Case No.: CRM-M-14914-2026 (O&M)
Court: Punjab and Haryana High Court
Judge: Justice Alok Jain
Provision Involved: Section 138, Negotiable Instruments Act, 1881; Section 528, Bharatiya Nagarik Suraksha Sanhita, 2023
Introduction
The Punjab and Haryana High Court has ruled that a woman cannot avoid criminal proceedings under Section 138 of the Negotiable Instruments Act, 1881 (NI Act) merely because her husband’s company subsequently agreed to settle or discharge the financial liability on her behalf.
In Tripti Srivastva and Another vs. Yogesh Singla, the High Court refused to quash a cheque dishonour complaint against a woman who was the proprietor of a firm, despite a settlement under which her husband’s company had undertaken to pay the outstanding amount.
The Court emphasised that questions concerning the existence of a legally enforceable debt, the parties’ respective liabilities and the effect of the settlement involved disputed questions of fact. Such issues could not appropriately be decided while exercising inherent jurisdiction to quash criminal proceedings.
Background of the Dispute
The petitioner was the proprietor of a firm, while her husband was a Director of IQ Med Health Care Private Limited. Both entities had business dealings with the complainant, Yogesh Singla, and financial liabilities arose from those transactions.
Subsequently, the parties entered into a One-Time Settlement (OTS) dated 22 August 2023. Under Clause 1.1 of the settlement, IQ Med Health Care Private Limited agreed to pay ₹85 lakh on behalf of the concerned firms towards full and final settlement of the outstanding liability.
The petitioner argued that once her husband and his company had undertaken responsibility for the payment, there remained no legally enforceable debt against her. On this basis, she sought quashing of the complaint and the summoning order issued by the Judicial Magistrate First Class, Karnal.
The proceedings against her arose from allegations of cheque dishonour under Section 138 of the NI Act.
Petitioner’s Argument
The petitioners contended that the woman was merely the proprietor of one of the entities involved in the business transactions, whereas her husband was associated with the private limited company that had subsequently accepted responsibility for the outstanding amount.
According to the petitioners, the settlement effectively transferred the responsibility for payment to the husband’s company. Therefore, continuing criminal proceedings against the wife would be unjustified.
Reliance was also placed on statements allegedly made by the complainant suggesting that the husband had acknowledged responsibility for the outstanding amount.
The petitioners therefore requested the High Court to exercise its inherent jurisdiction under Section 528 of the BNSS and terminate the criminal proceedings at the threshold.
Respondent’s Opposition
The complainant strongly opposed the petition and argued that the petitioner had not approached the Court with complete disclosure.
It was pointed out that she had executed a Special Power of Attorney in favour of her husband, authorising him to undertake acts on her behalf and agreeing to ratify acts lawfully performed pursuant to that authority.
The complainant argued that the settlement could not automatically absolve the petitioner from her independent liability.
It was further submitted that the basic requirements for maintaining proceedings under Section 138 of the NI Act had been satisfied and that the petitioner was attempting to delay the trial by relying upon the settlement and interim protection.
High Court’s Findings
Justice Alok Jain declined to interfere with the criminal proceedings.
The Court noted that the petitioner and the other accused were husband and wife and that two separate business entities had been created—one being the petitioner’s proprietorship concern and the other being a private limited company in which her husband was a Director.
The Court found that the petitioner could not simultaneously rely upon the settlement for her benefit and deny the obligations arising from the same arrangement.
An important factor considered by the Court was the Special Power of Attorney executed by the petitioner in favour of her husband. Since the authorisation had not been revoked before the cheques were issued, the petitioner could not simply argue that her husband had subsequently accepted sole responsibility for the liability.
The Court also relied upon the principle recognised by the Karnataka High Court in Mohammed Samdani Bashi v. Syed Issac Basha, reported in 2006(3) RCR Criminal (19).
Settlement Does Not Automatically End Section 138 Proceedings
The ruling highlights an important distinction between a settlement arrangement and the determination of criminal liability arising from cheque dishonour.
A settlement may have significant relevance during the trial or in determining how the parties intend to discharge the financial obligation. However, merely because another person or company undertakes to pay the amount does not automatically erase the original drawer’s or concerned party’s liability, particularly where the underlying transaction and legally enforceable debt remain disputed.
The Court observed that the complainant would still need to establish the relevant business dealings and legally enforceable liability during the proceedings.
Granting relief to the petitioner at the preliminary stage could therefore amount to prejudging matters that properly belonged to the trial.
High Court Refuses to Conduct a Mini-Trial
The Court reiterated that proceedings under the inherent jurisdiction of the High Court cannot be converted into a mini-trial.
Where the defence raises disputed factual questions requiring examination of documents, business transactions, authorisations, settlements and liabilities, those issues ordinarily require adjudication during trial.
The Court also noted that the petitioner had been repeatedly asked to demonstrate bona fides by making efforts towards discharge of the liability. However, her counsel had categorically declined to do so.
Consequently, the Court found no sufficient ground to interfere with the complaint or summoning order.
Conclusion
The Punjab and Haryana High Court’s decision serves as an important reminder that a settlement entered into by a third party or a spouse does not, by itself, extinguish the liability of another party facing proceedings under Section 138 of the NI Act.
The effect of a settlement depends upon its terms, the underlying transactions, the authority of the persons executing it and the factual circumstances surrounding the liability.
The judgment also reinforces the limited scope of the High Court’s inherent jurisdiction under Section 528 of the BNSS. Where the case involves disputed questions concerning debt, business dealings, authority and liability, the High Court is generally reluctant to terminate the proceedings at the preliminary stage.
Accordingly, the petition filed by Tripti Srivastva and her proprietorship firm was dismissed, allowing the Section 138 proceedings to continue before the competent court.
Key Takeaway
A third-party settlement cannot automatically wipe out a person’s liability in a cheque bounce case. Where factual disputes exist regarding the underlying debt, authorisation and settlement, such issues are ordinarily matters for trial rather than for determination in a quashing petition.