S. 148 NI Act | Signatory Of Cheque Issued By Company Can't Be Directed To Pay Compensation For Suspension Of Sentence : Supreme Court

The Supreme Court recently reiterated that the official signatory of the company does not assume the status of a 'drawer of a cheque' to attract the liability for payment of compensation under Section 148 of the Negotiable Instruments Act, 1881 (“N.I. Act”).

The Court clarified that liability for payment of compensation as well as deposit to suspend the sentence pending the appeal could only be fastened upon the drawer of the cheque, and not on the company's official who acted as an authorized signatory of the company.

“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.”, the Court held.

The bench comprising Justice CT Ravikumar and Justice Sanjay Karol heard a criminal appeal filed by the company's authorized officer who challenged the High Court's decision approving the trial court's direction to the appellant to deposit 20% of the compensation/fine amount for suspension of sentence in a cheque dishonor case.

Before the Supreme Court, the appellant referred to the case of Shri Gurudatta Sugars Marketing Pvt. Ltd. v. Prithviraj Sayajirao Deshmukh & Ors. (2024), where the Court ruled that an authorized signatory of a company, merely signing a cheque, does not make them its drawer. The appellant argued that, although the case dealt with Section 143A of the NI Act, its principles should apply analogously to Section 148. Therefore, an authorized signatory of a company cannot be required to deposit a percentage of the fine or compensation under Section 148 of NI Act.

Setting aside the impugned order, the judgment authored by Justice CT Ravikumar accepted the appellant's argument and observed that the 'drawer of cheque' remained the same in both Sections 143A and 148 of the NI Act, therefore, the appellant cannot be directed to deposit 20% compensation amount for suspension of sentence.

“In view of the analogicalness of Section 143A to Section 148, that both the provisions are under the same Act though applicable at different stage of proceedings under Section 138 of NI Act and that the proviso to Section 148(1) makes it abundantly clear that deposit under Section 148(1) of the NI Act shall be an additional compensation paid by the appellant under Section 143A thereof, it can only be said that the decision in Shri Gurudatta Sugars Marketing Pvt. Ltd.'s case (supra) is applicable to the extent it holds an officer of a company who is an authorised signatory of the cheque issued by a company is not the drawer of the same subject to what is held in the said decision with reference to Section 141, NI Act, as relates Section 148 thereof.”, the Court observed.

Also, the Court warned the Appellate Courts against the casual and mechanical exercise of power without considering whether the case falls within exceptional circumstances warranting an invocation of a condition to deposit an amount invoking the power under Section 148(1) of the NI Act.

Reference was made to the judgment in 'Jamboo Bhandari v. Madhya Pradesh State Industrial Development Corporation Limited and Ors' (2023).

“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. In the case on hand, the High Court has failed to consider these crucial aspects in the light of the dictum laid down by this Court in the decisions referred supra while considering the application for suspension of sentence for the conviction under Section 138 of the NI Act in the pending appeal.”, the court held.

Accordingly, the appeal was allowed.

Appearances:

For Petitioner(s) Mr. Siddharth Aggarwal, Sr. Adv. Mr. Anjan Datta, Adv. Mr. Sumon Pathak, Adv. Ms. Ishita Srivastava, Adv. Ms. Arshiya Ghose, Adv. Mr. Ashish Raghvuvanshi, Adv. Mr. Vishal Arun Mishra, AOR

For Respondent(s) Mr. Gautam S. Bharadwaj, Adv. Mr. Ashwin Kumar D.s., Adv. Mr. Ishan Roy Chowdhury, Adv. Ms. Surbhi Mehta, AOR

Case Title: Bijay Agarwal Versus M/s Medilines

Citation : 2024 LiveLaw (SC) 948

Click here to read/download the judgment

Related Report : S. 143A NI Act | Company's Authorized Signatory Not 'Drawer' Of Cheque, Can't Be Directed To Pay Interim Compensation: Supreme Court