Bharat Mittal vs. State Of Rajasthan

REPORTABLE
2025 INSC 1459


IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO. OF 2025
(@ SPECIAL LEAVE PETITION (CRL.) NO.12327 OF 2025)

BHARAT MITTAL …APPELLANT(S)

VERSUS

STATE OF RAJASTHAN AND ORS. ...RESPONDENT(S)

J U D G M E N T

ARAVIND KUMAR, J.
1. Leave granted.
2. The important question that arises before this Court in the present case is:
“ When a director of an accused company is convicted under Section 138 of
the Negotiable Instruments Act (hereinafter referred to as ‘the NI Act’),
without the company itself being convicted due to some existing ‘legal snag’
- such as winding up, liquidation, or any similar scenario -can the appellate
court, while hearing the appeal filed by the director challenging his
conviction and sentence, impose a condition of depositing 20% of the
amount as prescribed under Section 148 of the Act? ” This question assumes
Signature Not Verified
Digitally signed by
RASHI GUPTA
Date: 2025.12.18
18:03:57 IST
Reason:
significance in the present context, given the large number of litigations
arising under Section 138 of the NI Act. To properly address the complexity

1

of this issue and appreciate the existing legal position that guides us in
determining the mandate in such cases, it is necessary to first examine the
facts of the present case, which falls within this category.
BRIEF FACTS:
3. The Respondent No. 2/ Steel Authority of India (hereinafter referred to as
the SAIL/Complainant) had entered into a Memorandum of Understanding
(MOU) dated: 17.04.2012 with Respondent No. 3/ Shiv Mahima Ispat
Private Limited (hereinafter referred to as the Accused Company) for the
supply of Steel. During the financial year 2012–13, the accused company
ordered 208.01 metric tonnes of HR (Hot Rolled) coils, which were
dispatched from the complainant’s Bokaro Steel Plant to Kanakpura
Railway Siding, Jaipur District on 25.12.2012 and 26.12.2012 through
multiple invoices.
3.1. Payment was to be made by the accused on receipt of the goods.
Accused No. 1 company issued a cheque dated: 03.01.2013 for the
supplied coils for a sum of Rs. 4,82,72,269/- to the complainant
company, the cheque issued by the accused company was said to be
signed by Accused No.2/Appellant (hereinafter referred to as the
Appellant) who was the director of the Accused No. 1 company.
However, on depositing the cheque amount before the concerned bank,
the cheque was returned with an endorsement “Exceeds Arrangement”.
3.2. After complying with the requirements under Section 138 of the Act,
1
the complainant filed a complaint on 20.02.2013 before the Trial
2
Court against Respondent No. 3, Shiv Mahima Ispat Private Limited,
arraying the company as Accused No. 1. The appellant herein was

1
Regular Criminal Case No. 2919/2013
2
Court of Senior Judicial Magistrate, N. I. Act Matter. No.01, Jaipur Metropolitan City
- II

2

arrayed as Accused No. 2, while Shankar Lal Mittal, Basanti Devi,
Mukta Mittal, and Sunil Mittal were arraigned as Accused Nos. 3 to 6
on the ground that they were directors of the company.
3.3. In the meanwhile, the Complainant Company also filed a Company
3 4
Petition before the High Court seeking winding up of the Accused
Company under Section 433(e) and (f), 434 and 439 of the Companies
Act, 1956 on 21.03.2013.
3.4. The Trial Court took cognizance of the criminal complaint and
summoned the accused persons on 20.08.2013. This order of
summoning was challenged by Accused Nos. 1 to 6 before the Sessions
5 6
Court by filing a revision petition under Section 397 of the Code of
Criminal Procedure (hereinafter referred to as Cr.P.C.). The Sessions
Court, by order dated 12.05.2014, partly allowed the revision and
quashed the summons qua Accused Nos. 3 to 6 on the ground that no
specific role was attributed to them. However, the Sessions Court
allowed the prosecution to continue against the accused company and
the appellant herein.
3.5. While the case was pending before the Trial Court, the complainant
company lodged FIR No. 353/2014 at P.S. Vishwakarma, Jaipur under
Sections 420, 406, and 120B of the IPC against the appellant, Sunil
Mittal, and the accused company. After investigation, the Investigating
Officer filed a final report concluding that there was no sufficient
evidence to support the criminal allegations. The complainant filed a
protest petition seeking re-investigation and challenged the final report.

3
S. B. Company Petition No. 9/2013
4
High Court of Rajasthan, Jaipur Bench
5
Court of Additional District and Sessions Judge – 18, Jaipur Metropolitan City
6
Criminal Revision Petition No. 08/2014

3

The protest petition was dismissed by the concerned court, and the
matter attained finality.
3.6. On 22.04.2016, the High Court, in a company petition filed by the
complainant company, ordered that the accused company be wound up.
Pursuant to the said order, the accused company was formally wound
up on 01.12.2016.
3.7. Upon the accused company being formally wound up pursuant to the
order of the High Court, the only person left available for prosecution
in the complaint under Section 138 of the NI Act was the appellant
herein.
3.8. The Trial Court convicted the appellant for the offence under Section
138 of the NI Act and sentenced him to two years’ simple
imprisonment. The Trial Court further directed the appellant to pay
compensation of ₹8,10,00,000/- under Section 357(3) of the Code of
Criminal Procedure, failing which he was to undergo six months’
additional imprisonment.

7 8
4. The appellant filed an appeal before the Appellate Court under Section 374
of the Code of Criminal Procedure (Cr.P.C. in short), along with an
application under Section 389 of Cr.P.C seeking suspension of sentence. The
Appellate Court, by order dated 27.11.2024, allowed the application for
suspension of sentence, subject to the condition that the appellant deposit
20% of ₹8,10,00,000/- within 60 days, in terms of Section 148 of the NI Act.
4.1. On account of the appellant’s failure to deposit the amount as directed,
the Appellate Court issued a non-bailable warrant against him on
12.02.2025.

