Judicial Analysis Court Copy Headnote Facts Arguments Court observation

OMBAY HIGH COURT
Amit Borkar, J.
Lyka Labs Limited and Anr. – Applicants
versus
State of Maharashtra and Anr. – Respondents
Criminal Application No.886 of 2022 with Writ Petition No.201 of 2022 with Writ Petition No.1250 of 2022 with Criminal Application No.240 of 2021 with Writ Petition No.4128 of 2021 with Writ Petition No.2075 of 2022 with Writ Petition No.3443 of 2022 with Criminal Application No.967 of 2022 with Criminal Application No.1205 of 2022 with Criminal Application No.1208 of 2022 with Criminal Application No.1207 of 2022 with Writ Petition No.2644 of 2022 with Writ Petition No.4455 of 2022 with Writ Petition No.4576 of 2022
Decided on 8.3.2023

Advocates:
Counsel for the Parties:
Mr. Aabad Ponda, Senior Advocate with Mr. Bhomesh Bellam, Mr. Karma Vivan i/by Mr. Jugal Kanani for the applicant in APL/1205/2022, 1207/2022, 1208/2022 & 886/2022.
Mr. Jatin P. Shah with Ms. Snehankita M. Munj & Ms. Shraddha Kamble for respondent no.2 in APL/1205/ 2022, 1207/2022 & APL/886/2022.
Mr. Atal Bihari Dubey with Mr. Arvind Tiwari for the petitioner in WP/1250/2022.
Mr. Kunal Dalal for respondent no.1 in WP/2075/2022.
Mr. Niranjan Mundargi with Ms. Keral Mehta, Ms. Anisha Nair, and Mr. Khalid Kazi i/by Vis Legis Law Practice for the petitioner in WP/2644/2022.
Mr. Rajesh Kanojia with Ms. Nikita Singh i/by Res Juris for respondent no.2 in WP/2644/2022.
Mr. Sukrut Mhatre i/by Jyotirmai Deshmukh for the petitioner in WP/201/2022 & WP/4128/2022.
Mr. Maniram R. Gaud for the petitioner in WP/2075/2022.
Ms. Priya Rita i/by Disha Karambar & Associates for respondent no.2 in WP/201/2022 & WP/1250/2022.
Mr. Niranjan Mundargi with Mr. veerdhawal Deshmukh i/by Mr. Naved Askari for the petitioner in WP/3443/2022.
Ms. Y.N. Katpitia with Ms. R.B. Mrolia i/by Kry Legal for respondent no.2 in WP/3443/2022.
Mr. Ansh Karnawat with Mr. Paras Yadav and Mr. Vivek Babar i/by Ruturaj Bankar for the applicants in APL/967/2022.
Mr. Sharan Jagtiani, Senior Advocate with Mr. Gautam Ankhad, Mr. Vishal Narichania, Mr. Tushar Gujjar, Mr. Deepak Singh, and Briti Machdani i/by SL Partners for respondent no.2 in WP/4128/2022.
Ms. Jaldhara Shah with M. Shrinidhi i/by Bharucha & Partners for respondent no.1 in APL/967/2022.
Mr. Aabad Ponda, Senior Advocate with Mr. Pulkitesh Dutt Tiwari and Bency Ramkrishnan i/by Akash Menon for applicant in APL/240/2021.
Mr. Sandeep Kumar Singh i/by SKS Juris for respondent no.2 in APL/240/2021.
Ms. Mahalaxmi Ganpathy with Ms. Sayee Sawant and Ms. Savani Vaze for the petitioner in WP/4576/2022.
Mr. Rishi Bhuta with Mr. Suraj Iyer, Mani Thevar, Ms. Kavita Sharma, Ms. Ankita Bamboli, Mr. Prateek Dutta, Ms. Saakshi Jha, Mr. Aashish Dubey, Mr. Ujjwal Gandhi, Mr. Anurag Ghag and Mr. K.R. Shah i/by Ganesh Co. for the petitioner in WP/4455/2022.
Mr. A.R. Patil, APP for the State.

IMPORTANT POINT
Dishonour of cheque – Liability to pay interim compensation – Signatory of cheque, authorized by “Company”, cannot be directed to pay interim compensation under Section 143A of NI Act.

