MUMBAI: In a landmark judgment, the Bombay High Court on Wednesday held that in case of corporates issuing bounced cheques, the authorized signatory is not a ‘drawer’ and is not liable to pay interim compensation of up to 20% to the complainant. . Company only, pending trial.
“It is deemed that every person signing a check on behalf of the company on whose account the check is drawn does not become the drawer of the cheque. Such a signatory is only a person who draws the check on behalf of the company – the drawer – duly authorized to sign,” Justice Amit Borkar said. He was dealing with a batch of petitions to decide the common law points raised.
The High Court did not extend the definition of drawer to directors or authorized signatories of the company. It said, “The expression ‘drawer’ in section 138 has not been interpreted to include the signatory of the check or the signing director.” Section 148 of the Negotiable Instruments (NI) Act deals with the power of the appellate court, in an appeal against conviction by an appellant, to direct the appellant to deposit a minimum of 20% of the compensation awarded by the trial court. The HC held that when an appeal against conviction in a check bounce case is filed by a person other than the ‘drawer’, “it is not necessary to deposit the minimum 20% penalty or compensation” under the provisions of the NI Act. But, it added, the appellate court may order such deposit, pending appeal, to suspend the sentence, under a provision of the Code of Criminal Procedure. The drawer cannot be directed to pay interim compensation in terms of section 143A (provision of interim compensation) of the NI Act and under section 143A. A company is a separate legal entity, separate and independent from the persons constituting it. Senior lawyers termed the decision dealing with the scope of interim compensation under the 2018 amendment to the Negotiable Instruments Act as “revolutionary” and looked at its implications. nationwide. Venugopal Dhoot of Lyca Labs and Videocon Group was among the petitioners in a batch of over a dozen cases before the High Court.
In a detailed submission, senior advocate Aabad Ponda, appearing for one of the accused, submitted that the person signing the check of the company in which the account is in the name of the company does not become the drawer.
Senior advocate Sharan Jagtiani argued for a complainant that “the authorized signatory of the company becomes the drawer for the purpose of section 138 and 143A (interim compensation) of the NI Act as he is entitled to do so in respect of the account maintained by has been authorised.” company”.
Section 143A of the NI Act confers discretion on the court to direct the ‘drawee’ of the check to deposit a maximum of 20% of the check amount as interim compensation before determination of offence.
Ponda argued, “To attract liability under section 138 (dishonor of cheque) of the NI Act, the check must be drawn on the account of the drawer. …the word ‘drawer’ shall never mean the signatory of that cheque.” cannot be imputed as to whose account the check has not been drawn.
The SC had held that in order to sustain prosecution under section 141 (offences by companies) “it is imperative to present a company as an accused”. The HC noted that the SC has held that check bouncing is an “offence under section 138 of the NI Act capable of being committed only by the drawer of the cheque”.
“It is deemed that every person signing a check on behalf of the company on whose account the check is drawn does not become the drawer of the cheque. Such a signatory is only a person who draws the check on behalf of the company – the drawer – duly authorized to sign,” Justice Amit Borkar said. He was dealing with a batch of petitions to decide the common law points raised.
The High Court did not extend the definition of drawer to directors or authorized signatories of the company. It said, “The expression ‘drawer’ in section 138 has not been interpreted to include the signatory of the check or the signing director.” Section 148 of the Negotiable Instruments (NI) Act deals with the power of the appellate court, in an appeal against conviction by an appellant, to direct the appellant to deposit a minimum of 20% of the compensation awarded by the trial court. The HC held that when an appeal against conviction in a check bounce case is filed by a person other than the ‘drawer’, “it is not necessary to deposit the minimum 20% penalty or compensation” under the provisions of the NI Act. But, it added, the appellate court may order such deposit, pending appeal, to suspend the sentence, under a provision of the Code of Criminal Procedure. The drawer cannot be directed to pay interim compensation in terms of section 143A (provision of interim compensation) of the NI Act and under section 143A. A company is a separate legal entity, separate and independent from the persons constituting it. Senior lawyers termed the decision dealing with the scope of interim compensation under the 2018 amendment to the Negotiable Instruments Act as “revolutionary” and looked at its implications. nationwide. Venugopal Dhoot of Lyca Labs and Videocon Group was among the petitioners in a batch of over a dozen cases before the High Court.
In a detailed submission, senior advocate Aabad Ponda, appearing for one of the accused, submitted that the person signing the check of the company in which the account is in the name of the company does not become the drawer.
Senior advocate Sharan Jagtiani argued for a complainant that “the authorized signatory of the company becomes the drawer for the purpose of section 138 and 143A (interim compensation) of the NI Act as he is entitled to do so in respect of the account maintained by has been authorised.” company”.
Section 143A of the NI Act confers discretion on the court to direct the ‘drawee’ of the check to deposit a maximum of 20% of the check amount as interim compensation before determination of offence.
Ponda argued, “To attract liability under section 138 (dishonor of cheque) of the NI Act, the check must be drawn on the account of the drawer. …the word ‘drawer’ shall never mean the signatory of that cheque.” cannot be imputed as to whose account the check has not been drawn.
The SC had held that in order to sustain prosecution under section 141 (offences by companies) “it is imperative to present a company as an accused”. The HC noted that the SC has held that check bouncing is an “offence under section 138 of the NI Act capable of being committed only by the drawer of the cheque”.
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