7
Criminal Appeal No. 83/2024
8
The Court of Additional District & Session Judge No. 8, Jaipur Metropolitan City-
Second

4

4.2. The appellant thereafter filed an application before the Appellate Court
seeking exemption from the requirement of depositing 20% of the
amount as directed vide order dated 27.11.2024. He contended that the
accused company, M/s Shiv Mahima Ispat Pvt. Ltd., had already been
wound up by order dated 01.12.2016 of the Hon’ble High Court, and
that the Official Liquidator had accepted and partly satisfied the
complainant’s claim from the sale of company assets. It was therefore
argued that making the appellant/director personally liable was
contrary to law and would result in double recovery.
4.3. The appellant further contended that the Trial Court had wrongly
convicted him without convicting the company, in disregard of
Section 141 of the NI Act , and without considering the entire evidence
on record. He also urged that he was under severe financial hardship
being unemployed, without assets, struggling to support his family, and
burdened with loans and medical expenses, making it impossible to
deposit 20% of the compensation amount.
4.4. The appellant further relied upon the judgment of this Court in Jamboo
9
Bhandari v. M.P. State Industrial Development Corporation . Placing
reliance on the exceptional facts of the case namely, the liquidation of
the company, the wrongful imposition of vicarious liability, partial
recovery already effected, and his financial incapacity, the appellant
prayed for complete exemption from the deposit condition, submitting
that otherwise his right of appeal would be rendered illusory.
4.5. The Trial Court, by order dated 02.05.2025, dismissed the appellant’s
application for exemption, on the ground that its earlier order dated
27.11.2024, passed on the suspension of sentence, was a final order in

9
(2023) 10 SCC 446 Hereinafter referred to as Jamboo

5

respect of that application and could not be modified or reviewed
except for clerical or arithmetic errors.
5. The appellant challenged the order dated 27.11.2024 before the High Court
10
by filing a petition under Section 528 of Bharatiya Nagarik Suraksha
Sanhita (for short ‘BNSS’) up to an extent it imposes 20% of the
compensation amount to be deposited.
5.1. Before the High Court, the appellant relied on the judgments of this
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Court in Bijay Agarwal v. Medilines and Shri Gurudatta Sugars
12
Marketing P. Ltd. v. Prithviraj Sayajirao Deshmuk and Ors . ,
wherein it was held that an authorized signatory is not the “drawer” of
the cheque, and that the company alone is the drawer and therefore in
view of this principle, the Court exempted the authorized agent from
depositing any amount as prescribed under Sections 148 and 143A of
the NI Act.
5.2. The High Court, by the impugned order dated 27.05.2025, dismissed
the petition filed by the appellant on the ground that, under Section 141
of the NI Act, directors in charge of the company at the relevant time
can be held vicariously liable. Since the appellant signed the
dishonored cheque and assured repayment, he was rightly convicted,
and neither his resignation nor the company’s winding-up absolves him
of past liability.
5.3. The High Court further held that the appellant had failed to comply
with the mandatory 20% deposit, delayed the proceedings, and acted as
a compulsive litigant. The Court dismissed the petition with costs of
₹5,00,000 and restrained him from alienating personal assets until
clearance from the Official Liquidator. The appellant is challenging this

10
S.B. Criminal Miscellaneous (Petition) No. 2912/2025
11
2024 SCC OnLine SC 4094 Hereinafter referred to as Bijay Agarwal
12
2024 SCC OnLine SC 1800 Hereinafter referred to as Gurudatta

6

order of the High Court dismissing his petition under Section 528 of
the Cr.P.C.


SUBMISSION OF THE PARTIES
6. Sri R. Basant, Senior Advocate, appearing for the appellant, contended that
the order of the High Court has not followed the law laid down by this Court
and is therefore liable to be set aside. He further submitted that the High
Court erred in not applying the principles laid down in Bijay Agarwal v.
Medilines (supra) and Shri Gurudatta Sugars Marketing P. Ltd. v.
Prithviraj Sayajirao Deshmuk and Ors. (supra) , and that the appellant is
not the drawer of the company cheque. Accordingly, he argued, the appellant
is not liable to deposit any amount under Section 148 of the NI Act and
should be fully exempted. He further contended that,
6.1. The cheque in question was not issued towards any existing debt or
liability, as the supplied material was of inferior quality and did not
meet specifications. Approximately 500 MT worth ₹2.25 crores were
returned before and soon after the filing of the complaint, thereby
rebutting the statutory presumption under Section 138 of the NI Act.
6.2. The complainant’s own test reports, RTI replies, and the cross-
examination of PW-1 establish defective supply, short quantity,
absence of proper legal notice, and acknowledgment of returned goods,
negating any enforceable liability.
6.3. Multiple proceedings, including FIR No. 353/2014 and the accepted
closure report, confirmed the return of goods and dismissal of the
protest petition, proving that the complaint under Section 138 was a
collateral attempt to misuse the criminal process for recovery.

7

6.4. The appellant had resigned as director before the winding-up order of
the company. Any liability, if it exists, rests with the company under
liquidation and the Official Liquidator, not personally on the appellant,
as settled by this Court in Bijay Agarwal v. Medilines .
6.5. The High Court erred in directing a fresh deposit of 20% of the
compensation and in imposing costs and restraint on personal assets,
despite the value of goods already returned exceeding 20% of the
claim, rendering the impugned orders arbitrary, excessive, and contrary
to law.
7. Sri Nagamuthu, Senior Advocate, appearing for Respondent No.
2/Complainant Company, while supporting the impugned order, contended
as follows:
7.1. The appellant was both the signatory of the dishonored cheque and a
director actively managing the affairs of Shiv Mahima Ispat Pvt.
Ltd./the accused company. Having assured payment of the dues in
writing, he cannot now claim that he does not fall under the category
of “drawer” under Sections 138 and 141 of the NI Act.
7.2. Unlike other directors against whom the order of cognizance was set
aside, the appellant’s direct role in issuing the cheque and assuring
payment justified his prosecution and conviction by the Trial Court.
7.3. The appellant cannot escape liability under Section 148 of the NI Act,
as any contrary interpretation would defeat the purpose of the
provision. He also contended that the Appellant’s reliance on Bijay
Agarwal and Shri Gurudatta Sugars is misplaced, as those cases
involved non-executive directors or mere authorized signatories, unlike
his active role in the present case.
7.4. Proceedings against the company could not continue due to the
liquidation order under Section 446 of the Companies Act, 1956, but

8

that does not absolve the appellant’s personal criminal liability under
Section 138 of the NI Act.
7.5. The filing of a claim by the complainant company before the Official
Liquidator does not negate or extinguish the appellant’s liability. Any
recovery made in NI Act proceedings would be adjusted against the
company’s overall outstanding dues. Accordingly, the complainant
prayed for dismissal of the appeal.

THE QUESTION:
8. 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” alone in all situations?

