The Rajasthan High Court has held that a cheque issued by a guarantor as security for a principal debtor's loan is not per se excluded from the ambit of Section 138 of the Negotiable Instruments Act, 1881, and that disputed questions concerning the existence of a legally enforceable liability must be resolved by the trial court on the basis of evidence rather than through a premature quashing petition under Section 482 CrPC.
Background & Facts
The Dispute
The petitioner, Manglesh Kanwar, wife of Dheeraj Singh Chauhan, was arraigned as an accused in a complaint under Section 138 of the Negotiable Instruments Act, 1881 filed by respondent No. 2, Royal Finance, through its proprietor Jaydutt Sharma. The underlying transaction involved two loans advanced to the petitioner's husband: Rs. 1,00,000 on 13.04.2015 and a further Rs. 1,10,000 on 08.08.2015, both carrying interest at 2.25% per month. The total borrowed amount of Rs. 2,10,000 was guaranteed by the petitioner. In respect of this single liability, the husband issued a cheque for Rs. 2,10,000 and the petitioner also issued a cheque for the same amount, which she contended was given only as security.
Key Facts
- The husband's cheque was presented and dishonoured on 14.06.2016
- The petitioner's cheque was presented the following day, 15.06.2016, and likewise dishonoured for insufficiency of funds
- Respondent No. 2 instituted a joint complaint under Section 138 before the Special Metropolitan Magistrate (N.I. Act Cases), No. 7, Jodhpur Metropolitan (Criminal Original Case No. 416/2016, NCV No. 1385/2017)
- The trial court took cognizance on 03.08.2016
- On 14.03.2018, the substance of accusation was read over to both accused, who denied the accusation and claimed trial
- Owing to matrimonial discord, the petitioner began residing at her parental home and, having no knowledge of hearing dates, failed to appear before the trial court
- Consequently, on 19.07.2019, she was declared an absconder under Section 82 CrPC and a standing warrant was issued against her
- The proceedings continued against the husband, who was convicted by judgment dated 02.12.2019 and sentenced to six months' simple imprisonment with a fine of Rs. 2,65,000, plus a further two months' simple imprisonment in default of payment
- The husband has since served the sentence imposed upon him
- Upon learning of the standing warrant, the petitioner surrendered before the trial court and obtained bail
- The trial against the petitioner resumed: the complainant was cross-examined on her behalf, her statement under Section 313 CrPC was recorded, and the matter reached the stage of final arguments
Procedural History
- 13.04.2015: First loan of Rs. 1,00,000 advanced to husband
- 08.08.2015: Second loan of Rs. 1,10,000 advanced to husband
- 14.06.2016: Husband's cheque dishonoured
- 15.06.2016: Petitioner's cheque presented and dishonoured
- 03.08.2016: Trial court took cognizance of the offence
- 14.03.2018: Substance of accusation read over to both accused (order under challenge)
- 19.07.2019: Petitioner declared absconder, standing warrant issued
- 02.12.2019: Husband convicted and sentenced
- Date unspecified: Husband served sentence; petitioner surrendered and obtained bail
- 2023: Present Criminal Miscellaneous Petition No. 4716/2023 filed before the High Court
- 13.10.2026: Conclusion of arguments and reservation of judgment
- 27.10.2026: Judgment pronounced
Relief Sought
The petitioner sought quashing of the order dated 14.03.2018 whereby the substance of accusation was read over to her, as well as her acquittal in connection with the proceedings under Section 138 of the Act of 1881.
The Legal Issue
The central questions were: (1) whether proceedings under Section 138 of the Negotiable Instruments Act, 1881 against a guarantor who issued a cheque as security for the principal debtor's loan are legally sustainable, and (2) whether the conviction and sentence already undergone by the principal debtor in respect of the same underlying transaction furnish a ground for quashing the proceedings against the guarantor in exercise of the High Court's inherent jurisdiction under Section 482 CrPC.
