Page 27 - Banking Finance April 2023

LEGAL UPDATE

Legal

News

HC: Authorised signatory power of appeal court, in an appeal by Videocon Group were among the pe-
the drawer against conviction, to di- titioners in a batch of over a dozen
in Company's bounced
rect appellant to deposit minimum 20% matters before the HC.
cheque is not 'drawer' of compensation given by trial court. Senior counsel Aabad Ponda, appear-
In a landmark judgment, the Bombay The HC held that when appeal against ing for an accused, in detailed submis-
high court held that in case of conviction in a cheque bouncing case sions, said in a company where the
corporates issuing cheques that is filed by a person other than the account is in the company's name, the
bounce, the authorised signatory is not 'drawer', "deposit of minimum 20% signatory of the company's cheque
the 'drawer' and not liable to pay in- fine or compensation is not necessary" does not become the drawer.
terim compensation of up to 20% to a under the provisions of the NI Act. But,
Senior counsel Sharan Jagtiani had ar-
complainant. Only the company is, it added, the appeal court can order
gued for a complainant that
pending trial. such deposit, pending appeal, under a
"authorised signatory of a company
provision of the code of criminal pro-
"It is held that every person signing a becomes the drawer for the purpose
cedure, to suspend sentence.
cheque on behalf of the company on of sections 138 and 143A (interim com-
whose account a cheque is drawn does The HC held, "The signatory of the pensation) of the NI Act as he has been
not become a drawer of the cheque. cheque, authorised by the 'company', authorised to do so in respect of the
Such a signatory is only a person duly is not the drawer in terms of section account maintained by the company".
authorised to sign the cheque on be- 143A (provision for interim compensa-
Section 143A of the NI Act confers dis-
half of the company - drawer - of the tion) of the NI Act and cannot be di-
cretion on court to direct 'drawer' of
cheque," held Justice Amit Borkar. He rected to pay interim compensation
cheque to deposit maximum 20% of
was dealing with a batch of petitions under section 143A."
the cheque amount as interim com-
to decide the common law points
A company is a separate legal entity, pensation, before determination of
raised.
distinct and independent of persons guilt.
The HC did not extend the definition of that constitute it, noted the HC. Senior
Ponda argued, "To attract liability un-
drawer to company directors or lawyers hailed the judgment dealing
der section 138 (dishonour of cheques)
authorised signatories. It said, "The with scope of interim compensation
of the NI Act, the cheque must be
expression 'drawer' in section 138 has underthe 2018 amendment to the
drawn from the account of the drawer.
not been interpreted to include either Negotiable Instruments Act as being
…word 'drawer' can never be con-
signatory of the cheque or the signa- "revolutionary" and see its impact na-
strued to mean signatory of a cheque
tory director." Section 148 of Nego- tionwide.
from whose account the cheque is not
tiable Instruments (NI) Act deals with
Lyka Labs and Venugopal Dhoot of drawn."
BANKING FINANCE | APRIL | 2023 | 23