.

In 2016, the respondent lodged a complaint against both under Section 138 of the Negotiable Instruments (NI) Act, 1881 in connection with a Rs.20 lakh loan payment.

The father-daughter duo operated a joint account and the daughter was allegedly present when the respondent received the amount though she was not a signatory to the cheque. A post-dated cheque, inclusive of the interest amount given by the petitioners, was, subsequently, dishonoured.

Thus, in 2018, the petitioners moved the high court seeking the quashing of proceedings before a Coimbatore magistrate, alleging that no loan was involved.

Early this year, the High Court refused to enter into the merits of the matter and dismissed the plea. This led to the present appeal before the Apex Court.

The petitioners argued that the order was against the law, settled by the Apex Court. They cited the judgment in the R Kalyani v Janak C Mehta case wherein it was held that one of the paramount duties of the Superior Courts was to see that an apparently innocent person was not subjected to persecution and humiliation on the basis of a false complaint. It was submitted that the High Court should have considered the substantial questions of the law.

While the Supreme Court refused to entertain the father's petition, it agreed to examine the daughter's appeal since she was not a signatory to the cheque.

Advocates B Ragunath and Sriram Parakkat represented the petitioners.