Settlement by Husband's Company Does Not Extinguish Wife's Liability in Cheque Bounce Case: P&H High Court

Chandigarh: The Punjab and Haryana High Court has dismissed a petition filed by a woman and her proprietorship firm seeking quashing of a complaint under Section 138 of the Negotiable Instruments Act, 1881, holding that she could not resist trial merely because her husband's company had undertaken, under a settlement agreement, to discharge the liability on her behalf.

Justice Alok Jain was hearing a petition filed under Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023, seeking quashing of Complaint and the summoning passed by the Judicial Magistrate 1st Class, Karnal, whereby the petitioners had been summoned to face trial under Section 138 of the NI Act.

Counsel for the petitioners submitted that petitioner No. 1 was the proprietor of petitioner No. 2-firm, while her husband was a Director of IQ Med Health Care Private Ltd. Both petitioner No. 1 and her husband had business dealings with the respondent and a joint liability towards him, pursuant to which a one-time settlement dated 22.08.2023 was arrived at. Under Clause 1.1 of the settlement, a sum of Rs. 85,00,000 was to be paid by IQ Med Health Care Private Ltd. on behalf of both firms in full and final settlement of the liability.

It was argued that once the company and the husband of petitioner No. 1 had undertaken the liability, petitioner No. 1 could not be compelled to face criminal proceedings, more so since the complainant had himself admitted, in the complaint, that accused No. 1 (the husband) had acknowledged and undertaken responsibility to pay the outstanding amount against the firm of petitioner No. 1, leaving no legally enforceable debt qua her. Reliance was also placed on an order in another complaint where the complainant had himself stated that only the accused whose signatures appeared on the cheque be summoned to face trial.

Per contra, counsel for the respondent submitted that petitioner No. 1 had not approached the Court with clean hands, having concealed a Special Power of Attorney executed by her in favour of her husband, under which she had agreed to ratify all acts lawfully done on her behalf. It was contended that if petitioner No. 1 were discharged, her husband could take the stand that the entity against whom the liability was due stood discharged, causing the entire litigation to collapse. It was further argued that all statutory ingredients of Section 138 were satisfied and that petitioner No. 1 was merely delaying the trial by taking advantage of the interim protection granted to her.

The Court observed that petitioner No. 1 and the other accused were admittedly husband and wife, who, apparently to deceive the public at large, had created two separate entities a proprietorship firm in the name of petitioner No. 1 and a private limited company of which her husband was Director while both were engaged in the same business dealings with the respondent. The Court noted that petitioner No. 1 could not, on the one hand, seek to take the benefit of the settlement agreement while, on the other, decline to discharge her own liability under it.

Relying on the Karnataka High Court's decision in Mohammed Samdani Bashi v. Syed Issac Basha, 2006(3) RCR Criminal (19), the Court held that since the authorization in favour of the husband had never been revoked prior to the issuance of the cheques, petitioner No. 1 could not be permitted to contend that the other accused had owned up sole responsibility. It observed that petitioner No. 1 remained an important party to the lis, since the complainant, at the stage of demonstrating the legally enforceable debt, would necessarily have to rely upon her business dealings as well.

The Court further held that since the proceedings under Section 138 arise out of the dishonour of a cheque issued in discharge of a legally enforceable debt, any concession granted to petitioner No. 1 at this stage would amount to interfering with and prejudging the issues arising for trial. It also noted that petitioner No. 1 had been repeatedly called upon to demonstrate her bona fides by making an effort towards discharge of the liability, but her counsel had categorically declined to do so.

Finding no merit in the petition, the Court dismissed the same, holding that the disputed questions of fact raised could not be adjudicated in proceedings under Section 528 of the BNSS, where the Court, exercising its inherent jurisdiction, cannot conduct a mini-trial.

Appearances:

For the Petitioners: Mr. Nitin Sansanwal, Advocate; Mr. Keshav Pratap Singh, Advocate.

For the Respondent: Mr. Pratham Bali, Advocate.

Case Title: Tripti Srivastva and Another vs. Yogesh Singla, CRM-M-14914-2026 (O&M)