A. STATUTORY SETTING
9. Before we proceed to answer the question that arises before us, we wish to
extract the provisions of the Act that we will be discussing in detail in our
analysis. The relevant provisions of the Act necessary is as follows:
i. Section 7: Drawer” - The maker of a bill of exchange or cheque is called
“
the “drawer”

ii. Section 138. Dishonour of cheque for insufficiency, etc., of funds in the
account.— Where any cheque drawn by a person on an account maintained
by him with a banker for payment of any amount of money to another
person from out of that account for the discharge, in whole or in part, of
any debt or other liability, is returned by the bank unpaid, either because
of the amount of money standing to the credit of that account is insufficient
to honour the cheque or that it exceeds the amount arranged to be paid
from that account by an agreement made with that bank, such person shall
be deemed to have committed an offence and shall, without prejudice to

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any other provision of this Act, be punished with imprisonment for [a term
which may be extended to two years’], or with fine which may extend to
twice the amount of the cheque, or with both:

Provided that nothing contained in this section shall apply unless—

(a) The cheque has been presented to the bank within a period of six
months from the date on which it is drawn or within the period of its
validity, whichever is earlier;
(b) the payee or the holder in due course of the cheque, as the case may be,
makes a demand for the payment of the said amount of money by giving
a notice; in writing, to the drawer of the cheque, 5 [within thirty days]
of the receipt of information by him from the bank regarding the return
of the cheque as unpaid; and
(c) the drawer of such cheque fails to make the payment of the said amount
of money to the payee or, as the case may be, to the holder in due course
of the cheque, within fifteen days of the receipt of the said notice.

Explanation .—For the purposes of this section, “debt of other liability”
means a legally enforceable debt or other liability.

iii. Section 141- Offences by companies.— (1) If the person committing an
offence under section 138 is a company, every person who, at the time the
offence was committed, was in charge of, and was responsible to, the
company for the conduct of the business of the company, as well as the
company, shall be deemed to be guilty of the offence and shall be liable to
be proceeded against and punished accordingly:

Provided that nothing contained in this sub-section shall render any person
liable to punishment if he proves that the offence was committed without
his knowledge, or that he had exercised all due diligence to prevent the
commission of such offence:

[Provided further that where a person is nominated as a Director of a
company by virtue of his holding any office or employment in the Central
Government or State Government or a financial corporation owned or
controlled by the Central Government or the State Government, as the case
may be, he shall not be liable for prosecution under this Chapter.]

(2) Notwithstanding anything contained in sub-section (1), where any
offence under this Act has been committed by a company and it is proved
that the offence has been committed with the consent or connivance of, or
is attributable to, any neglect on the part of, any director, manager,
secretary or other officer of the company, such director, manager, secretary

10

or other officer shall also be deemed to be guilty of that offence and shall
be liable to be proceeded against and punished accordingly.
Explanation.—For the purposes of this section, —
(a) “company” means anybody corporate and includes a firm or other
association of individuals; and
(b) “director”, in relation to a firm, means a partner in the firm.


iv. Section 143A: Power to direct interim compensation. —
(1) Notwithstanding anything contained in the Code of Criminal
Procedure, 1973, the Court trying an offence under section 138 may order
the drawer of the cheque to pay interim compensation to the
complainant—
(a) in a summary trial or a summons case, where he pleads not guilty to
the accusation made in the complaint; and
(b) in any other case, upon framing of charge.

(2) The interim compensation under sub-section (1) shall not exceed
twenty per cent. of the amount of the cheque.

(3) The interim compensation shall be paid within sixty days from the date
of the order under subsection (1), or within such further period not
exceeding thirty days as may be directed by the Court on sufficient cause
being shown by the drawer of the cheque.

(4) If the drawer of the cheque is acquitted, the Court shall direct the
complainant to repay to the drawer the amount of interim compensation,
with interest at the bank rate as published by the Reserve Bank of India,
prevalent at the beginning of the relevant financial year, within sixty days
from the date of the order, or within such further period not exceeding
thirty days as may be directed by the Court on sufficient cause being shown
by the complainant.

(5) The interim compensation payable under this section may be recovered
as if it were a fine under section 421 of the Code of Criminal Procedure,
1973 (2 of 1974).

(6) The amount of fine imposed under section 138 or the amount of
compensation awarded under section 357 of the Code of Criminal
Procedure, 1973 (2 of 1974), shall be reduced by the amount paid or
recovered as interim compensation under this section.]

v. Section 148. Power of Appellate Court to order payment pending appeal
against conviction . —

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(1) Notwithstanding anything contained in the Code of Criminal
Procedure, 1973 (2 of 1974), in an appeal by the drawer against conviction
under section 138, the Appellate Court may order the appellant to deposit
such sum which shall be a minimum of twenty per cent. of the fine or
compensation awarded by the trial Court:

Provided that the amount payable under this sub-section shall be in
addition to any interim compensation paid by the appellant under section
143A.

(2) The amount referred to in sub-section (1) shall be deposited within
sixty days from the date of the order, or within such further period not
exceeding thirty days as may be directed by the Court on sufficient cause
being shown by the appellant.

(3) The Appellate Court may direct the release of the amount deposited
by the appellant to the complainant at any time during the pendency of
the appeal:
Provided that if the appellant is acquitted, the Court shall direct the
complainant to repay to the appellant the amount so released, with
interest at the bank rate as published by the Reserve Bank of India,
prevalent at the beginning of the relevant financial year, within sixty days
from the date of the order, or within such further period not exceeding
thirty days as may be directed by the Court on sufficient cause being
shown by the complainant.]


B. THE LEGAL POSITION GOVERNING THE PROSECUTION OF A
COMPANY FOR AN OFFENCE UNDER SECTION 138 READ WITH
SECTION 141 OF THE NI ACT


10. Before we proceed to answer the question framed in Paragraph 8, it is
apposite to reiterate the legal position governing the prosecution of a
company for an offence punishable under Section 138 of the NI Act.

I. THE PRINCIPLES OF VICARIOUS LIABILITY – WHO CAN BE
MADE RESPONSIBLE FOR THE OFFENCE OF SECTION 138
COMMITTED BY A COMPANY.

12

11. Section 141 of the NI Act fastens vicarious liability under Section 138 read
with Section 141 upon ‘every person who, at the time the offence was
committed, was in charge of and responsible to the company for the conduct
of its business’, as well as upon the company itself. A plain reading of
Section 141 indicates that liability may be attributed to three distinct
categories of persons:
i. the Company
ii. every person who, at the time of commission of the offence, was in
charge of and responsible to the company for the conduct of its business
iii. any director, manager, secretary, or officer of the company with whose
consent, connivance, or due neglect the company committed the
13
offence.
14
12. In K.K. Ahuja v. V.K. Vora & Anr . , the issue that arose for consideration
was whether a director or officer could be held vicariously liable under
Section 141 merely on account of his designation. This Court answered the
question in the negative, holding that vicarious liability under Section 141
attaches only to those persons who, at the time of commission of the offence,
were in charge of and responsible for the conduct of the business of the
company. The Court further held that while a Managing Director or Joint
Managing Director may, by virtue of their position, be presumed to be in
charge of the business, any other director or officer would require specific
and necessary averments demonstrating their role, responsibilities, and
involvement in the conduct of the company’s affairs. Mere designation as a
director or officer is not sufficient. In Central Bureau of Investigation v.

