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TMI Blog2024 (7) TMI 1308X X X X Extracts X X X X X X X X Extracts X X X X ..... ct" to be paid by the respondents - directors of the company on whose account the dishonoured cheque was drawn. 3. Appellant company entered into several Agreements and Sale Orders with one Cane Agro Energy (India) Ltd. (Cane hereinafter) between September 2016 and June 2017. Under these Agreements and Sale Orders, the appellant made advance payments amounting to Rs.63,46,00,000/- (Rupees sixty three crores forty six lakhs) for supply of sugar by Cane. It is alleged by the appellant that Cane failed to supply the ordered quantities of sugar and also failed to discharge its other obligations as agreed upon. Cane agreed to refund the advance amount due and payable to the Appellant. In part discharge of liability, a sum of Rs.1,00,00,000/- (Rupees one crore) was refunded by Cane on 30.01.2018. 4. Subsequently, respondent Nos. 1 to 3 issued two cheques dated 30.03.2020 in favour of the appellant, one for Rs.45,00,00,000/- (Rupees forty five crores) and one for Rs.6,64,41,300/- (Rupees six crores sixty four lakhs forty one thousand and three hundred), amounting to a total amount of Rs.51,64,41,300/- (Rupees fifty one crores sixty four lakhs forty one thousand and three hundred). These ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 26.07.2022 to pay the interim compensation upon an application made by them. 9. Appellant preferred an application under Section 421, CrPC read with Section 143-A(5), NI Act seeking execution of order dated 27.04.2022 and thus recovery of interim compensation as if it were a fine. The respondents filed their response to the application, the same is pending before the Judicial Magistrate. 10. Respondent Nos. 1 to 3 preferred Criminal Application No. 967 of 2022 before the High Court challenging the order of interim compensation dated 27.04.2022 passed by the Judicial Magistrate. The High Court, vide interim order dated 23.09.2022, stayed the operation of the order impugned therein. 11. During the pendency of the above application, the High Court, in a batch of Writ Petitions and Criminal Application dealing with the same issue and the question of law that 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, NI Act leaving aside the company, vide its final judgment and order dated 08.03.2023 held that the signatory of the cheque is not a 'drawer' in ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the offence under Section 138 is not complete until a demand notice is served on the drawer, emphasizing the drawer's responsibility. The drawer is considered the principal offender if the cheque is returned unpaid, subject to the fulfilment of the necessary conditions before and after the cheque is dishonoured. 15.2. General Rule of Criminal Liability The High Court noted the general rule against vicarious liability in criminal cases, where individuals are typically not held criminally liable for acts committed by others. However, this principle is subject to exceptions created by specific statutory provisions extending liability to additional parties. Section 141, NI Act is one such provision that extends criminal liability for dishonour of a cheque committed by a company to its officers. The Court emphasized that liability under Section 141 arises from the conduct, act, or omission of the person involved, not merely their position in the company. The provision establishes vicarious liability for officers of the company, such as signatories of the cheque, managing directors, or those in charge of its affairs, by legal fiction. Thus, while the drawer of the cheque remains p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interpretation SLP(Crl.) Nos. 8849-8850 of 2023 Page 11 of 22 remains faithful to the lawmakers' intentions and avoids inconsistencies or injustices that may arise from a literal reading of isolated provisions. 15.4.2. The High Court emphasized that Section 143A should be interpreted plainly, without resorting to other rules of interpretation. It asserted that the term 'drawer' in Section 143A has a clear and unambiguous meaning, referring specifically to the person who issues the cheque. Referring to the Statement of Objects and Purposes of the Negotiable Instruments (Amendment) Act, 2018, the High Court noted that the purpose of Section 143A is to provide interim relief to payees of dishonoured cheques by imposing liability on the drawer. This, according to the High Court, aligns with the legislative intent to curb frivolous litigations and expedite resolution of cheque dishonour cases. 15.4.3. The High Court rejected the inclusion of authorized signatories within the definition of 'drawer'. It pointed out that the legislature's choice of words in Section 143A specifically targets the drawer of the cheque, whether an individual or a company, and does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ework. SUBMISSIONS OF THE APPELLANT 19. The learned counsel for the appellant submitted that if a director, managing director, chairman, promotor of a company can be arrayed as accused under Section 141, NI Act despite not being a signatory to the cheque, then it is only fair that one or more of such individuals be held liable to pay interim compensation. 20. Relying upon the object of Section 143-A, NI Act, it was submitted that for addressing the issue of undue delay and for providing relief to the payees of dishonoured cheque, it is only just and fair that this be done through payment of interim compensation by the director or any such person in charge of the company. This would be in alignment with the purposes and objectives of the provision. 21. Further, it was argued that in the present case the company is admitted to CIRP, thus being its alter ego, it is only the directors who can be directed to pay interim compensation in furtherance of the object of the provision in light of the CIRP proceedings against the company, the payees of the dishonoured cheque cannot be left with no interim relief, thereby defeating the purpose of Section 143- A and causing injustice to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he cheque drawn on the company's account by such authorised signatory. 26. It was further submitted that with respect to the interpretation of the provision, the appellant's argument that the meaning of 'drawer' under Section 143-A must be read liberally and purposively is contrary to the position of law on interpretation of statutes. Further submission is that such an interpretation of penal statues is contrary to the settled principles of criminal law, as penal provisions are to be read strictly in order to determine the liability of a party, more so where vicarious liability is to be determined. To substantiate this, he relied upon the judgment of this Court in the case of K.K. Ahuja v. V.K. Vohra. (2009) 10 SCC 48. 27. In conclusion, it was submitted that the primary liability for an offence under Section 138 is that of the company itself and the company's management is only subsequently and vicariously liable. Thus, it is only the company that is to be considered as the drawer of the cheque. Consequently, a strict interpretation of Section 143-A would mean that it is only the drawer-company's liability to pay the interim compensation as the provision does not provide for an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from the plain language of the statute, aims to hold the drawer accountable. The appellants' argument for a broader interpretation to include authorized signatories under Section 143A contradicts this principle and would lead to an unjust extension of liability not supported by the statutory text. 32. The High Court's reliance on established legal precedents further reinforces its interpretation. Judicial precedents relied upon in the impugned judgment underscore the need for a literal interpretation of the statutory provisions. These precedents support the High Court's decision to limit the definition of 'drawer' to the issuer of the cheque, excluding authorized signatories. 33. The appellants' reliance on the judgment in Aneeta Hada (Supra), (2012) 5 SCC 661 is misplaced and out of context. While this case underscored the necessity of involving the company as an accused to maintain a prosecution under Section 141, it does not support the extension of liability to authorized signatories under Section 143A. The judgment nowhere lays down that directors or authorised signatories would come under the ambit of 'drawer' for the purposes of Section 143A. The appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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