Page 1

       REPORTABLE    

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL No.  813        OF 2013 (Arising out of S.L.P. (Crl.) No. 9794 of 2010)

Mrs. Aparna A. Shah               .... Appellant(s)

Versus

M/s Sheth Developers Pvt. Ltd. & Anr.   .... Respondent(s)

J U D G M E N T

P.Sathasivam,J.

1) Leave granted.

2) This appeal is directed against the final judgment and  

order  dated  24.09.2010  passed  by  the  High  Court  of  

Judicature at Bombay in Criminal Writ Petition No. 1823 of  

2010 whereby the High Court partly allowed the petition filed  

by the appellant herein.

3) Brief facts:

a) M/s  Sheth  Developers  Private  Ltd.-the  respondent  

herein is a company incorporated under the provisions of the  

1

Page 2

Companies Act, 1956 having its registered office at 11, Vora  

Palace, M.G. Road, Kandivali (West), Mumbai and is engaged  

in  the  business  of  land  development  and  constructions.  

Aparna A. Shah (the appellant herein) and Ashish Shah, her  

husband,  are  the  Land  Aggregators  and  Developers  who  

have been in the said business for the last 15 years and are  

the owners of certain lands in and around Panvel.   

b)  According  to  the  appellant,  in  January  2008,  since  the  

Company was interested in  developing a Township Project  

and a Special  Economic Zone (SEZ) project in and around  

Panvel,  Dist.  Raigad,  Maharashtra,  one  Virender  Gala  of  

Mahavir Estate Agency - the Broker, introduced them to the  

appellant herein and her husband as the land owners holding  

huge  land  in  Panvel.   The  appellant  represented  to  the  

Company that the said land was ideal for the development of  

a Township Project and a Special Economic Zone (SEZ) and  

also  that  they  have  no  financial  means  and  capacity  to  

develop  the  same  single  handedly.   It  was  further  

represented that they were also looking for a suitable person,  

interested in developing the said land jointly with them.  

2

Page 3

(c) On  believing  the  above  said  representations,  the  

respondent-Company agreed for the development of the said  

land  jointly  with  the  appellant  herein  and  her  husband.  

When the respondent-Company requested for inspection of  

the title documents in respect of the said land, the appellant  

and her husband agreed for the same upon the entrustment  

of a token amount of Rs. 25 crores with an understanding  

between the parties that the said amount would be returned  

if  the  project  is  not  materialize.   Agreeing  the  same,  the  

respondent-Company  issued  a  cheque  of  Rs.  25  crores  in  

favour of the appellant herein and her husband. However, for  

various  reasons,  the  proposed  joint  venture  did  not  

materialize and it was claimed by the appellant herein that  

the  whole amount  of Rs.  25 crores was spent  in  order  to  

meet  the  requirements  of  the  initial  joint  venture  in  the  

manner as requested by the respondent-Company.   

(d) According  to  the  appellant,  again  the  respondent-

Company expressed interest to start a new project and to  

take financial facilities from their bank in order to submit a  

tender for the purchase of a mill land.  With regard to the  

3

Page 4

same,  the  respondent-Company  approached  the  appellant  

herein  and  her  husband  and  informed  that  they  are  not  

having sufficient securities to enable the bank to grant the  

facility  and  the  bank  is  to  show  receivables  in  writing.  

Therefore, on an understanding between the respondent and  

the appellant, a cheque of Rs. 25 crores was issued by the  

husband of the appellant from their joint account.  It is the  

case of the appellant that in breach of the aforementioned  

understanding, on 05.02.2009, the respondent deposited the  

cheque with IDBI Bank at Cuffe Parade, Mumbai and the said  

cheque was dishonoured due to “insufficient funds”.   

e) On 18.02.2009, a statutory notice under Section 138 of  

the Negotiable Instruments Act, 1881 (in short ‘the N.I. Act”)  

was issued to the appellant and her husband asking them to  

repay  the  sum  of  Rs.  25  crores.   On  06.03.2009,  the  

appellant  and  her  husband  jointly  replied  mentioning  the  

circumstances in which the said cheque was issued with the  

supporting letters.   

