NI Act| Every Person Signing Cheque On Behalf Of Company Does Not Become Drawer Of Cheque- Delhi HC

The Delhi High Court in a plea filed against the Cisco System Capital (India) Pvt. Ltd. said that every person signing a cheque on behalf of a company on whose account the cheque is drawn does not become the drawer of the cheque as per the Negotiable Instruments Act, 1881.

A Single Bench of Justice Anup Jairam Bhambhani asserted, “… the Supreme Court in N. Harihara Krishnan vs. J. Thomas, 3 has held that every person signing a cheque on behalf of a company, on whose account the cheque is drawn, does not become the ‘drawer’ of the cheque; muchless would such person become liable for the debt or other liability comprised in such cheque.”

The Bench will be hearing the matter next on April 21, 2023.

Advocate Sandeep Mahapatra appeared for the petitioner while Advocate Chetna Bhalla appeared for the respondent.

In this case, the petitioner sought quashing of a criminal complaint filed under Section 138 of the NI Act, pending before the Metropolitan Magistrate along with summoning order. The original dispute arose from a Master Lease & Finance Agreement (MLFA) entered between M/s. CISCO Systems Capital (India) Pvt. Ltd. and M/s. New Delhi Tele Tech. Pvt. Ltd., which was referred for mediation.

A cheque was the subject matter of the criminal complaint which was issued by the company towards the discharge of part of the debt owed to the respondent under the mediated settlement agreement and not under the MLFA. The petitioner had resigned from the directorship of the company with effect from April 1, 2010, whereas the said cheque was dated July 20, 2012, which was returned unpaid on the next day. He was arrayed as accused in the criminal complaint in his alleged capacity of ‘Chairman and Managing Director’.

The High Court after hearing the contentions of the counsel noted, “Surely, all past directors of a company cannot be implicated for the offence under section 138, NI Act; and reference to everyone who was in-charge of, or was responsible for the business of the company, and any other person who was a Director or a Manager or a Secretary or Officer of the Company with whose connivance or due to whose neglect the company had committed the offence, must necessarily be restricted to those who fall within the ambit of the phrase “...at the time the offence was committed”.”

Accordingly, the Court stayed further proceedings in the said criminal complaint in so far as they were related to the petitioner till the next date of hearing.

Cause Title- Kapil Puri v. Cisco System Capital (India) Pvt. Ltd.

Click here to read/download the Order