According to the Court, this authorised signatory is not a “drawer” of the check under the Negotiable Instruments Act and cannot be ordered to pay the plaintiff interim damages.
According to a recent ruling by the Bombay High Court, a person who is authorised by a business to sign checks on that business’ behalf is not regarded as the “drawer of the check” for the purposes of interim compensation under the Negotiable Instruments (NI) Act. State of Maharashtra v. Lyka Labs Limited & Anr.
So, according to Justice Amit Borkar, the signatory cannot be ordered to pay the complaint interim compensation under Section 143A of the Act in the instance of dishonour of such cheques signed by authorised signatories.
The order held, “The signature of the cheque, authorised by a “business,” is not the drawer in accordance with section 143A of the NI Act and cannot be required to deposit any share of interim compensation.
A number of petitions, including one from former Videocon chairman Venugopal Dhoot, were used to pass the order.
Whether the authorised signatory of the check is the “drawer” and whether he can be ordered to pay interim compensation in an appeal were the legal issues at hand.
According to Section 143A of the NI Act, courts have the authority to order the appellant to deposit at least 20% of the fine or compensation that was imposed by the trial court.
This clause was added to protect drawees from unjustified delays in the dishonoured check’s final resolution.
A check must be issued on an account kept by the drawer, who can be an individual or a legal company, in order to be subject to punishment for dishonour of checks under Section 138 of the NI Act. The drawer is held primarily responsible.
In interpreting Section 138 of the NI Act, the Court noted that the term “drawer” had not been interpreted to include the check’s signing.
Furthermore, it was mentioned that the authorised signatory of a firm is not included in the definition of “drawer” in Section 143A.
Judge Borkar further stated that a deposit of at least 20% of the fine or compensation is not required in an appeal under Section 148 of the NI Act brought by individuals other than the drawer in response to a conviction under Section 138 of the NI Act.
However, the Court noted that in other appeals, the appellate court may exercise its authority to direct deposit compensation while suspending the sentence under Section 389 of the Code of Criminal Procedure.
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