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The signatory of the cheque, authorised by the company, is not directed to pay interim compensation: Bombay high court 

Last Updated on March 15, 2023 by Administrator

Bombay high court recently held that, in case of dishonour of the cheque, the authorised signatory of the company will not be considered as the drawer of the cheque and therefore, will not be liable to pay the interim compensation under section 143A of the Negotiable Instrument (NI) act.

The common question of law that arose before the court was- 

 Whether the signatory of the cheque, authorised by the “Company”, is the “drawer” and whether such signatory could be directed to pay interim compensation in terms of section 143A of the Negotiable Instruments Act, 1881 (hereafter “NI Act”, for short) living aside the company.”

Whether a deposit of a minimum sum of 20% of the fine or compensation is necessary under Section 148 of NI Act in an appeal filed by persons other than “drawer” against the conviction and sentence under section 138 of the NI Act

Senior advocate Mr Ponda representing the accused submitted, “As per section 143A, only a ‘drawer’ of the cheque is required to pay interim compensation and no one else. To attract liability under section 138 of the NI Act, the cheque must be drawn from the account of the drawer. Under the scheme of chapter XVII of the Act, the word ‘drawer’ can never be construed to mean signatory of a cheque from whose account the cheque is not drawn.”

Senior advocate Mr. Sharan Jagtiani, representing complainant, contented that the authorised signatory of the company becomes the drawer for the purpose of section 138 and 143A of the NI act as he has been authorised to do so in respect of the account maintained by the company

Justice Amit Borkar interpreted the section 138 of NI act and observed that the expression ‘drawer’ cannot be interpreted as signatory of the cheque. Also, the word drawer in section 143A does not include the authorised signatory of the company.

The court stated in its order- 

“The signatory of the cheque, authorised by the “Company”, is not the drawer in terms of section 143A of the NI Act and cannot be directed to pay interim compensation under section 143A.”

 It also observed “In an appeal under section 148 of 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 court specified that in the appeal filed by the person other than ‘drawer’ under section 138 of NI act, such power to direct deposit of compensation is available with the appellate court under section 389 of CrPC. 

Written By – Shagun Behal

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