The Supreme Court has referred to a larger Bench an important question concerning the scope of Section 148 of the Negotiable Instruments Act, 1881, particularly on whether appellate courts can direct deposit of compensation amounts against convicted directors or authorised signatories when the company, the drawer of the cheque cannot be prosecuted due to a legal impediment such as winding-up.
A Bench of Justice Aravind Kumar and Justice N.V. Anjaria, reiterated that offences under Section 138 of the NI Act are quasi-criminal in nature with a predominant compensatory object, intended to preserve the credibility of cheque transactions and ensure timely recovery for payees.
The Court observed that Sections 143A and 148, introduced by the Negotiable Instruments (Amendment) Act, 2018, were enacted to address delays in cheque dishonour litigation and to discourage dilatory tactics at the trial and appellate stages. These provisions, the Bench noted, are remedial in character, enabling interim compensation and conditional appellate relief, and therefore cannot be viewed as purely penal provisions warranting an unduly restrictive interpretation.
In this context, the Bench expressed prima facie disagreement with the reasoning adopted in Shri Gurudatta Sugars Marketing Pvt. Ltd. v. Prithviraj Sayajirao Deshmukh,2024 SCC OnLine SC 1800 and Bijay Agarwal v. Medilines, 2024 SCC OnLine SC 4094 where the term “drawer” under Sections 143A and 148 was interpreted narrowly to exclude directors or authorised signatories. The Court indicated that such a literal construction may frustrate legislative intent by permitting convicted officers of a company to avoid deposit obligations solely because the company itself cannot be proceeded against due to a legal bar.
However, noting that both Gurudatta and Bijay Agarwal were decisions of co-ordinate Benches, the Court recorded that it was not inclined to finally pronounce upon the correctness of those rulings and instead found it appropriate to refer the issue for authoritative determination.
Hence, the Supreme Court granted leave and directed that the papers be placed before the Chief Justice of India for constitution of a larger Bench to resolve the interpretative conflict on whether, upon a conviction under Section 138 read with Section 141, the appellate deposit contemplated by Section 148 may be directed against a convicted director/authorized signatory, or whether such deposit is confined to the juristic “drawer/company” alone in all scenarios?
Appearances:
For Petitioner(s) : Mr. Raghenth Basant, Sr. Adv.; Mr. Manisha Kaushik, Adv.; Mr. Satya Kam Sharma, AOR; Ms. Yashpriya Sahran, Adv.; Ms. Hima Bharatwaj, Adv.
For Respondent(s) :Mr. Anand Varma, AOR; Mr. Ayush Gupta, Adv
