The Calcutta High Court has quashed criminal proceedings initiated against the wife of a sole proprietor in a cheque dishonour case under Section 138 of the Negotiable Instruments Act, holding that criminal liability cannot be imposed on a non-signatory spouse merely on the basis of vague allegations of “dominion and control.”
Justice Uday Kumar held that a sole proprietorship has no separate legal identity distinct from its proprietor and that the principle of vicarious liability under Section 141 of the Negotiable Instruments Act cannot be extended to rope in the spouse of the proprietor.
Background of the Case
The petitioner, N. Mamatha Nagesh, approached the High Court under Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023, seeking quashing of proceedings pending before the 7th Judicial Magistrate at Calcutta in a complaint filed by Inditrade Fincorp Limited under Section 138 of the Negotiable Instruments Act.
According to the complaint, a commercial loan facility had been extended by the complainant NBFC to a business concern named “Dhathri Fuels.” A cheque bearing No. 000448 dated January 18, 2022 was allegedly issued towards discharge of liability, but upon presentation it was dishonoured for “insufficient funds.”
The Court noted that the GST Registration Certificate and bank mandates showed that “Dhathri Fuels” was a sole proprietorship owned exclusively by the petitioner’s husband, G.V. Nagesh. The petitioner was neither a partner, nor an authorised signatory to the bank account, nor was her signature present on the cheque.
The petitioner further contended that she had been unnecessarily impleaded in the criminal case only to exert psychological pressure on her husband, who was the principal accused.
Complainant Remained Absent Despite Service
The High Court recorded that despite repeated opportunities and service of notice, the complainant failed to appear before the Court. The postal endorsement reflected “Addressee Left.”
Justice Uday Kumar held that such endorsement amounted to deemed service under Section 27 of the General Clauses Act and Section 114 of the Evidence Act. Relying on decisions including C.C. Alavi Haji v. Palapetty Muhammed and Madan & Co. v. Wazir Jaivir Chand, the Court observed that a party cannot frustrate legal proceedings by vacating premises without leaving a forwarding address.
The Court proceeded to decide the matter on merits based on the “sterling quality” documents available on record.
Court on Liability of Non-Signatory Under Section 138 NI Act
Examining the statutory scheme of Section 138 of the Negotiable Instruments Act, the Court observed that liability under the provision is strictly tied to the drawer, signatory, and account holder.
The Court relied on the Supreme Court judgment in Jugesh Sehgal v. Shamsher Singh Gogi, which held that one of the essential ingredients of Section 138 is that the cheque must have been issued from an account maintained by the accused.
Justice Uday Kumar observed:
“The Petitioner is a total stranger to the bank account.”
The Court further held:
“To compel a non-signatory to undergo the rigours of a trial to prove a negative is a manifest failure of justice.”
Section 141 NI Act Cannot Apply to Sole Proprietorship
The Court rejected the complainant’s attempt to invoke vicarious liability under Section 141 of the NI Act. It observed that a sole proprietorship is not a separate legal entity and therefore does not fall within the meaning of a “company” under Section 141.
Relying on Bijoy Kumar Moni v. Paresh Manna, the Court held:
“A sole proprietorship concern is not a ‘Company’ within the meaning of Section 141 of the NI Act.”
The judgment further stated that a spouse cannot be prosecuted merely because of marital relationship or “bald averments” alleging control over business affairs.
Defective Demand Notice Held Fatal to Prosecution
The High Court also found a serious defect in the statutory demand notice issued under Section 138 NI Act. While the dishonoured cheque amount was ₹36,07,687, the demand notice sought only ₹7,607.
The Court held that the statutory requirement under proviso (b) to Section 138 mandates a demand for the “said amount of money,” meaning the actual cheque amount.
Relying on K.R. Indira v. Dr. G. Adinarayana and Suman Sethi v. Ajay K. Churiwal, the Court held that the defective notice rendered the prosecution legally unsustainable.
Justice Uday Kumar concluded:
“The statutory notice in this case is void ab initio.”
Failure of Magistrate’s ‘Gatekeeping’ Duty
The Court further held that the Magistrate failed to conduct the mandatory inquiry required under Section 202 CrPC (now Section 225 BNSS) before summoning a person residing outside the territorial jurisdiction of the court.
The petitioner was a permanent resident of Karnataka, whereas the complaint had been filed in Kolkata. The Court observed that had the mandatory inquiry been conducted, the Magistrate would have discovered the legal defects in the complaint at the threshold itself.
Proceedings Quashed Against Wife
Holding that continuation of proceedings against the petitioner would amount to abuse of process of law, the High Court allowed the revision petition and quashed the proceedings insofar as they related to the petitioner.
The Court also cancelled all summons, warrants, bail bonds, and look-out circulars issued against her in the case.
Case Details
Case Title: N. Mamatha Nagesh v. State of West Bengal & Anr.
Case No.: CRR 2270 of 2025
Bench: Justice Uday Kumar
Date of Judgment: May 8, 2026
