Director Who Signed Cheque Not Liable for Dishonour Unless Company Is Made an Accused: Supreme Court
The Supreme Court, in Bijoy Kumar Moni v. Paresh Manna & Anr., reiterated that an authorized signatory of a company cannot be held liable under Section 138 of the Negotiable Instruments Act, 1881, for a dishonoured cheque unless the company is arraigned as the principal accused.
A bench comprising Justice JB Pardiwala and Justice R Mahadevan upheld the acquittal of a director convicted for a dishonoured cheque issued on the company’s account, emphasizing that vicarious liability under Section 141 of the NI Act requires the company to first be prosecuted. The Court clarified that only the drawer of the cheque, as defined under Section 138, can be held liable, and signing a cheque as an authorized signatory does not transfer liability to the individual unless statutory conditions are met.
The case involved Paresh Manna, Director of Shilabati Hospital Pvt. Ltd., who issued a cheque for ₹8.45 lakh, allegedly to settle a personal debt, which was dishonoured for insufficient funds. The complainant, Bijoy Kumar Moni, accused Manna of defaulting on a loan, leading to his conviction by the trial court. However, the Calcutta High Court reversed the conviction, ruling that the cheque was drawn on the hospital’s account, not Manna’s personal account, and the hospital was not arraigned as an accused.
The Supreme Court rejected the complainant's argument that the debt was personal and reaffirmed that the cheque’s drawer must maintain the account to attract liability under Section 138. It held that prosecuting an authorized signatory without arraigning the company contravenes the NI Act’s principles, emphasizing strict interpretation of penal provisions.
While dismissing the appeal, the Court acknowledged the complainant’s potential loss due to the dishonoured cheque but noted that the statute of limitations for civil action had expired. It allowed the complainant to approach the police for filing an FIR under charges of cheating, highlighting that criminal remedies outside the NI Act might still be pursued.