In this article we have explained about Quashing of Summoning Order
The quashing of summoning orders represents a critical facet of the legal landscape, navigating the delicate balance between justice and the protection of individual rights. In the realm of legal proceedings, summoning orders serve as the gateway to initiating judicial actions against individuals accused of offenses. However, the power vested in these orders is not absolute, and the legal system recognizes the need for a judicious examination of their validity.
Landmark Judgment on Quashing of Summoning order
In this article, we will discuss the case of Suresh P. versus Pratap Rudra, argued by Shri. Vishal Saini, Advocate for Suresh P, seeking to quash the summon order against two accused individuals, namely, Bhaskaraiah Pothugunta and Pushpa Latha Pothugunta, who are the father and wife of the main accused
Brief Facts of Case
A complaint numbered NACT/1243/2016 was filed by the complainant, namely Pratap Rudra. He filed the case against three persons who are directors of a fictitious company named Vernasco, which doesn’t even exist.
Accused came to know about case when their property were attached and and then they appeared in court and Advocate Saini submitted before JMIC, Kurukshetra that the present case is not maintainable against present 2 accused i.e Wife and father of main accused but as in summons case their is no procedure to drop proceedings against accused so trial court refused to drop proceedings against 2 accused.
In present case Advocate Vishal Saini was representing accused then he chose to opt for quashing of summoning order dated 20.05.2017
It was analysed by Hon’ble High Court of Punjab and Haryana that :-
“It is evident from the perusal of the complaint that the allegations levelled in the complaint is to the effect that the petitioners had posed as Directors of the Company, namely, Vernasco and they are alleged to have demanded the money. The advance is also stated in the complaint to have been made in favour of the accused persons in their individual capacity. The money was not advanced to the company. The said fact stands corroborated from the dishonoured cheque as well. The same have been issued from the joint account/personal account by Suresh Pothugunta. The said cheque has not been issued for and on behalf of the company in question (assuming for the sake of arguments that any company by the said name did exist). Company being a juristic entity enjoys an identity independent of its Directors. It cannot thus prosecuted or be held responsible for the individual acts of its Directors in their personal capacity that has no concern or relation to the affairs of the company. The liability to repay the amount so borrowed by any person acting as a Director of the company, in its individual capacity, is exclusively upon such a Director. The perusal of the complaint shows that the petitioners have been summoned in their capacity as authorized signatories of the company. It is incomprehensible that the complaint would be lodged against the company even when there is no liability to be discharged by the company and where the cheque in question has not been issued by the authorized representative/signatory of the company in their capacity and for and on behalf of discharge of any liability of the company. The order of summoning pertains to the petitioners as authorized signatory of the company is thus bad and liable to be set aside. The cheque not having been issued for and on behalf of the company or on account of the company, the petitioners cannot be prosecuted in their capacity as office bearers of the said company. It is also well settled that the company cannot be held vicariously liable for the acts of its Directors in their individual capacity.
That delving further into the matter, it is also evident that the petitioners are not signatories to the dishonoured cheque.
The scheme of the Negotiable Instruments Act intends to fasten criminal liability on the person who is the drawer of the cheque. The liability cannot be fastened on the person who is not the signatory of the cheque in question. Merely for the reason that the account in question was jointly held by three persons would not render the other account holders culpably liable for prosecution under Section 138 of the Negotiable Instruments Act. Reference in this regard is made to the following extract of the judgement of the Hon’ble Supreme Court in the matter of Mrs. Aparna A. Shah Vs. M/s Sheth Developers Pvt. Ltd., and another, Criminal Appeal No. 813 of 2013 (Arising out of S.L.P (Crl.) No. 9794 of 2010), d/d 01.07.2013.
“8. In order to constitute an offence under Section 138of the N.I. Act, this Court, in Jugesh Sehgal vs. Shamsher Singh Gogi, (2009) 14 SCC 683, noted the following ingredients which are required to be fulfilled:
“(i) a person must have drawn a cheque on an account maintained by him in a bank for payment of a certain amount of money to another person from out of that account;
(ii) the cheque should have been issued for the discharge, in whole or in part, of any debt or other liability;
(iii) that 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;
(iv) that cheque is returned by the bank unpaid, either because of the amount of money standing to the credit of the 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 the bank;
(v) the payee or the holder in due course of the cheque 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 15 days of the receipt of information by him from the bank regarding the return of the cheque as unpaid;
(vi) the drawer of such cheque fails to make payment of the said amount of money to the payee or the holder in due course of the cheque within 15 days of the receipt of the said notice.