13
the persons mentioned in (ii) and (iii) are hereinafter referred to as the ‘category of
persons’
14
( 2009) 10 SCC 48

13

15
Asian Global Ltd. , this Court reiterated that criminal liability cannot be
imposed mechanically or on the basis of assumptions. There must be
material to indicate participation of the accused in the day-to-day
management or decision-making of the company. Vicarious liability in
criminal jurisprudence arises only where the statute expressly provides for
such liability and where the statutory conditions are duly fulfilled. Similarly,
16
in National Small Industries Corporation Ltd. v. Harmeet Singh Paintal ,
this Court held that, for fastening liability under Section 141, the complaint
must contain clear and specific averments to the effect that the accused was
in charge of and responsible for the conduct of the business of the company
at the relevant time. A mere reproduction of the statutory language or bald
assertions without particulars would not suffice.
13. In the judgment relating to vicarious liability in SMS Pharmaceuticals Ltd.
17
v. Neeta Bhalla , this Court while answering a reference relating to
vicarious liability of directors held as follows:
1. This matter arises from a reference made by a two Judge Bench of
this Court for determination of the following questions by a larger
Bench:

"(a) whether for purposes of Section 141 of the Negotiable
Instruments Act, 1881, it is sufficient if the substance of the
allegation read as a whole fulfill the requirements of the said section
and it is not necessary to specifically state in the complaint that the
persons accused was in charge of, or responsible for, the conduct of
the business of the company.

(b) whether a director of a company would be deemed to be in
charge of, and responsible to, the company for conduct of the
business of the company and, therefore, deemed to be guilty of the
offence unless he proves to the contrary.

(c) even if it is held that specific averments are necessary, whether
in the absence of such averments the signatory of the cheque and or

15
( 2010) 11 SCC 203
16
2010) 3 SCC 330
(
17
(2005) 8 SCC 89

14

the Managing Directors of Joint Managing Director who admittedly
would be in charge of the company and responsible to the company
for conduct of its business could be proceeded against.”
……
19. In view of the above discussion, our answers to the questions posed
in the Reference are as under:
(a) It is necessary to specifically aver in a complaint under Section 141
that at the time the offence was committed, the person accused was
in charge of, and responsible for the conduct of business of the
company. This averment is an essential requirement of Section 141
and has to be made in a complaint. Without this averment being made
in a complaint, the requirements of Section 141 cannot be said to be
satisfied.
(b) The answer to question posed in sub-para (b) has to be in negative.
Merely being a director of a company is not sufficient to make the
person liable under Section 141 of the Act. A director in a company
cannot be deemed to be in charge of and responsible to the company
for conduct of its business. The requirement of Section 141 is that
the person sought to be made liable should be in charge of and
responsible for the conduct of the business of the company at the
relevant time. This has to be averred as a fact as there is no deemed
liability of a director in such cases.
(c) The answer to question (c) has to be in affirmative. The question notes
that the Managing Director or Joint Managing Director would be
admittedly in charge of the company and responsible to the company
for conduct of its business. When that is so, holders of such positions
in a company become liable under Section 141 of the Act. By virtue
of the office they hold as Managing Director or Joint Managing
Director, these persons are in charge of and responsible for the conduct
of business of the company. Therefore, they get covered under Section
141. So far as signatory of a cheque which is dishonoured is
concerned, he is clearly responsible for the incriminating act and will
be covered under Subsection (2) of Section 141.

14. It is necessary to reiterate this position of law for the reason that where a
company commits an offence under Section 138 read with Section 141 of the
Negotiable Instruments Act, the persons who were in charge of and
responsible for the conduct of its affairs at the relevant time may also be held
vicariously liable along with the company.


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II. PROSECUTION CANNOT BE MAINTAINED AGAINST A
DIRECTOR OR CHEQUE SIGNATORY ALONE WITHOUT
MAKING THE COMPANY AN ACCUSED, EXCEPT IN ONE
SITUATION - A LEGAL IMPEDIMENT (LEGAL SNAG).”
18
15. This Court, in Aneeta Hada v. Godfather Travels & Tours Pvt. Ltd . , laid
down the law that criminal prosecution against ‘every person who, at the
time the offence was committed, was in charge of and responsible to the
company for the conduct of its business,’ as contemplated under Section 141
of the Act, cannot be maintained unless the company itself is arraigned as an
accused in a complaint filed under Section 138 read with Section 141 of the
Act.
16. In Aneeta Hada , this Court undertook an examination of the correctness of
certain earlier pronouncements which had taken the view that prosecution
could be maintained against a director or the signatory of the cheque even in
the absence of the company being arraigned as an accused. One such
19
decision was Anil Hada v. Indian Acrylic Ltd . In Anil Hada , the Court
was dealing with a situation wherein the complaint had been instituted only
against the directors of M/s Indo Flogate Industries Ltd., the company not
having been impleaded on account of it being under liquidation. In those
circumstances, this Court proceeded to hold as follows:
“10. Three categories of persons can be discerned from the said provision
who are brought within the purview of the penal liability through the legal
fiction envisaged in the section. They are: (1) The company which
committed the offence, (2) Everyone who was in charge of and was
responsible for the business of the company, (3) any other person who is a
director or a manager or a secretary or officer of the company, with whose
connivance or due to whose neglect the company has committed the
offence.

