The Rajasthan High Court has held that conviction and sentence already undergone by a husband (principal debtor) in respect of the same underlying transaction in which his wife had also issued a security cheque, as a guarantor, does not furnish a ground to her to seek quashing of proceedings under Section 138 Negotiable Instruments Act.

The bench of Justice Sunil Beniwal further observed that liability of a guarantor, arising from a cheque issued as security, could not be excluded from Section 138, NI Act, merely on the ground that the guarantor's liability was co-extensive with that of the principal debtor under the general law of contract.

For context, petitioner's husband had borrowed a sum from the respondent in relation to which a cheque was issued by the husband. Regarding the same transaction, the petitioner stood as a guarantor and had issued a cheque of the loaned amount as security. Both the cheques were dishonoured and the respondent filed a joint complaint against both.

While the proceedings were ongoing, owing to the matrimonial discord, the petitioner shifted to her maternal home. Eventually, the petitioner's husband was convicted and served his sentence. However, since no notice was served at the petitioner's maternal home, she failed to appear for further proceeding and was declared as an absconder.

Eventually, upon receiving information of the husband's conviction, she surrendered before the trial court and obtained bail. The present petition was filed seeking acquittal.

It was argued by the petitioner that the loan was taken by her husband in which she merely stood as a guarantor. Since her cheque was issued only as a security, it could not form basis of prosecution under Section 138 NI Act.

It was submitted that presumption under Section 139 NI Act, could not be invoked against her in absence of any legally enforceable debt or liability attributable to her.

Further, it submitted that since her husband had already served sentence for cheque dishonour, complainant's pending remedy was only civil suit.

After hearing the contentions, the Court firstly referred to the Supreme Court case of ICDS Ltd. v. Beemna Shabeer & Anr. and observed that petitioner's status as a guarantor, by itself, could not be used to quash proceeding when the cheque was issued by her.

“…cheque issued by a guarantor is not excluded from the ambit of Section 138 of the Act of 1881 merely because the underlying transaction was undertaken by the principal debtor. The expressions employed in the provision are sufficiently wide to encompass a cheque issued in respect of a legally enforceable debt or other liability, subject to fulfilment of the statutory requirements.”

Further, Court rejected the argument of the petitioner's husband already having served the sentence resulting in double recovery, and opined that there was a difference between criminal liability arising from cheque dishonour and recovery of underlying debt.

It was held that possibility of double recovery did not extinguish the proceedings arising from a separate cheque issued by the petitioner.

“The husband's incarceration does not, by itself, establish that the amount due to the complainant has been paid or recovered. At the same time, the complainant cannot recover the same debt more than once. Any amount actually recovered towards the underlying liability must, therefore, be duly accounted for in accordance with law.”

The Court also highlighted that the matter, in relation to the petitioner, had reached the final stage, and thus, all the disputes raised by the petitioner, regarding nature of transaction, purpose of issued cheque, existence of legally enforceable liability, could be considered by the trial court, based on evidence on record.

Accordingly, the petition was dismissed.