f) On  04.04.2009,  a  complaint  was  filed  against  the  

appellant and her husband in the Court of the Metropolitan  

4

Page 5

Magistrate, Dadar, Mumbai and the same was registered as  

Case  No.  1171-SS  of  2009.   By  order  dated  20.04.2009,  

process was issued against them.   

g) On 12.01.2010, the appellant and her husband filed an  

application objecting  the  exhibition of  documents  and  the  

same was registered as Exh. 28.  By order dated 11.05.2010,  

the said application was dismissed.   

h) Against the issuance of process dated 20.04.2009 and  

order  dated  11.05.2010  dismissing  the  application  by  the  

Magistrate, the appellant filed Writ Petition No. 1823 of 2010  

before the High Court.  The High Court, by impugned order  

dated 24.09.2010, partly allowed the petition and quashed  

the order dated 11.05.2010 and directed the Magistrate to  

decide the objections raised by the counsel for the accused  

after  hearing  both  the  sides,  but  refused  to  quash  the  

proceedings.   

i) Aggrieved by the said order, the appellant has filed the  

above appeal by way of special leave.

5

Page 6

4) Heard Mr. K.V. Vishwanathan, learned senior counsel for  

the appellant and Mr. Mukul Rohtagi, learned senior counsel  

for respondent No.1.

Contentions:

5) Mr. K.V. Vishwanathan, learned senior counsel for the  

appellant, by drawing our attention to Section 138 of the N.I.  

Act  as  well  as  various  decisions  of  this  Court  relating  to  

interpretation of the expression “drawer”, submitted that the  

issuance  of  process  by  learned  Magistrate  cannot  be  

sustained.  On the other hand, Mr. Mukul Rohtagi, learned  

senior  counsel  for  respondent  No.1/the  complainant  

submitted  that  inasmuch  as  the  instant  case  is  squarely  

covered by Section 141 of the N.I. Act and that the accused  

persons, namely, Ashish Shah and Aparna Shah (appellant  

No.1) are an association of individuals as envisaged under  

Section 141, learned Magistrate was fully justified in issuing  

process.   He  also  submitted  that  the  transaction  with  

respondent No.1 herein was negotiated by both the accused,  

the cheque which had been issued by respondent No.1 was  

deposited  in  the  joint  account  maintained  by  both  the  

6

Page 7

accused, the cheque bears the name and stamp of both the  

accused and by suppressing all the materials, the appellant  

has approached the High Court  and this  Court,  hence her  

claim  has  to  be  rejected  on  the  ground  of  

concealing/suppressing material facts.  He finally pointed out  

that inasmuch as the trial has commenced and the appellant  

will have her remedy during trial, the High Court was right in  

dismissing her petition filed under Section 482 of the Code of  

Criminal Procedure, 1973 (in short ‘the Code’).

6) We have carefully considered the rival submissions and  

perused all the relevant materials.  

Discussion:

7) In order to understand the rival contentions, it is useful  

to refer Section 138 of the N.I. Act which reads as under:  

“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  arrangement  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 a  

7

Page 8

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.

Explanation.-For the purposes of this section, “debt or  other liability” means a legally enforceable debt or other  liability”.

8) In order to constitute an offence under Section 138 of  

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;

8

Page 9

(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.

Being cumulative, it is only when all the aforementioned  ingredients are satisfied that the person who had drawn  the cheque can be deemed to have committed an offence  under Section 138 of the Act.”

Considering  the  language used in  Section 138 and taking  

note of background agreement pursuant to which a cheque  

is issued by more than one person, we are of the view that it  

is only the “drawer” of the cheque who can be made liable  

for the penal action under the provisions of the N.I. Act.  It is  

settled law that strict interpretation is required to be given to  

penal statutes.   