18
(2012) 5 SCC 661. Hereinafter referred to as Annetha Hada.
19
(2000) 1 SCC 1. Hereinafter referred to as Anil Hada

16

………
13. If the offence was committed by a company it can be punished only if
the company is prosecuted. But instead of prosecuting the company if a
payee opts to prosecute only the persons falling within the second or third
category the payee can succeed in the case only if he succeeds in showing
that the offence was actually committed by the company. In such a
prosecution the accused can show that the company has not committed the
offence, though such company is not made an accused, and hence the
prosecuted accused is not liable to be punished. The provisions do not
contain a condition that prosecution of the company is sine qua non for
prosecution of the other persons who fall within the second and the third
categories mentioned above. No doubt a finding that the offence was
committed by the company is sine qua non for convicting those other
persons. But if a company is not prosecuted due to any legal snag or
otherwise, the other prosecuted persons cannot, on that score alone,
escape from the penal liability created through the legal fiction envisaged
in Section 141 of the Act.
(Emphasis supplied)
17. Aneeta Hada partially overruled the ratio of Anil Hada to the extent that it
had permitted prosecution of category of persons without arraigning the
company as an accused. Aneeta Hada clarified that a complaint under
Section 138 read with Section 141 of the Act cannot be maintained against
the ‘category of persons’ alone unless the company is also made an accused.
However, it upheld the only exception recognized in Anil Hada namely, that
where the company cannot be prosecuted due to a legal impediment,
proceedings may validly continue against the ‘category of persons’ alone.
18. From the above analysis, the following conclusions emerge:
i. The ‘category of persons’ referred to in Section 141 of the Act cannot
be prosecuted in a complaint under Section 138 read with Section 141
unless the company is also arrayed as an accused.

17

ii. The only exception arises where, due to a legal impediment, the
company cannot be prosecuted, in such circumstances, the prosecution
may proceed solely against the ‘category of persons’.
iii. Where a complaint has been properly filed against both the company
and the ‘category of persons’, but during the pendency of the
proceedings the company goes into liquidation, winding-up, or faces
any other legal snag, the prosecution will continue only against the
‘category of persons’ and not against the company.
19. This position of law is important for us to reiterate for the simple reason that
when a prosecution proceeded just against the managerial persons or the
category of persons and not against the company because of some legal snag,
as is in the present case, such managerial persons can be convicted of the
offences under Section 138 r/w Section 141. A person who has been
convicted can maintain an appeal against his conviction.

III. SECTION 148 OF THE NEGOTIABLE INSTRUMENTS ACT –
WHETHER MANDATORY?
20
20. In Surinder Singh Deswal & Ors. v. Virender Gandhi , this Court, while
examining whether Section 148 of the NI Act is mandatory or directory, held
that the expression ‘may’ occurring therein is to be construed as ‘shall’,
thereby rendering the provision mandatory in nature. The same question
again fell for consideration in Jamboo Bhandari v. Madhya Pradesh State
21
Industrial Development Corporation Ltd. & Ors . , wherein this Court,
while taking note of the ratio in Surinder Singh , clarified that although
Surinder Singh treated the requirement under Section 148 as mandatory, the

20
(2019) 11 SCC 341. Hereinafter referred to as the Surinder Singh.
21
(2023) 10 SCC 446. Hereinafter referred to as Jamboo.

18

appellate court retains a limited discretion, in exceptional circumstances, to
exempt an appellant from making the statutory deposit contemplated under
the provision. The Court held as follows:
“6. What is held by this Court is that a purposive interpretation should be
made of Section 148 of the N.I. Act. Hence, normally, Appellate Court
will be justified in imposing the condition of deposit as provided in Section
148. However, in a case where the Appellate Court is satisfied that the
condition of deposit of 20% will be unjust or imposing such a condition
will amount to deprivation of the right of appeal of the Appellant,
exception can be made for the reasons specifically recorded.
7. Therefore, when Appellate Court considers the prayer Under Section
389 of the Code of Criminal Procedure of an Accused who has been
convicted for offence Under Section 138 of the N.I. Act, it is always open
for the Appellate Court to consider whether it is an exceptional case which
warrants grant of suspension of sentence without imposing the condition
of deposit of 20% of the fine/compensation amount. As stated earlier, if
the Appellate Court comes to the conclusion that it is an exceptional case,
the reasons for coming to the said conclusion must be recorded.”

22
21. This Court, in Muskan Enterprises v. State of Punjab & Anr once again
considered the question whether Section 148 of the NI Act is mandatory in
all cases. Concurring with the ratio laid down in Jamboo Bhandari , this
Court reiterated that while Section 148 is generally mandatory, the appellate
court retains the discretion, in exceptional circumstances, to exempt an
appellant from making the deposit contemplated under the said provision.
22. We concur with the ratio laid down in Jamboo Bhandari and Muskan
Enterprises and are of the considered view that the appellate court does
possess a limited discretion, to be exercised only in exceptional
circumstances, to exempt an appellant from making the deposit
contemplated under Section 148 of the Act.

22
(2024) SCC OnLine SC 4107. Hereinafter referred to as Muskan.

19

23. It is necessary to reiterate this position of law for the reason that, in the
present case, while examining whether the appellant may be exempted from
the deposit contemplated under Section 148 of the Act, the foremost question
that arises is whether the appellate court indeed possesses the discretion to
grant such exemption. It is only upon affirming the existence of such
discretion that the applicability of the same to the facts of the present case
can be assessed.

C. THE ISSUE, THE STATUTORY TEXT AND THE INTENT OF THE
LEGISLATURE
24. Before we proceed to analyse the question framed in Paragraph 8, it is
appropriate to briefly recapitulate the conclusions reached in the preceding
discussion, which we reiterate as under:
I. Where a company commits an offence under Section 138 read with
Section 141 of the Negotiable Instruments Act, the persons who were
in charge of and responsible for the conduct of its affairs at the relevant
time may also be held vicariously liable along with the company.
II. Where a company is alleged to have committed an offence under
Section 138 of the Act, a complaint cannot be maintained solely against
the managerial personnel without arraigning the company as an
accused. The only exception to this requirement arises where the
company cannot be prosecuted due to a legal impediment or legal snag
III. An appellate court possesses a limited discretion, to be exercised only
in exceptional circumstances, to exempt an appellant from making the
deposit contemplated under Section 148 of the NI Act.

20

25. Before proceeding with the further analysis, we consider it appropriate to
reproduce the Statement of Objects and Reasons of the Negotiable
Instruments (Amendment) Act, 2018 , by which Sections 143A and 148
were introduced into the Negotiable Instruments Act, 1881. The same reads
as follows:
“The Negotiable Instruments Act, 1881 (the Act) was enacted to define
and amend the law relating to Promissory Notes, Bills of Exchange and
Cheques. The said Act has been amended from time to time so as to
provide, inter alia, speedy disposal of cases relating to the offence of
dishonor of cheques. However, the Central Government has been
receiving several representations from the public including trading
community relating to pendency of cheque dishonor cases. This is
because of delay tactics of unscrupulous drawers of dishonored cheques
due to easy filing of appeals and obtaining stay on proceedings. As a
result of this, injustice is caused to the payee of a dishonored cheque
who has to spend considerable time and resources in court proceedings
to realize the value of the cheque. Such delays compromise the sanctity
of cheque transactions.

