In a recent judgement in BIJOY KUMAR MONI VERSUS PARESH MANNA CRIMINAL APPEAL NO. 5556 OF 2024 (Arising out of SLP (Crl) No. 13133/2024) the Supreme Court held that a company’s authorized signatory cannot be held responsible for a bounced cheque under Section 138 of the Negotiable Instruments Act, 1881 unless the company itself is named as the main accused. The Court upheld the decision to acquit a man charged with issuing a dishonoured cheque because the cheque was written on behalf of a company that wasn’t included in the case. The Court dismissed claims that the company didn’t need to be involved since the cheque was meant to cover the individual’s personal debt, even though he signed it as the company’s director. They explained that if Shilabati Hospital Pvt. Ltd. had been included in the accusation, the complainant could have demonstrated that the cheque was for a legitimate debt using the presumption in Section 139. However, since the cheque’s signatory wasn’t charged, the High Court was right to say that the individual couldn’t be prosecuted on his own. The only way he could be held accountable was if the company was also accused, but that wasn’t the case, the Court stated.
“Section 138 of the NI Act clearly postulates that the cheque returned for insufficiency of funds should have been drawn by a person on an account maintained by him. It will amount to doing violence to the language of the statute if Section 138 of the Act is interpreted to mean that even if a person draws a cheque on an account not maintained by him, he shall be liable if the cheque is returned for insufficiency of funds. Such an interpretation will lead to absurd and wholly unintended results,” the Court observed.
“The position of law as has been settled by this Court and reiterated in a legion of decisions is that it is only the drawer of the cheque who can be held liable for an offence under Section 138 of the NI Act. Further, this Court has also declared through several pronouncements on the subject that an authorised signatory acting on behalf of the principal cannot be said to be the “drawer” of the cheque “on an account maintained by him with a banker” under Section 138,” it was added.
The Supreme Court relied on NEPC Micon Limited and Others v. Magma Leasing Limited reported in (1999) 4 SCC 253 and Raghu Lakshminarayanan v. Fine Tubes reported in (2007) 5 SCC 103 in support of its conclusion.