11. In Sham Sunder and Others vs. State of Haryana, (1989) 4 SCC 630, this Court held as under:
“9. The penal provision must be strictly construed in the first place. Secondly, there is no vicarious liability in criminal law unless the statute takes that also within its fold. Section 10 does not provide for such liability. It does not make all the partners liable for the offence whether they do business or not.”
12. As rightly pointed out by learned senior counsel for the appellant, the interpretation sought to be advanced by the respondents would add words to Section 141 and extend the principle of vicarious liability to persons who are not named in it.
19. In Gita Berry vs. Genesis Educational Foundation, 151 (2008) DLT 155, the petitioner therein was wife and she filed a petition under Section 482 of the Code seeking quashing of the complaint filed under Section 138 of the N.I. Act. The case of the petitioner therein was that the offence under Section 138 of the Act cannot be said to have been made out against her only on the ground that she was a joint account holder along with her husband. It was pointed out that she has neither drawn nor issued the cheque in question and, therefore, according to her, the complaint against her was not maintainable. Learned Single Judge of the High Court of Delhi, after noting that the complaint was only under Section 138 of the Act and not under Section 420 IPC and pointing out that nothing was elicited from the complainant to the effect that the petitioner was responsible for the cheque in question, quashed the proceedings insofar as the petitioner therein.
20. In Smt. Bandeep Kaur vs. S. Avneet Singh, (2008) 2 PLR 796, in a similar situation, learned Single Judge of the Punjab and Haryana High Court held that in case the drawer of a cheque fails to make the payment on receipt of a notice, then the provisions ofSection 138 of the Act could be attracted against him only. Learned Single Judge further held that though the cheque was drawn to a joint bank account which is to be operated by anyone, i.e., the petitioner or by her husband, but the controversial document is the cheque,the liability regarding dishonouring of which can be fastened on the drawer of it. After saying so, learned Single Judge accepted the plea of the petitioner and quashed the proceedings insofar as it relates to her and permitted the complainant to proceed further insofar as against others.
22. In the light of the above discussion, we hold that under Section 138 of the Act, it is only the drawer of the cheque who can be prosecuted. In the case on hand, admittedly, the appellant is not a drawer of the cheque and she has not signed the same. A copy of the cheque was brought to our notice, though it contains name of the appellant and her husband, the fact remains that her husband alone put his signature. In addition to the same, a bare reading of the complaint as also the affidavit of examination- in- chief of the complainant and a bare look at the cheque would show that the appellant has not signed the cheque.
23. We also hold that under Section 138 of the N.I. Act, in case of issuance of cheque from joint accounts, a joint account holder cannot be prosecuted unless the cheque has been signed by each and every person who is a joint account holder. The said principle is an exception to Section 141 of the N.I. Act which would have no application in the case on hand. The proceedings filed underSection 138cannot be used as an arm twisting tactics to recover the amount allegedly due from the appellant. It cannot be said that the complainant has no remedy against the appellant but certainly not under Section 138. The culpability attached to dishonour of a cheque can, in no case “except in case of Section 141 of the N.I. Act” be extended to those on whose behalf the cheque is issued. This Court reiterates that it is only the drawer of the cheque who can be made an accused in any proceeding under Section 138 of the Act. Even the High Court has specifically recorded the stand of the appellant that she was not the signatory of the cheque but rejected the contention that the amount was not due and payable by her solely on the ground that the trial is in progress. It is to be noted that only after issuance of process, a person can approach the High Court seeking quashing of the same on various grounds available to him. Accordingly, the High Court was clearly wrong in holding that the prayer of the appellant cannot even be considered. Further, the High Court itself has directed the Magistrate to carry out the process of admission/denial of documents. In such circumstances, it cannot be concluded that the trial is in advanced stage.”
The same would now lead to the next argument raised by learned counsel for the respondent where it has been indicated that petitioner no.2-Pushpalatha Pothugunta is a recipient of a sum of Rs.2 lakhs at entry no.24 and 25 in the table extracted in the complaint for a sum of Rs. One lakh each. The aforesaid argument would not cut any ice inasmuch as the said entry would only be proof, at best, for having advanced the amount in favour of Pushpalatha Pothugunta and for seeking recovery of the same in an appropriate proceedings. In the absence of the said person having executed any cheque in discharge of such a liability, she cannot be held liable to be prosecuted for dishonor of a cheque that is not being issued by her. A plain reading of Section 138 of the NI Act shows that the same intents to empower the complainant to initiate proceedings wherein cheque issued by any person on an account maintained by him is dishonoured. The relevant provision of Section 138 of the Negotiable Instruments Act is extracted hereinafter below:-
138 Dishonour of cheque for insufficiency, etc., of funds
in the account.