2. It is proposed to amend the said Act with a view to address the issue
of undue delay in final resolution of cheque dishonor cases so as to
provide relief to payees of dishonored cheques and to discourage
frivolous and unnecessary litigation which would save time and money.
The proposed amendments will strengthen the credibility of cheques
and help trade and commerce in general by allowing lending
institutions, including banks, to continue to extend financing to the
productive sectors of the economy.

3. It is, therefore, proposed to introduce the Negotiable Instruments
(Amendment) Bill, 2017 to provide, inter alia, for the following,
namely:

(i) to insert a new Section 143A in the said Act to provide that the Court
trying an offence Under Section 138, may order the drawer of the
cheque to pay interim compensation to the complainant, in a summary
trial or a summons case, where he pleads not guilty to the accusation
made in the complaint; and in any other case, upon framing of charge.
The interim compensation so payable shall be such sum not exceeding
twenty per cent of the amount of the cheque; and


21

(ii) to insert a new Section 148 in the said Act so as to provide that in
an appeal by the drawer against conviction Under Section 138, the
Appellate Court may order the Appellant to deposit such sum which
shall be a minimum of twenty per cent of the fine or compensation
awarded by the trial court.”


I. THE ISSUE
26. Bearing in mind the legislative intent noted above, we now proceed to
examine Section 148 in the context of the issue arising in the present matter.
In the preceding part of our analysis, we have reiterated that prosecution may
lie against the category of persons mentioned in Section 141 when the
company itself cannot be prosecuted on account of a legal impediment, such
persons being vicariously liable along with the company. We have also
reiterated that the appellate court retains a limited discretion, in exceptional
circumstances, to exempt an appellant from making the deposit
contemplated under Section 148 of the Act. The question that now arises for
our consideration, and which has been formulated in Paragraph 8, is whether
the expression ‘drawer’ in Section 148 must be understood as referring only
to the company, and consequently, whether in cases where a person falling
within the category noted under Section 141 stands convicted for an offence
under Section 138 on account of the company not being prosecutable due to
a legal snag, all such situations must, by necessary implication, be treated as
‘exceptional cases’ within the meaning of Jamboo Bhandari and Muskan
Enterprises , thereby mandating that the appellate court exempt the appellant
from the statutory deposit under Section 148.
27. In order to simplify, the key issue is whether the word “drawer” occurring
in Section 148 refers only to the company and if so, whether all cases where
individuals are convicted vicariously (because the company could not be

22

prosecuted) must automatically be treated as “exceptional cases”
warranting exemption from the statutory deposit.
28. Having introduced the core issue which arises for our consideration we will
now proceed to analyze the issue.

II. STATUTORY TEXT AND LEGISLATIVE INTENT:
29. We have extracted Section 148 as well as the Statement of Objects and
Reasons for enacting Section 148 of the Act in previous sections. Therefore,
at this juncture, we proceed to analyze the text of Section 148 and the
Legislative Intent behind enacting the same.
30. The Negotiable Instruments (Amendment) Act, 2018 was enacted in
response to the persistent and systemic delay that had come to characterise
prosecutions under Section 138 of the Act. Experience demonstrated that
drawers of dishonoured cheques frequently employed procedural stratagems
such as jurisdictional objections and applications for stay in order to protract
the proceedings and thereby defeat the compensatory object of the statute.
The legislature, cognizant of this mischief, sought to restore efficacy to the
mechanism of cheque dishonour prosecutions.
31. In furtherance of this objective, Parliament introduced Section 143A,
authorising the Trial Court to direct payment of interim compensation up to
twenty per cent of the cheque amount during pendency of the trial. This
provision marks a conscious legislative shift aimed at securing early
financial relief to the complainant and deterring frivolous defences. The
amendment accordingly reinforces the compensatory and remedial character
of proceedings under Section 138.
32. Complementing this framework, the amendment inserted Section 148,
empowering the Appellate Court to direct the convicted drawer to deposit a

23

minimum of twenty per cent of the fine or compensation awarded by the
Trial Court, even during the pendency of the appeal. The said provision
addresses a long-standing lacuna wherein convicted persons routinely
invoked the appellate process solely to delay or evade payment. The
mandate of a pre-deposit thus strengthens enforcement and enhances the
credibility of negotiable instruments in commercial transactions.
33. Section 148, operating through a non obstante clause, confers an overriding
and independent power upon the Appellate Court, untrammelled by the
general provisions of the Code of Criminal Procedure. The deposit
envisaged is interim in nature and does not amount to a final affirmation of
guilt. Its purpose is to ensure that the complainant is not deprived of the
fruits of a lawful conviction due to appellate delays. The provision further
contemplates release of the deposited amount to the complainant, subject to
suitable undertakings for restitution in the event the appeal succeeds.
34.
The architecture of Section 148 reflects a deliberate departure from the
conventional appellate norm that ordinarily presumes the suspension of
monetary consequences upon admission of appeal. Parliament, recognising
the inherently compensatory nature of Section 138 proceedings, envisaged
that the right of appeal must not become an instrument for defeating
legitimate financial claims arising from a proved dishonour. Section 148,
therefore, recalibrates the balance between the appellant’s right to challenge
the conviction and the complainant’s right to timely recompense, ensuring
that the appellate process does not operate as a de facto stay of monetary
liability.
35. The expression “may order” in Section 148 confers a structured discretion,
which is neither mechanical nor unguided. While the statutory minimum of
twenty per cent indicates the legislative benchmark, the Appellate Court is
expected to examine the nature of the transaction, the conduct of the convict-

24

appellant, and the reasons advanced for resisting such deposit. The purpose
of the provision is not punitive, but regulatory, its object being the
discouragement of dilatory tactics rather than the imposition of an additional
penalty. We may also note that the deposit contemplated under Section 148
is in addition to any interim compensation already paid by the appellant
under section 143A if any .
36. Further, Section 148 must be read harmoniously with the broader legislative
scheme introduced in 2018, which sought to foreground restitutionary
justice as a central feature of cheque dishonour cases. The mischief targeted
by the amendment was not merely the delay in trial, but the erosion of
confidence in the cheque as a reliable negotiable instrument of commerce.
By obligating the Appellate Court to consider a pre-deposit, the Legislature
sought to infuse financial discipline and ensure that convictions under
Section 138 attain practical efficacy, rather than remain symbolic judicial
declarations.
37. The power under Section 148 is also restorative in design. The provision
enables the complainant to obtain release of the deposited amount during
pendency of the appeal, subject to the appellant’s right of restitution upon
acquittal. This statutorily-sanctioned mechanism of conditional release
underscores the legislative recognition that the complainant’s hardship does
not end with conviction and that appellate delays can result in cumulative
financial prejudice. Section 148, therefore, creates a provisional, reversible
flow of compensation to mitigate such prejudice.
38. It is equally significant that Section 148 does not interfere with or dilute the
appellate court’s authority to independently assess the merits of the
conviction. The requirement of a pre-deposit does not create a presumption
against the appellant, nor does it shift the burden of proof. Rather, it operates
within the realm of procedural regulation and is intended to maintain the