Arguments Presented
For the Petitioner
Learned counsel for the petitioner submitted that the loan was admittedly obtained by the husband for his business and the petitioner had merely issued a cheque as a guarantor. For the single liability of Rs. 2,10,000, two cheques - one by the husband and one by the petitioner - were obtained, which was impermissible. The petitioner's cheque, having been issued only as security or guarantee, could not form the basis of prosecution under Section 138. The husband having already undergone the sentence, the complainant's remedy lay in civil proceedings for recovery. Counsel further contended that the complainant adopted an impermissible procedure by presenting both cheques, issuing a composite legal notice, and initiating common proceedings; the statutory procedure under the Act of 1881 required separate proceedings for each cheque. The presumption under Section 139 could not be invoked against the petitioner in the absence of any legally enforceable debt attributable to her. Reliance was placed on Shantaram Namdeo Sathe v. State of Maharashtra (2019 SCC OnLine Bom 4354) for the proposition that a cheque issued merely as security cannot attract Section 138, and on Dilip Hariramani v. Bank of Baroda (2024) 15 SCC 443 to submit that vicarious criminal liability under Section 141 cannot be fastened on a guarantor. The petitioner's absence from proceedings was attributed to matrimonial discord and lack of service of notice.
For the Respondent
Learned counsel for respondent No. 2 submitted that a joint complaint under Section 138 was maintainable against both the principal borrower and the guarantor. The petitioner had stood as guarantor and issued a signed cheque in respect of the liability. The trial court summoned both accused, explained the substance of accusation, and commenced trial in accordance with the summons-case procedure. The petitioner's subsequent absence led to forfeiture of bail bonds and declaration as an absconder under Section 82 CrPC. After her appearance, the trial resumed at an advanced stage: the complainant was cross-examined, the petitioner's Section 313 statement was recorded, and final arguments were pending. The petition challenged the order dated 14.03.2018 after an unexplained delay of approximately five years. In summons cases, Section 251 CrPC does not contemplate a formal charge or separate hearing on charge; the mere statement of accusation and commencement of trial did not constitute illegality. Reliance was placed on Rakesh Jain v. State of Rajasthan (SB Criminal Miscellaneous Petition No. 167/2017) for the maintainability of a joint complaint, and on ICDS Ltd. v. Beemna Shabeer (AIR 2002 SC 3014) wherein the Supreme Court held that the expression "any debt or other liability" in Section 138 is of wide import and encompasses a guarantor's liability. The petitioner's prayer for acquittal ought to be considered by the trial court upon conclusion of the trial; premature interference would deprive parties of statutory remedies against the eventual judgment.
The Court's Analysis
The Court first addressed the procedural challenge to the order dated 14.03.2018. Proceedings under Section 138 are tried as summons cases. Section 251 CrPC (corresponding to Section 274 BNSS) requires the substance of accusation to be stated to the accused, who is then called upon to plead. In this case, the substance of accusation was stated on 14.03.2018, the petitioner denied it and claimed trial. No procedural illegality was apparent, and the challenge to the order could not be sustained.
On the substantive question, the Court examined the Supreme Court's decision in ICDS Ltd. v. Beemna Shabeer (supra), which held that a cheque issued by a guarantor is not excluded from the ambit of Section 138 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. Accordingly, the petitioner's status as a guarantor does not, by itself, furnish a ground for quashing the proceedings when the cheque is alleged to have been issued by her and bears her signature.
The decision in Dilip Hariramani v. Bank of Baroda (supra), relied upon by the petitioner, was distinguished. That decision concerned the imposition of vicarious criminal liability under Section 141 upon a person in relation to cheques issued by a firm. In the present case, the petitioner is alleged to have issued a cheque from her own bank account. The question is not merely whether criminal liability can be fastened on her by virtue of her status as a guarantor, but whether the cheque personally issued by her satisfies the requirements of Section 138.