9) In Jugesh Sehgal (supra), after noting the ingredients  

for attracting Section 138 on the facts of the case, this Court  

concluded that there is no case to proceed under Section 138  

9

Page 10

of the Act.  In that case, on 20.01.2001, the complainant filed  

an FIR against all the accused for the offence under Sections  

420, 467, 468, 471 and 406 of the Indian Penal Code, 1860  

(hereinafter referred to as “IPC) and there was hardly any  

dispute  that  the  cheque,  subject-matter  of  the  complaint  

under Section 138 of the N.I. Act, had not been drawn by the  

appellant on an account maintained by him in Indian Bank,  

Sonepat Branch.  In the light of the ingredients required to be  

fulfilled to attract the provisions of Section 138, this Court,  

after  finding  that  there  is  little  doubt  that  the  very  first  

ingredient of Section 138 of the N.I. Act enumerated above is  

not  satisfied  and  concluded  that  the  case  against  the  

appellant for having committed an offence under Section 138  

cannot be proved.  

10) In  S.K.  Alagh vs.  State  of  Uttar  Pradesh  and  

Others, (2008) 5 SCC 662, this Court held:     

19. … …. If and when a statute contemplates creation of  such  a  legal  fiction,  it  provides  specifically  therefor.  In  absence of any provision laid down under the statute,  a  Director of a Company or an employee cannot be held to  be  vicariously  liable  for  any  offence  committed  by  the  Company  itself.  (See  Sabitha  Ramamurthy v.  R.B.S.  Channabasavaradhya, (2006) 10 SCC 581)”

1

Page 11

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.   

13) In the case on hand, we are concerned with criminal  

liability on account of dishonour of a cheque. It primarily falls  

on the drawer, if it is a Company, then Drawer Company and  

is extended to the officers of the company.  The normal rule  

in the cases involving criminal  liability is against  vicarious  

liability. To put it clear, no one is to be held criminally liable  

for an act of another.  This normal rule is, however, subject to  

exception  on  account  of  specific  provision  being  made  in  

statutes extending liability to others.  For example, Section  

1

Page 12

141 of the N.I. Act is an instance of specific provision that in  

case  an  offence  under  Section  138  is  committed  by  a  

company, the criminal liability for dishonour of a cheque will  

extend to the officers of the company.  As a matter of fact,  

Section 141 contains conditions which have to be satisfied  

before  the  liability  can  be  extended.   Inasmuch  as  the  

provision creates a criminal liability, the conditions have to  

be strictly complied with.  In other words, the persons who  

had nothing to do with the matter, need not be roped in.  A  

company being a juristic person, all its deeds and functions  

are the result of acts of others.  Therefore, the officers of the  

company, who are responsible for the acts done in the name  

of the company, are sought to be made personally liable for  

the acts which result in criminal action being taken against  

the company.  In other words, it makes every person who, at  

the time the offence was committed, was in-charge of, and  

was responsible to the company for the conduct of business  

of  the  company,  as  well  as  the  company,  liable  for  the  

offence.  It  is true that  the proviso to sub-section enables  

certain  persons  to  prove  that  the  offence  was  committed  

1

Page 13

without their knowledge or that they had exercised all due  

diligence to prevent commission of the offence.  The liability  

under Section 141 of the N.I. Act is sought to be fastened  

vicariously  on a  person  connected  with  the  company,  the  

principal accused being the company itself.  It is a departure  

from the rule in criminal law against vicarious liability.   

14) It is not in dispute that the first respondent has not filed  

any complaint under any other provisions of the penal code  

and, therefore, the argument pertaining to the intention of  

the  parties  is  completely  misconceived.   We  were  taken  

through the  notice  issued under  the  provisions  of  Section  

138, reply given thereto, copy of the complaint and the order  

issuing process.  In this regard, Mr.Mukul  Rohatgi,  learned  

senior  counsel  for  the  respondent  after  narrating  the  

involvement  of  the  appellant  herein  and  her  husband  

contended  that  they  cannot  be  permitted  to  raise  any  

objection on the ground of concealing/suppressing material  

facts within her knowledge.  For the said purpose, he relied  

on  Oswal  Fats  and  Oils  Limited vs.  Additional  

Commissioner  (Administration),  Bareilly  Division,  

1

Page 14

Bareilly  and  Others,  (2010)  4  SCC  728,  Balwantrai  

Chimanlal Trivedi vs.  M.N. Nagrashna & Ors., AIR 1960  

SC  1292,  J.P.  Builders  & Anr. vs.  A.  Ramadas Rao &  

Anr.,  (2011)  1  SCC 429.   Inasmuch as  the  appellant  had  

annexed the relevant materials, namely, copy of notice, copy  

of reply, copy of the complaint and the order issuing process  

which  alone  is  relevant  for  consideration  in  respect  of  

complaint under Section 138 of the N.I. Act, the argument of  

learned senior counsel for Respondent No.1 that the stand of  

the appellant has to be rejected for suppressing of material  

facts or relevant facts, cannot stand.  In such circumstances,  

we are  of  the  view that  the  case  law relied  upon by the  

contesting respondent No.1 is inapplicable to the facts of the  

present case.  

