BIJOY KUMAR MONI VERSUS PARESH MANNA (Supreme Court)

In BIJOY KUMAR MONI VERSUS PARESH MANNA & ANR CRIMINAL APPEAL NO. 5556 OF 2024 (Arising out of SLP (Crl) No. 13133/2024) the Supreme Court clarified that a company’s authorized signatory cannot be held responsible for a bounced cheque under Section 138 of the Negotiable Instruments Act, 1881 unless the company itself is named as the main accused. The Court upheld the decision to acquit a man charged with issuing a dishonoured cheque because the cheque was written on behalf of a company that wasn’t included in the case. The Court dismissed claims that the company didn’t need to be involved since the cheque was meant to cover the individual’s personal debt, even though he signed it as the company’s director. They explained that if Shilabati Hospital Pvt. Ltd. had been included in the accusation, the complainant could have demonstrated that the cheque was for a legitimate debt using the presumption in Section 139. However, since the cheque’s signatory wasn’t charged, the High Court was right to say that the individual couldn’t be prosecuted on his own. The only way he could be held accountable was if the company was also accused, but that wasn’t the case, the Court stated.

“Section 138 of the NI Act clearly postulates that the cheque returned for insufficiency of funds should have been drawn by a person on an account maintained by him. It will amount to doing violence to the language of the statute if Section 138 of the Act is interpreted to mean that even if a person draws a cheque on an account not maintained by him, he shall be liable if the cheque is returned for insufficiency of funds. Such an interpretation will lead to absurd and wholly unintended results,” the Court observed.

“The position of law as has been settled by this Court and reiterated in a legion of decisions is that it is only the drawer of the cheque who can be held liable for an offence under Section 138 of the NI Act. Further, this Court has also declared through several pronouncements on the subject that an authorised signatory acting on behalf of the principal cannot be said to be the “drawer” of the cheque “on an account maintained by him with a banker” under Section 138,” it was added.

This appeal originated from a bounced cheque issued by Paresh Manna, a Director of Shilabati Hospital Pvt. Ltd., intended to repay a personal loan of Rs. 8,45,000. The complainant, Bijoy Kumar Moni, claimed he had lent Manna money back in 2006 and that Manna issued a cheque from the hospital’s account to settle the debt, which bounced due to insufficient funds. Following this, Moni filed a complaint leading to Manna’s conviction, sentencing him to one year in jail and requiring him to pay Rs. 10,00,000 in damages. Although the Sessions Court confirmed the conviction, the Calcutta High Court overturned it, concluding that since the cheque was issued on behalf of the hospital, Manna couldn’t be held liable under Section 141 unless the company was a defendant.

At the Supreme Court, the complainant insisted that the debt was personal and separate from the company, pointing out that Manna never argued that the loan benefitted the hospital during the trial. Manna, on his end, argued that he issued the cheque in his role as Director of Shilabati Hospital Pvt. Ltd. and that he couldn’t be prosecuted without the company being part of the case.

The Court emphasized that under the NI Act, only the person who draws the cheque can be held liable under Section 138. They reaffirmed the principle that a company is a separate legal entity, meaning the authorized signatory acts for the company, which is the actual drawer of the cheque. The Court referenced past cases that made it clear that a cheque must come from an account held by the accused to apply Section 138.

The phrase “on an account maintained by him with a banker” shows a specific link between the account holder and the bank. Granting someone the power to handle an account doesn’t change the fact that it’s the account holder’s account, the Court noted. They stated that the responsibility cannot extend to just any authorized signatories unless the conditions laid out in Section 141 are met. The Court highlighted that for vicarious responsibility under Section 141, the company needs to be prosecuted as the primary offender. If the company isn’t included in the case, then the director or authorized signatory cannot be deemed liable.

The Court explained that the company must first be recognized as the main offender under Section 138 before any blame can be placed on its directors or those responsible for the company’s operations. If the company isn’t held liable, there’s no basis to hold others accountable for the offense under Section 138. Since Shilabati Hospital Pvt. Ltd. was not part of the legal proceedings, Manna couldn’t be found vicariously liable, the Court ruled. They dismissed the argument that not including cases like this under Section 138 would undermine the law’s purpose.

NEPC Micon Limited and Others v. Magma Leasing Limited reported in (1999) 4 SCC 253, Raghu Lakshminarayanan v. Fine Tubes reported in (2007) 5 SCC 103 referred.