Where any cheque drawn by a person on an account 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 provisions of this Act, be punished with imprisonment for 19 [a term which may be extended 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, 20 [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.”
A bare reading of the same lays emphasis within Court ‘cheque drawn by a person’. Hence, the offence in question would not get attracted where the cheque in question has not been drawn by the person sought to be prosecuted.
Drawer has been defined under Section 7 of the Negotiable Instruments Act and reads thus:-
“7. “Drawer”, “drawee”- The maker of a bill of exchange or cheque is called the drawer”, the person thereby directed to pay is called the “drawee”.
A joint reading of the same establishes that a drawer of the cheque
alone can be prosecuted. The petitioners are not the drawer of the cheque as per Section 7 of the Negotiable Instruments Act, 1881.
Having considered the case on the first principles itself, I refrain from entering into the area as to whether any company by the said name exists or not.
In view of the facts of the case as noticed above and the ingredients attracting offence under Section 138 NI Act, it is held that the following circumstances must exist before a person can be prosecuted for offences as above:-
(i) There must be a pre-existing liability and legally enforceable debt; and
(ii) The cheque should be issued in discharge of pre- existing liability and legally enforceable debt; in whole or in part; and
(iii) The accused should be signatory to the cheque or should be responsible for management and supervision of the affairs (in the case of a juristic entity); and
(iv) The cheque should be drawn by the maker on the account maintained by him; and
(v) The cheque should be presented to the bank within a period of its validity; and.
(vi) Cheque should be returned unpaid; and
(vii) Payee or holder in due course makes a demand for
payment of the amount by notice in writing; and
(viii) The drawer of the cheque fails to make payment
within the period prescribed despite notice.
A perusal of the facts shows that the said ingredients are not
satisfied in the present case.
Furthermore, it is specifically held by the Hon’ble Supreme
Court that extending the principle of vicarious liability to the persons who do not fall under Section 138 NI Act would amount to misreading of Section 141 of the Negotiable Instruments Act and the same would not be permissible. Resultantly, I am of the view that the Complaint No.NACT- 1243 of 2016 instituted on 16.11.2016 under Section 138/142 of Negotiable Instruments Act (Annexure P-1), as well as order of summoning dated 20.05.2017 ( Annexure P-2), and the subsequent orders passed by the Judicial Magistrate against the petitioners are liable to be quashed alongwith all subsequent proceedings.
The instant petition is accordingly allowed.
Frequently Asked Questions (FAQs) on Quashing of Summoning Orders
Q.What is the significance of quashing summoning orders?
Quashing summoning orders is crucial in ensuring a fair and just legal process, preventing potential miscarriages of justice.
Q.How do summoning orders function in legal proceedings?
Summoning orders act as the gateway to initiate judicial actions against individuals accused of offenses.
Q.Is the power vested in summoning orders absolute?
No, the legal system recognizes the need for a judicious examination of the validity of summoning orders.
Q.Why is the lack of specific allegations important in quashing summoning orders?
Specific allegations play a key role in ensuring a legitimate legal process and preventing arbitrary accusations.
Q.What instances warrant the intervention of the judiciary in quashing summoning orders?
Intervention may be necessary in cases involving a lack of specific allegations or a mechanical application of the legal process.
Q.Tell us about the case of Suresh P. versus Pratap Rudra.
The case involves an attempt to quash summoning orders against two accused individuals, the father and wife of the main accused, in a fictitious company case.
Q.What were the brief facts of the case filed by Pratap Rudra?
Pratap Rudra filed a complaint (NACT/1243/2016) against directors of a fictitious company, Vernasco, which doesn’t exist.
Q.How did the accused learn about the case, and what action did they take?
The accused discovered the case when their property was attached. They appeared in court, and Advocate Vishal Saini sought to quash the summoning order.
Q.What argument did Vishal Saini Advocate Saini present before the court?
Advocate Vishal Saini argued that the complaint was not maintainable against the wife and father of the main accused.
Q.What analysis did the High Court undertake in quashing the summoning order?
The High Court analyzed the complaint and emphasized that the accused were not signatories to the dishonored cheque.