25

integrity of the proceedings without impinging upon substantive rights. The
appellate adjudication remains fully insulated from the interim financial
arrangement mandated by Section 148.
39.
Having reiterated the nature of provision of Section 148 of the Act and
having examined the legislative intent underlying its enactment, we now
proceed to consider the issue that arises for determination, and which has
been the subject of deliberation by this Court in the decisions of Shri
Gurudatta Sugars Marketing Pvt. Ltd. Vs. Prithviraj Sayajirao Deshmukh
23 24
and Ors and Bijay Agarwal v. Medilines.

III. THE RATIO OF THE JUDGMENT IN GURUDATTA AND BIJAY.
40. The proceedings before this Court in Gurudatta arose from proceedings
initiated under Section 138 of the Negotiable Instruments Act, 1881,
wherein the appellant-company had sought interim compensation under
Section 143A in respect of cheques issued by Cane Agro Energy (India) Ltd.
towards repayment of substantial advance amounts received under sugar-
supply arrangements. The Magistrate, upon considering the application,
directed the respondents, who were directors and authorised signatories of
the company to deposit interim compensation quantified at four percent of
the cheque amount as the company – Cane was admitted to Corporate
Insolvency Resolution Process by the National Company Law Tribunal,
Mumbai and therefore cannot be proceeded against. Aggrieved thereby, the
respondents invoked the jurisdiction of the High Court, which set aside the
order on the ground that the respondents, not being the “drawer” of the
cheque, could not be burdened with such liability.

23
2024 SCC OnLine SC 1800. Hereinafter referred to as Gurudatta
24
2024 SCC OnLine SC 4094. Hereinafter referred to as Bijay.

26

41. The issue that arose before this Court in the case of Gurudatta was 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 leaving
aside the company?
42. Upon a comprehensive analysis of the statutory framework, this Court held
that the expression “drawer” in the NI Act is a term of precise legal import,
referring only to the person or entity whose bank account is the source of the
cheque. The act of signing a cheque on behalf of a company does not elevate
the signatory to the status of drawer, as the company being a distinct juristic
person will remain the sole drawer in law. While vicarious criminal liability
of officers and signatories may arise under Section 141 in the event of
prosecution under Section 138, such vicarious liability cannot be extended
to obligations relating to interim compensation under Section 143A, which
is a substantive provision creating financial liability at a pre-trial stage.
43. In view of this legal position, the Court upheld the reasoning of the High
Court and held that the Magistrate had committed a manifest error in
directing the respondents to deposit interim compensation. Since the
company alone answered the statutory description of “drawer,” interim
compensation could not have been demanded from individual directors or
signatories. The appeal was accordingly dismissed, with the High Court
underscoring that provisions imposing monetary or penal consequences
upon individuals must receive strict construction, and the separate legal
identity of a corporation cannot be disregarded except where the statute
expressly so provides.
44. This Court in Gurudatta held as follows:
“28. The High Court's interpretation of Section 7 of the NI Act
accurately identified the "drawer" as the individual who issues the
cheque. This interpretation is fundamental to understanding the

27

obligations and liabilities Under Section 138 of the NI Act, which
makes it clear that the drawer must ensure sufficient funds in their
account at the time the cheque is presented. The Appellants' argument
that directors or other individuals should also be liable Under Section
143A misinterprets the statutory language and intent. The primary

liability, as correctly observed by the High Court, rests on the drawer,
emphasizing the drawer's responsibility for maintaining sufficient
funds.

29. The general Rule against vicarious liability in criminal law
underscores that individuals are not typically held criminally liable for
acts committed by others unless specific statutory provisions extend
such liability. Section 141 of the NI Act is one such provision, extending
liability to the company's officers for the dishonour of a cheque. The
Appellants' attempt to extend this principle to Section 143A, to hold
directors or other individuals personally liable for interim
compensation, is unfounded. The High Court rightly emphasized that
liability Under Section 141 arises from the conduct or omission of the
individual involved, not merely their position within the company.

30. The distinction between legal entities and individuals acting as
authorized signatories is crucial. Authorized signatories act on behalf of
the company but do not assume the company's legal identity. This
principle, fundamental to corporate law, ensures that while authorized
signatories can bind the company through their actions, they do not
merge their legal status with that of the company. This distinction
supports the High Court's interpretation that the drawer Under Section
143A refers specifically to the issuer of the cheque, not the authorized
signatories.

31. The principle of statutory interpretation, particularly in relation to
Sections 143A and 148, was also correctly applied by the High Court.
The Court emphasized that when statutory language is clear and
unambiguous, it should be given its natural and ordinary meaning. The
legislative intent, as discerned 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

28

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 Appellants' interpretation conflates the roles of authorized
signatories and drawers, which are distinct under the NI Act. Appellants
have relied upon a single paragraph, which does not form part of the
ratio therein, to substantiate their argument. But in this relied upon
paragraph, the Court only made an observation that the authorised
signatory becomes a drawer for the company, for the limited purpose of
extending the criminal liability as per Section 141.

34. The Respondents correctly argued that an authorized signatory is
not a drawer of the cheque, as established in N. Harihara Krishnan
(Supra) (2018) 13 SCC 663. This judgment clarified that a signatory is
merely authorized to sign on behalf of the company and does not
become the drawer. The Respondents' interpretation aligns with the
principle that penal statutes should be interpreted strictly, particularly
in determining vicarious liability. The judgment in K.K. Ahuja (Supra)
(2009) 10 SCC 48, further supports this approach, emphasizing that
penal provisions must be read strictly to determine liability.

35. In conclusion, the High Court's decision to interpret 'drawer' strictly
as the issuer of the cheque, excluding authorized signatories, is well-
founded.
This interpretation aligns with the legislative intent, established
legal precedents, and principles of statutory interpretation. The primary
liability for an offence Under Section 138 lies with the company, and
the company's management is vicariously liable only under specific
conditions provided in Section 141. The Appellants' submissions are
thus rejected, and the High Court's judgment is upheld. This decision
maintains the clarity and consistency of the law regarding cheque
dishonour cases, ensuring that liability is appropriately assigned to the
responsible parties under the NI Act. Therefore, the question of law put
before this Court is answered in the negative.”

