Authorized Signatory of Company Cannot Be Ordered to Pay Compensation for Suspension of Sentence: Supreme Court
The Supreme Court, in Bijay Agarwal vs. M/s Medilines, reiterated that an authorized signatory of a company is not considered the "drawer" of a cheque under Section 148 of the Negotiable Instruments Act, 1881 (N.I. Act), and cannot be held liable for compensatory payments or required to deposit funds for sentence suspension.
The Court clarified that the liability for compensation and deposit to suspend a sentence applies solely to the drawer of the cheque, not the company's authorized officer. Citing the case of Shri Gurudatta Sugars Marketing Pvt. Ltd. v. Prithviraj Sayajirao Deshmukh, the appellant argued that the principles from Section 143A should apply to Section 148, meaning an authorized signatory cannot be required to deposit compensation.
Agreeing with the appellant, the Court ruled that both Sections 143A and 148 treat the drawer of the cheque in the same way, and therefore, the appellant, being an authorized signatory, cannot be directed to deposit 20% of the compensation. The Court also warned appellate courts against mechanically exercising power under Section 148(1) without considering whether exceptional circumstances exist.
The appeal was allowed, and the High Court's order was set aside.