NI Act, section 143A
The Bombay High Court recently held that authorised signatory of a company who signs a cheque on its behalf is not the “drawer” of the cheque and hence such signatory is not liable to pay interim compensation under section 143A of the Negotiable Instruments Act, 1881 in a case for dishonour of cheque.
What is Negotiable Instruments Act:
A “negotiable instrument” means a promissory note, bill of exchange or cheque payable either to order or to bearer. The act protects the rights of complainants.
What section 143A says:
It empowers the Court to order the drawer of the cheque to pay Interim Compensation to the complainant: In case of a summary trial or a summons case, where the drawer pleads not guilty to the allegations made in the complaint. In any other case, upon framing of the charges.
What Bombay High court observed:
In a landmark judgement, the Bombay high court held that in case of corporations issuing cheques that bounce, the authorised signatory is not the ‘drawer’ and not liable to pay interim compensation to a complainant. Only the company is liable to pay it if a trial is pending.
Justice Amit Borkar said:
“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.”
A company is a separate legal entity, distinct and independent of persons that constitute it, noted the HC Senior lawyers.
Case: Lyka Labs Limited & Anr. v. State of Maharashtra & Anr. and connected cases
Coram: Justice Amit Borkar
Case No.: Criminal Application No.886 Of 2022