The judgment in Shantaram Namdeo Sathe (supra) was also distinguished. The mere description of a cheque as a security cheque does not, by itself, determine the applicability of Section 138. The relevant consideration is whether the cheque represented a legally enforceable debt or other liability in the circumstances existing at the relevant time. The decision turned upon the evidence available in that case and cannot be construed as laying down an absolute rule excluding every cheque issued by way of security from the operation of Section 138.
The Court noted the petitioner's contention that her cheque was to be presented only upon dishonour of her husband's cheque. The complaint reflected that the husband's cheque was dishonoured on 14.06.2016 and the petitioner's cheque was presented on 15.06.2016. The sequence of presentation did not, by itself, conclude the separate question whether the petitioner's cheque represented a legally enforceable liability - a question that must be examined in light of the terms of the transaction and the evidence available at trial.
The further contention that the husband's incarceration precluded continuation of proceedings against the petitioner required a distinction between criminal liability arising from dishonour of a cheque and recovery of the underlying debt. The husband's imprisonment does not, by itself, establish that the amount due has been paid or recovered. At the same time, the complainant cannot recover the same debt more than once; any amount actually recovered must be duly accounted for. However, the possibility of double recovery does not, in the absence of further material, extinguish proceedings arising from a separate cheque allegedly issued by the petitioner.
Critically, the trial had reached an advanced stage: the petitioner had appeared, the complainant had been cross-examined on her behalf, her statement under Section 313 CrPC had been recorded, and final arguments were pending. In these circumstances, the disputed questions concerning the nature of the transaction, the purpose for which the petitioner's cheque was issued, and the existence of a legally enforceable liability may appropriately be considered by the trial court on the basis of the evidence on record. The inherent jurisdiction under Section 482 CrPC (corresponding to Section 528 BNSS) is not ordinarily exercised to undertake an assessment of disputed evidence or to substitute a premature determination of issues that remain for adjudication at trial.
The Verdict
The petition was dismissed. The Court found no sufficient ground to exercise its inherent jurisdiction to quash the proceedings against the petitioner. The order dated 14.03.2018 reading over the substance of accusation was upheld. The husband's conviction (02.12.2019) and sentence (six months' simple imprisonment, fine of Rs. 2,65,000 with two months' default imprisonment) stood unaffected. The petitioner was granted liberty to raise all available grounds before the trial court, which shall consider them on their own merits uninfluenced by the High Court's observations. Pending applications, if any, were disposed of.
What This Means For Similar Cases
Guarantor's Cheque Not Per Se Excluded From Section 138
The judgment reaffirms that the expression "any debt or other liability" in Section 138 is of wide import. A cheque issued by a guarantor from her own account is not automatically excluded from prosecution merely because the underlying loan was obtained by the principal debtor. Practitioners must focus on whether the statutory ingredients - a legally enforceable debt, presentation within validity, dishonour, notice, and failure to pay - are satisfied, rather than relying on the guarantor label alone.
Security Cheque Characterization Does Not Automatically Bar Prosecution
Describing a cheque as a "security cheque" or "guarantee cheque" is not determinative. The relevant inquiry is whether the cheque represented a legally enforceable liability at the time of presentation. This is a factual question to be resolved on evidence at trial. Lawyers should not advise clients that a security cheque provides absolute immunity from Section 138; instead, they must build an evidentiary record showing the cheque was not intended to discharge any enforceable obligation.
Advanced Trial Stage Weighs Against Quashing
Where the trial has progressed to the stage of cross-examination of the complainant, recording of the accused's Section 313 statement, and final arguments, the High Court will be reluctant to exercise its Section 482 jurisdiction to quash proceedings. The Court emphasized that disputed questions of fact and enforceability are for the trial court to decide. Practitioners filing quashing petitions at an advanced trial stage must demonstrate exceptional circumstances - such as a patent lack of jurisdiction or a clear abuse of process - rather than mere factual disputes.
