Mumbai: The Bombay High Court has ruled that in a cheque bounce case, where the cheque issued by a company is dishonoured, the signatory of the cheque, authorised by the “company”, is not the “drawer” and is not liable to pay interim compensation of up to 20% to the complainant.
Justice Amit Borkar observed, “The signatory of the cheque… is not the drawer in terms of section 143A of the NI Act (Negotiable Instruments Act)…” The HC was hearing a batch of petitions, including that of former Videocon founder Venugopal Dhoot.
Section 143A of the Act confers discretion on court to direct ‘drawer’ of the cheque to deposit a maximum 20% of the cheque amount as interim compensation, before determination of guilt.
Person signing a cheque on behalf of the company does not become a drawer of the cheque
In a detailed 56-page judgment, Justice Borkar noted, “It is held that every person signing a cheque on behalf of the company on whose account a cheque is drawn does not become a drawer of the cheque. Such a signatory is only a person duly authorised to sign the cheque on behalf of the company / drawer of the cheque.”
The HC did not extend the definition of drawer to company directors or authorised signatories. The court said, “The expression ‘drawer’ in section 138 has not been interpreted to include either the signatory of the cheque or the signatory director.”
Deposit of a minimum sum of 20% of the fine or compensation is not necessary
In an appeal under section 148 of the NI Act filed by persons other than ‘drawer’ against the conviction under section 138 of the NI Act, a deposit of a minimum sum of 20% of the fine or compensation is not necessary.
However, the HC added that the appeal court can order such deposit, pending appeal, under a provision of the code of criminal procedure, to suspend sentence.
Citing a Supreme Court judgment, Justice Borkar said that the apex court held that to maintain prosecution under section 141 (offence by companies) “arraigning of a company as an accused is imperative”. Hence, the company will face trial under the NI Act for a cheque bounce case and not the authorised signatory.