15) Mr.  Mukul  Rohtagi,  learned  senior  counsel  for  

respondent No.1, by drawing our attention to the definition of  

“person” in Section 3(42) of the General Clauses Act, 1897  

submitted that in view of various circumstances mentioned,  

the  appellant  herein  being  wife,  is  liable  for  criminal  

prosecution.   He  also  submitted  that  in  view  of  the  

1

Page 15

explanation in Section 141(2) of the N.I. Act, the appellant  

wife is being prosecuted as an association of individual.  In  

our view, all the above contentions are unacceptable since it  

was never the case of respondent No.1 in the complaint filed  

before learned Magistrate  that  the appellant  wife is  being  

prosecuted as an association of individuals and, therefore, on  

this  ground  alone,  the  above  submission  is  liable  to  be  

rejected.  Since, this expression has not been defined, the  

same has to be interpreted ejusdem generis having regard to  

the purpose of the principle of vicarious liability incorporated  

in  Section  141.   The  terms  “complaint”,  “persons”  

“association  of  persons”  “company”  and  “directors”  have  

been explained by this Court in Raghu Lakshminarayanan  

vs. Fine Tubes, (2007) 5 SCC 103.

16) The above discussion with reference to Section 138 and  

the materials culled out from the statutory notice, reply, copy  

of the complaint, order, issuance of process etc., clearly show  

that only the drawer of the cheque being responsible for the  

same.  

1

Page 16

17) In addition to our conclusion, it is useful to refer some of  

the decisions rendered by various High Courts on this issue.

18) Learned  Single  Judge  of  the  Madras  High  Court  in  

Devendra  Pundir vs.  Rajendra  Prasad  Maurya,  

Proprietor, Satyamev Exports S/o. Sri Rama Shankar  

Maurya, 2008 Criminal Law Journal 777, following decisions  

of this Court, has concluded thus:  

“7.  This  Court  is  of  the  considered  view that  the  above  proposition of law laid down by the Hon’ble Apex Court in  the decision cited supra is squarely applicable to the facts  of the instant case.  Even in this case, as already pointed  out, the first accused is admittedly the sole proprietrix of  the concern namely, “Kamakshi Enterprises” and as such,  the question of the second accused to be vicariously held  liable for the offence said to have been committed by the  first  accused  under  Section  138  of  the  Negotiable  Instruments Act not at all arise.”

After  saying  so,  learned  Single  Judge,  quashed  the  

proceedings  initiated  against  the  petitioner  therein  and  

permitted  the  Judicial  Magistrate  to proceed and expedite  

the trial in respect of others.  

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.  

1

Page 17

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  of  Section  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  

1

Page 18

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.  

21) In the light of the principles as discussed in the earlier  

paras, we fully endorse the view expressed by the learned  

Judges  of  the  Madras,  Delhi  and  Punjab  &  Haryana  High  

Courts.

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  

1

Page 19

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 under Section 138 cannot 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  

1

Page 20

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.  

24) Under these circumstances, the appeal deserves to be  

allowed  and  process  in  Criminal  Case  No.  1171/SS/2009  

pending before the Court of learned Metropolitan Magistrate  

13th Court,  Dadar,  Mumbai  deserves  to  be  quashed,  

accordingly,  quashed  against  the  appellant  herein.   The  

appeal is allowed.        

………….…………………………J.                   (P. SATHASIVAM)                                  

       ………….…………………………J.    

2

Page 21

              (JAGDISH SINGH KHEHAR)   

NEW DELHI; JULY 01, 2013.

2