Headnote:
(A) Negotiable Instruments Act, 1881 – Sections 138 and 141 – Dishonour of cheque – Offence by company – Obligation to honour cheque is on drawer – General rule in cases involving criminal liability is against vicarious liability – No one is to be held criminally liable for act of another – Criminal liability for offence by a company under Section 138 of Act is fastened vicariously on persons referred to in sub-section (1) of Section 141 by virtue of a legal fiction – To widen dragnet of an offence under Section 138 which is committed by drawer only, persons other than drawer are made vicariously liable – All other persons, such as signatories of cheque, managing directors, and in-charge directors, are brought into dragnet on touchstone of vicarious liability under Section 141 of Act – Authorised signatory being individual cannot be equated with or termed as a legal entity created under a Statute. (Paras 18, 19 and 20)
(B) Negotiable Instruments Act, 1881 – Sections 143A and 148 – Dishonour of cheque – Liability to pay interim compensation – Signatory of cheque, authorized by “Company”, is not drawer in terms of Section 143A of NI Act and cannot be directed to pay interim compensation under Section 143A – In an appeal under Section 148 of NI Act filed by persons other than “drawer” against conviction under Section 138 of NI Act, deposit of a minimum sum of 20% of fine or compensation is not necessary – However, in an appeal filed by persons other than “drawer” against conviction under Section 138 of NI Act such power to direct deposit of compensation is available with Appellate Court while suspending sentence under Section 389 of Code of Criminal Procedure. (Paras 50 and 51)
(C) Interpretation of Statute – Rules of Interpretation – When a language of a provision is plain and unambiguous and capable of only one meaning, there is no question of construction of a statute, as provision speaks for itself – Words and phrases occurring in a statute are to be taken not in an isolated or detached manner dissociated from the context but are to be read together and construed in light of the purpose and object of Act itself – Meanings of words and expressions used in an Act must take their colour from context in which they appear – Principle that statute must be read as a whole equally applies to different parts of same section. (Paras 22 and 23)
Result: Reference answered.

JUDGMENT

This is a batch of matters before me wherein the same common question of law arises for decision. Accordingly, I propose (also as has been agreed to by all the learned counsel appearing for the parties) to decide only the principle question of law posed for decision and leave the individual cases to be decided accordingly. Hence, I am relieved of the need of noticing facts of individual cases.

(i) 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 143A of the Negotiable Instruments Act, 1881 (hereafter “NI Act”, for short) living aside the company.”

(ii) Whether a deposit of a minimum sum of 20% of the fine or compensation is necessary under Section 148 of NI Act in an appeal filed by persons other than “drawer” against the conviction and sentence under section 138 of the NI Act.

2. Mr. Ponda learned senior advocate on behalf of the accused made the following submissions:—

(i) As per section 143A, only a ‘drawer’ of the cheque is required to pay interim compensation and no one else. To attract liability under section 138 of the NI Act, the cheque must be drawn from the account of the drawer. Under the scheme of chapter XVII of the Act, the word ‘drawer’ can never be construed to mean signatory of a cheque from whose account the cheque is not drawn.

(ii) Section 143A of the act uses the word ‘drawer’. In the case of an individual’s cheque, the drawer is the signatory from whose account the cheque is drawn. Similar would be a case of a company being a legal person, it is a living being who can sign the cheque, but the cheque is issued from the account of the company, and, therefore, the signatory of the cheque does not become a drawer.

(iii) Under sections 30 and 31 of the act, it is the drawer of a cheque who is bound to compensate the holder in case of dishonour. The responsibility and liability for honouring the cheque is that of the drawer only. Such liability arises at the first instance to ensure that the cheque is honoured on presentation. Such responsibility and obligation to honour the cheque can only be traced to the drawer company and not to an individual authorised signatory, whether he is a director or not. If the cheque bounces, the drawer is liable to pay the payee, provided a demand notice is given to him. The requirement to have sufficient funds in the account from which the cheque is issued is only with the drawer company and not the authorised signatory.

(iv) As an illustration, in the case of a large public limited company authorising a salaried employee as a signatory, can such employee be made liable for payment of interim compensation under section 143A for a cheque of thousands of crores. Such a signatory employee has no personal liability concerning the money transaction with the company, which is a legal person.

(v) The power to direct interim compensation under section 143A of the NI Act is of draconian nature and tantamounts to adjudication and compensation amount before adjudication of guilt in a criminal trial. Therefore, such provisions are required to be strictly construed.

(vi) Relying on the judgment of the Apex Court in the case of P.J. Agro Tech Ltd v. Water Base Ltd., reported in (2010) 12 SCC 146, he submitted that a criminal or a quasi-criminal provision has to be strictly construed. Therefore, it would be unjust and unfair to foist the liability to pay interim compensation to a person not covered under the provision.

(vii) Relying on section 143A(5), he submitted that the interim compensation directed under section 143A needs to be recovered as if it is a fine under section 421 of the Code of Criminal Procedure, 1973. Such amount of fine under section 421, can be recovered either by a warrant of attachment or sale of immovable property or by warrant to the Collector authorising him to realise the amount as arrears of land revenue. Moreover,