LexSHRI GURUDATTA SUGARS MARKETING PVT. LTD. versus PRITHVIRAJ SAYAJIRAO DESHMUKH & ORS.
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[2024] 7 S.C.R. 1211 : 2024 INSC 551 Shri Gurudatta Sugars Marketing Pvt. Ltd. v. Prithviraj Sayajirao Deshmukh & Ors. (Criminal Appeal Nos. 3070-3071 of 2024) 24 July 2024 [Vikram Nath* and Prashant Kumar Mishra, JJ.] Issue for Consideration Whether the signatory of the cheque, authorized by the “Company”, is the “drawer” and whether such signatory could be directed to pay interim compensation in terms of section 143-A of the Negotiable Instruments Act, 1881 leaving aside the company. The High Court answered the question in the negative. Headnotes† Negotiable Instruments Act, 1881 – ss.138, 141, 143-A – Appellant company entered into several agreements with C Ltd. and made advance payments for supply of sugar – C failed to supply – In order to discharge the liability, two cheques were issued by respondent nos.1 to 3 (directors of C) in favour of the appellant and the same were dishonoured due to insufficiency of funds – Appellant issued notice – Again payments were not made – Appellant preferred a complaint before the Judicial Magistrate – In the meantime, C was admitted into CIRP – Appellant filed an application u/s. 143-A, NI Act against respondent Nos. 1 to 3 seeking interim compensation – Judicial Magistrate directed each of the respondents to pay 4% of the total cheque amount as interim compensation – The said order was challenged by the respondent nos.1 to 3 before the High Court – The High Court allowed the application preferred by the respondent Nos. 1 to 3 herein and set aside the order of interim compensation passed by the Judicial Magistrate – Correctness: Held: The High Court’s interpretation of Section 7 of the NI Act accurately identified the “drawer” as the individual who issues the cheque – This interpretation is fundamental to understanding the obligations and liabilities u/s. 138 of the NI Act, which makes it * Author 1212 [2024] 7 S.C.R. Digital Supreme Court Reports clear that the drawer must ensure sufficient funds in their account at the time the cheque is presented – The appellants’ argument that directors or other individuals should also be liable u/s. 143-A misinterprets the statutory language and intent – The general rule against vicarious liability in criminal law underscores that individuals are not typically held criminally liable for acts committed by others unless specific statutory provisions extend such liability – Section 141 of the NI Act is one such provision, extending liability to the company’s officers for the dishonour of a cheque – The appellants’ attempt to extend this principle to Section 143-A, to hold directors or other individuals personally liable for interim compensation, is unfounded – The High Court rightly emphasized that liability u/s. 141 arises from the conduct or omission of the individual involved, not merely their position within the company – The distinction between legal entities and individuals acting as authorized signatories is crucial – Authorized signatories act on behalf of the company but do not assume the company’s legal identity – This principle, fundamental to corporate law, ensures that while authorized signatories can bind the company through their actions, they do not merge their legal status with that of the company – This distinction supports the High Court’s interpretation that the drawer u/s. 143-A refers specifically to the issuer of the cheque, not the authorized signatories – The High Court’s decision to interpret ‘drawer’ strictly as the issuer of the cheque, excluding authorized signatories, is well-founded – This interpretation aligns with the legislative intent, established legal precedents, and principles of statutory interpretation – The primary liability for an offence u/s. 138 lies with the company, and the company’s management is vicariously liable only under specific conditions provided in Section 141 – The appellants’ submissions are thus rejected, and the High Court’s judgment is upheld – Thus, the question of law put before this Court is answered in negative. [Paras 28, 29, 30, 35] Case Law Cited Aneeta Hada v. Godfather Travels and Tours Pvt. Ltd. [2012] 5 SCR 503 : (2012) 5 SCC 661 – held inapplicable. Nazir Ahmad v. King Emperor, AIR 1936 Privy Council 253; Central Bank of India v. Ravindra [2001] Supp. 4 SCR 323 : (2002) 1 SCC 367; Noor Mohammed v. Khurram Pasha [2022] 6 SCR 860 : (2022) 9 SCC 23; N. Harihara Krishnan v. J. Thomas [2024] 7 S.C.R. 1213 Shri
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