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Bijay Agarwal vs. M/s Medilines

Not available · 2024 INSC 918Decided 21 Oct 2024
Not available
Justice C.T. Ravikumar · Justice Sanjay Karol

Background

The appellant was the authorised signatory/Director of a company that had been convicted under Section 138 of the Negotiable Instruments Act (cheque dishonour) after failing to honour a cheque issued in connection with a business agreement with the respondent company. While his appeal against conviction was pending, the trial/sessions court and later the Karnataka High Court required him, as a condition for suspending his sentence, to deposit 20% of the compensation amount under Section 148 of the NI Act: the same condition applicable to an actual "drawer" of a dishonoured cheque. The appellant argued that since he was only an authorised signatory of the company (which was the actual co-accused and liable entity), not personally the drawer of the cheque, this deposit condition should not automatically apply to him.

Decision Breakdown

The Supreme Court examined whether a company's authorised signatory who signs a cheque on the company's behalf should be treated as the "drawer" for the purpose of the mandatory deposit condition under Section 148 NI Act. It held that the courts below failed to properly consider that the appellant was not personally the drawer of the cheque, the company was, and that this was an exceptional circumstance justifying relief from the deposit condition normally imposed on drawers seeking suspension of sentence. Setting aside the High Court's common order, the Court restored the earlier suspension of sentence but removed the requirement to deposit 20% of the fine, while keeping the bond conditions in place until the appeals are decided by the appellate court, and directed that court to dispose of the appeals expeditiously.

Lesson Learnt

A company director or authorised signatory who signs a cheque only in that representative capacity is not automatically treated the same as the cheque's "drawer" for the purpose of mandatory interim-deposit conditions in a Section 138 NI Act appeal. Courts must examine this distinction rather than mechanically imposing the drawer's deposit obligation on him.

Official source (sci.gov.in)View Judgment (PDF)

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