Authorised Signatory Not Liable To Pay Interim Compensation For Dishonoured Cheques: Bombay High Court
- Published on: Mar 21, 2023
The Bombay High Court has ruled that the authorised signatory of a company who signs a cheque on its behalf is not the "drawer" of the cheque and is therefore not liable to pay interim compensation under Section 143A of the Negotiable Instruments Act in a case for dishonour of a cheque. The ruling was delivered in a batch of petitions dealing with the common question of whether the signatory of a cheque, authorised by the company, is the drawer and can be directed to pay interim compensation under section 143A of the Negotiable Instruments Act.
According to the court, the word ‘drawer’ in section 143A has a clear and unambiguous meaning, and the legislature has excluded anyone else from being made liable to pay interim compensation. The court further held that those who are not the drawers of the cheque are not required to make a deposit in terms of Section 148 of the Act while filing an appeal against conviction under Section 138 of the NI Act.
Under Section 138 of the Act, the maker of a bill of exchange or cheque is called the “drawer”. If an offence under Section 138 is committed by a company, Section 141 extends liability vicariously to officers of the company. However, the court reasoned that the term "drawer" has achieved a technical connotation over the years which must not be disturbed. The court noted that the legislature has never changed the definition of "drawer", and judicial pronouncements have consistently held that "drawer" includes only the principal offender and not those who are vicariously liable.
The court clarified that the appellate court has the power under section 389 of Cr.P.C. to direct the deposit of the amount in an appeal under section 148 of NIA by persons other than the drawer. Under Section 148 of the NI Act, the appellate court, in an appeal filed by the drawer against conviction under Section 138, can direct the drawer to deposit a minimum of 20% of the fine or compensation awarded by the trial court. However, since an authorised signatory is not considered the "drawer" of the cheque in the case of a company, the appellate court cannot direct the deposit of the amount in an appeal filed by the authorised signatory.
In conclusion, the Bombay High Court has clarified that an authorised signatory of a company who signs a cheque on its behalf is not the "drawer" of the cheque and is therefore not liable to pay interim compensation for dishonoured cheques under Section 143A of the Negotiable Instruments Act.
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