Q.What does the Negotiable Instruments Act say about the liability of the company and its directors?
The Act clarifies that the company cannot be held vicariously liable for the individual acts of its directors in their personal capacity.
Q.What are the essential ingredients for prosecuting an offense under Section 138 of the Negotiable Instruments Act?
The essential elements include a pre-existing liability, issuance of the cheque to discharge a debt, the accused being a signatory to the cheque, presentation to the bank, dishonor, and a demand for payment.
Q.How did the court interpret Section 138 regarding joint accounts?
The court clarified that joint account holders cannot be prosecuted unless each signatory to the cheque is liable.
Q.What was the High Court’s ruling on the culpability of joint account holders in the case of Mrs. Aparna A. Shah vs. M/s Sheth Developers Pvt. Ltd.?
The High Court ruled that vicarious liability doesn’t apply to joint account holders unless all are named in the complaint.
Q.What is the significance of the case Gita Berry vs. Genesis Educational Foundation?
The case highlights that being a joint account holder does not make one automatically liable for a dishonored cheque.
Q.How did the court distinguish between the liability of the company and its directors in this case?
The court emphasized that the accused were summoned as authorized signatories of the company and not for any liability of the company.
Q.What led the court to quash the summoning orders in this case?
The court quashed the orders due to the absence of the essential elements for prosecuting an offense under Section 138 NI Act.
Q.What is the role of the court in quashing summoning orders?
The court plays a crucial role in ensuring that summoning orders adhere to legal principles and are not issued arbitrarily.
Q.Can the company be held responsible for the personal acts of its directors?
No, the company cannot be held responsible for the personal acts of its directors that have no concern or relation to the company’s affairs.
Q.How did the court interpret the term “drawer” in the Negotiable Instruments Act?
The court clarified that only the drawer of the cheque can be prosecuted under Section 138 of the Act.
Q.What circumstances must exist before a person can be prosecuted for offenses under Section 138 of the Negotiable Instruments Act?
The person must have a pre-existing liability, the cheque should be issued to discharge a debt, and the accused must be a signatory to the cheque.
Q.Why did the court quash the complaint and summoning orders in this case?
The court quashed them as the accused were not the drawers of the cheque and did not fulfill the essential elements under Section 138.
Q.What impact did the joint account holders’ argument have on the court’s decision?
The court emphasized that joint account holders cannot be prosecuted unless each one is a signatory to the dishonored cheque.
Q.Why did the court reject the argument about the recipient of funds in the case?
The court rejected it as the accused were not signatories to the cheque, and the funds were not advanced on behalf of the company.
Q.How did the court view the complaint against the wife of the main accused?
The court held that the wife cannot be prosecuted for a cheque not issued by her, even if funds were credited to her account.
Q.What principles did the court emphasize in interpreting Section 138 of the Negotiable Instruments Act?
The court stressed the importance of strictly construing the penal provision and not extending vicarious liability unless expressly provided by the statute.
Q.How did the court interpret the liability of joint account holders in the case of Smt. Bandeep Kaur vs. S. Avneet Singh?
The court held that joint account holders cannot be prosecuted under Section 138 unless all signatories are liable.
Q.Why did the court refrain from determining the existence of the company in this case?
The court focused on the core issue of the accused not being signatories to the dishonored cheque, rendering the summoning orders invalid.
Q.What is the overarching principle highlighted by the court in quashing the summoning orders?
The court emphasized that the drawer of the cheque alone can be prosecuted under Section 138 NI Act.
Q.What is the takeaway from this case for individuals facing summoning orders under Section 138?
The case underscores the importance of a thorough examination of the essential elements before initiating proceedings, ensuring justice prevails without unjustly implicating individuals.
The quashing of summoning orders is a legal recourse available to individuals when they believe that the issuance of such orders is unjust or in violation of legal principles. It underscores the importance of due process, jurisdictional competence, and adherence to legal procedures in the functioning of the judicial system. As legal systems evolve, the scrutiny of summoning orders remains a critical aspect of ensuring a fair and equitable legal process.
- Jugesh Sehgal vs. Shamsher Singh Gogi, (2009) 14 SCC 683
- Sham Sunder and Others vs. State of Haryana, (1989) 4 SCC 630,
- In Gita Berry vs. Genesis Educational Foundation, 151 (2008) DLT 155,
- Smt. Bandeep Kaur vs. S. Avneet Singh, (2008) 2 PLR 796
- THE NEGOTIABLE INSTRUMENTS ACT, 1881