Authorised Signatory Of Company Is Not ‘Drawer’; Cannot Be Directed To Deposit Fine Or Compensation U/S. 148 NI Act: Supreme Court

The Supreme Court held that, merely because an officer of a company is authorised signatory of the cheque, he cannot be directed to deposit compensation under Section 148 of the Negotiable Instruments Act, 1881 (NI Act).

The Court held thus in a batch of Criminal Appeals preferred against the common Order of the Karnataka High Court.

The two-Judge Bench of Justice C.T. Ravikumar and Justice Sanjay Karol observed, “To wit, as in the case of the position qua Section 143A, NI Act, merely because an officer of a company concerned is the authorised signatory of the cheque concerned by itself will not make such an officer ‘drawer of the cheque’ under Section 148, NI Act, so as to empower the Appellate Court, in an appeal against conviction for an offence under Section 138, NI Act, to direct to deposit compensation of any sum under Section 148(1), of the NI Act.”

Senior Advocate Siddharth Aggarwal and AOR Vishal Arun Mishra represented the Appellant while AOR Surbhi Mehta represented the Respondent.

In this case, a Complaint was filed by the Respondent Company against another company and the Appellant under Section 138 of the NI Act. A Memorandum of Understanding (MOU) was executed and five post-dated cheques were issued. The cheque presented was dishonoured and thereupon the Complainant caused the legal notice. Pursuantly, the accused issued two fresh post-dated cheques but the same got dishonoured and returned with the endorsement “payment stopped by the drawer”. Thereafter, the Trial Court found the Appellant guilty and convicted him. Being aggrieved, he filed an Appeal and his sentence was suspended with a condition to deposit 20% of the fine/compensation amount in each of the Appeals. Hence, he approached the High Court and as the decision was not in his favour, he moved to the Apex Court.

The question that arose before the Court was, “whether the signatory of a cheque authorized by the Company is a drawer and whether such a signatory could be directed to deposit any sum out of the fine or compensation awarded by the Trial Court under Section 148 of NI Act, as a condition for suspending the sentence in an appeal filed against his conviction under Section 138 of the NI Act?”

The Supreme Court in view of the facts and circumstances of the case, noted, “… the primary liability for an offence under Section 138 lies with the company and the company’s management is vicariously liable only under specific conditions provided in Section 141 and for the purpose of Section 143A of the NI Act and a signatory merely authorised to sign on behalf of the company would not become the ‘drawer’ of the cheque and, therefore, could not be directed to pay interim compensation under Section 143A.”

The Court further reiterated that an Appellate Court in an Appeal against conviction under Section 138 of NI Act, could not place a condition to deposit an amount invoking the power under Section 148(1) of NI Act, mechanically without considering whether the case falls within exceptional circumstances.

“In view of the said exposition of law, the Appellate Court ought to have considered the aforesaid aspects as it would certainly be an exceptional circumstance to exempt the appellant who is not the ‘drawer’ of the cheque concerned to deposit the amount payable under Section 148(1) by an appellant who is the ‘drawer’ of the cheque”, it added.

The Court also said that the High Court failed to consider the crucial aspects in the light of the dictum laid down by the Court in the decisions referred while considering the Application for suspension of sentence for the conviction under Section 138 of the NI Act in the pending Appeal.

Accordingly, the Apex Court allowed the Appeals and set aside the impugned Order.

Cause Title- Bijay Agarwal v. M/s. Medilines (Neutral Citation: 2024 INSC 918)

Appearance:

Appellant: Senior Advocate Siddharth Aggarwal, AOR Vishal Arun Mishra, Advocates Anjan Datta, Sumon Pathak, Ishita Srivastava, Arshiya Ghose, and Ashish Raghuvanshi.

Respondent: AOR Surbhi Mehta, Advocates Gautam S. Bharadwaj, Ashwin Kumar D.S., and Ishan Roy Chowdhury.

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