Summary
An authorised signatory of a company cheque is not its drawer for Section 143A and cannot be directed to pay interim compensation on that basis. The Court upheld the setting aside of interim compensation orders against the respondent directors, distinguishing their possible vicarious criminal liability from the company’s liability as drawer.
Issues
- Whether an authorised company signatory is a drawer who can be ordered to pay interim compensation under Section 143A.
- Whether Section 141 or the object of interim relief permits extending that payment liability to directors when the company is undergoing insolvency proceedings.
Provisions considered
- Sections 7 and 138, Negotiable Instruments Act, 1881The company whose account bears the cheque remains the drawer and bears primary liability; its authorised signatory does not acquire that identity. (¶¶ 28, 30, 35)
- Section 141, Negotiable Instruments Act, 1881Vicarious criminal liability of company officers arises on the statutory conditions and does not make them drawers for interim compensation. (¶¶ 29, 33, 35)
- Section 143A, Negotiable Instruments Act, 1881The plain reference to the drawer excludes personal interim compensation orders against authorised signatories acting for a company. (¶¶ 30, 31, 34, 35)
Held
- A person authorised to sign a cheque on a company’s behalf does not become its drawer. The company and its signatory retain separate legal identities, and Section 143A does not impose interim compensation liability on the signatory merely because of that role. (¶¶ 28, 30, 34, 35)
- Section 141 extends criminal liability to company officers only on its specified conditions. That extension cannot be carried into Section 143A to make directors personally liable for interim compensation. (¶¶ 29, 35)
- Clear statutory language must receive its ordinary meaning, and penal provisions concerning vicarious liability require strict interpretation. The purpose of interim relief cannot justify adding authorised signatories to the class liable under Section 143A. (¶¶ 31, 32, 34)
- Aneeta Hada concerns prosecution of the company and the extension of criminal liability under Section 141. Its observation concerning an authorised signatory does not establish that directors or signatories are drawers for Section 143A. (¶ 33)
Result
Appeals dismissed; the High Court orders setting aside interim compensation against the respondent directors were upheld. Pending applications disposed of.