In a significant judgment, the Supreme Court clarified that an official signatory of a company cannot be deemed the “drawer of a cheque” and thus cannot be held liable to deposit compensation under Section 148 of the Negotiable Instruments Act, 1881, for suspension of sentence in cheque dishonor cases. The bench, comprising Justice CT Ravikumar and Justice Sanjay Karol, set aside the High Court’s directive to the company’s authorized signatory to deposit 20% of the compensation for suspension of his sentence.

The Court drew from its earlier ruling in Shri Gurudatta Sugars Marketing Pvt. Ltd. v. Prithviraj Sayajirao Deshmukh & Ors. (2024), which held that merely signing a cheque on behalf of a company does not make an individual its “drawer.” The judgment affirmed that Sections 143A and 148 of the Negotiable Instruments Act should be interpreted analogously, underscoring that liability lies with the drawer, not the authorized signatory.

The Supreme Court criticized the lower courts for adopting a mechanical approach while exercising powers under Section 148(1). It emphasized that appellate courts must carefully examine whether a case involves exceptional circumstances before directing a deposit under the section. The judgment also referenced Jamboo Bhandari v. Madhya Pradesh State Industrial Development Corporation Limited and Ors. (2023), which emphasized caution in imposing conditions without thorough analysis.

The Court ultimately ruled in favor of the appellant, holding that an authorized signatory cannot be directed to deposit compensation unless they are the actual “drawer” of the cheque. This decision reinforces the distinction between a company’s liability and the responsibilities of its officers.

Case Title: Bijay Agarwal Versus M/s Medilines
Judges: Justice CT Ravikumar and Justice Sanjay Karol