45. In Gurudatta , this Court was concerned with the interpretation of the
expression ‘drawer’ as it appears in Section 143A of the NI Act. Sections
143A and 148 of the Negotiable Instruments Act operate in distinct statutory
spheres, though both were introduced by the 2018 Amendment with the
object of strengthening the compensatory framework of cheque-dishonour
jurisprudence. Section 143A empowers the trial court to direct payment of
interim compensation up to twenty per cent of the cheque amount during the

29

pendency of the trial, once the accused pleads not guilty in a summons trial
or upon framing of charges in other forms of trial. The provision is,
therefore, procedural and interlocutory in character, intended to curb dilatory
tactics and to ensure that the complainant is not left remediless during
protracted proceedings. The power under Section 143A is discretionary,
contingent upon the stage of trial, and the amount directed to be paid is
subject to restitution in the event of acquittal, thereby preserving the
presumption of innocence while balancing the interests of the complainant.
46. Section 148, on the other hand, operates post-conviction and vests the
appellate court with the power to direct the appellant-accused to deposit a
minimum of twenty per cent of the fine or compensation awarded by the trial
court as a condition of the appeal. Unlike Section 143A, Section 148 is held
to be mandatory in nature by this Court in the case of Surinder Singh
Deswal & Ors. v. Virender Gandhi (supra) . In Surinder , this Court held that
the word “may” occurring in Section 148 should be read as “ shall”. The
appellate court therefore “ shall ” order such deposit, subject to reasons to be
recorded in writing for any reduction or exemption. The provision
strengthens the enforceability of trial court orders/conviction and prevents
frivolous appeals intended to stall the execution. Thus, while Section 143A
is a pre- conviction , trial-stage remedy to provide interim relief to
complainants, Section 148 is a post-conviction, appellate-stage safeguard
ensuring the efficacy of compensation orders, reflecting two complementary
but distinct legislative mechanisms to deter delay and secure the
compensatory mandate of Section 138.
47. We have now examined the ratio laid down in Gurudatta , wherein this Court
was concerned with the interpretation of the expression ‘drawer’ as it
appears in Section 143A of the Act. The incidental question that therefore
arises in the present matter is whether the interpretation of the term ‘drawer’
adopted in Gurudatta for the purposes of Section 143A would equally apply

30

to the same expression occurring in Section 148 of the Act. This precise issue
came up for consideration before this Court in Bijay Agarwal .
48. In Bijay Agarwal this Court was dealing with the issue Whether the
signatory of a cheque authorized by the Company is a drawer and whether
such a signatory could be directed to deposit any sum out of the fine or
compensation awarded by the trial Court Under Section 148 of the
Negotiable Instruments Act, 1881 (for short 'NI Act')", as a condition for
suspending the sentence in an appeal filed against his conviction Under
Section 138 of the NI Act?
49. It is important to look into the facts of the case in the case of Bijay Agarwal
wherein ratio has been laid down . The appeals in Bijay Agarwal arose from
a common order of the High Court of Karnataka rejecting the Bijay’s
challenge to the condition imposed by the Sessions Court requiring deposit
of 20% of the fine/compensation amount as a precondition for suspension of
sentence in appeals arising from conviction under Section 138 of the
Negotiable Instruments Act. The appellant therein, described by the
complainant itself as only an authorised signatory/Director of M/s Gee Pee
Infotech Pvt. Ltd., who had been convicted by the Trial Court for dishonor
two cheques, after the cheques issued on behalf of the company were
returned with the endorsement “payment stopped by the drawer.” The Trial
Court imposed fine and default imprisonment, the Sessions Court suspended
the sentence but directed a mandatory deposit of 20% of the
fine/compensation amount in each of the appeals under Section 148. It was
this direction that formed the subject matter of challenge before the High
Court and thereafter in appeal before this Court.
50.
The primary issue before this Court was whether an authorised signatory of
a company who signed the cheque on behalf of the company can be treated
as a “drawer” for purposes of Section 148, so as to empower the appellate

31

court to mandate a deposit of at least 20% of the fine or compensation. The
appellant relied on Shri Gurudatta Sugars Marketing Pvt. Ltd. (supra) to
contend that an authorised signatory is not the “drawer” within the meaning
of Sections 7, 143A and 148, and thus cannot be directed to make such
deposit. The respondent argued that the said decision was confined to
Section 143A and could not be extended to Section 148. This Court
examined the statutory scheme of Sections 143A and 148, noting their
common structure, legislative purpose, and the proviso to Section 148(1),
which explicitly links amounts deposited under Section 148 to interim
compensation under Section 143A and applying the ratio of Shri Gurudatta
Sugars , this Court held that both provisions operate only against the
“drawer” of the cheque, and that an authorised signatory does not become
the drawer merely by virtue of signing the cheque on behalf of the company.
The Court reaffirmed that criminal liability for dishonour under Section 138
primarily rests on the company, and vicarious liability of officers arises only
under Section 141 in clearly circumscribed situations. The Court further
relied on Jamboo Bhandari , emphasising that the appellate court cannot
impose a deposit condition under Section 148 mechanically, without
examining whether exceptional circumstances exist and one such
circumstance being that the appellant is not the drawer. This Court held that
High Court, failed to consider these decisive aspects.
51. Consequently, this Court set aside the High Court’s order and quashed the
Sessions Court’s direction requiring the appellant to deposit 20% of the
fine/compensation as a condition for suspension of sentence. The order
suspending sentence was restored, subject only to execution of bond. The
Court clarified that an authorised signatory of a company cannot be
compelled to deposit amounts under Section 148 unless shown to be the
drawer, and directed the First Appellate Court to dispose of the pending
appeals expeditiously.

32

52. This Court in Bijay Agarwal held as follows:
“13. A scanning of Sections 143A and 148 would reveal that the former
deals with the power of the Court trying an offence Under Section 138 of
the NI Act to direct the drawer of the cheque to pay interim compensation
to the complainant whereas the latter Section deals with the power of the
Appellate Court in an appeal by the drawer against the conviction Under
Section 138 to the Appellant to deposit such sum which shall be a
minimum of 20% of the fine or compensation awarded by the trial Court.
The proviso to Section 148(1) would further reveal that the amount
payable thereunder shall be in addition to any interim compensation paid
by the Appellant Under Section 143A, NI Act. Thus, a scanning of both
the Sections would reveal that the said Sections empower to issue such
directions only to the 'drawer' of the cheque. We have already noted that in
'Shri Gurudatta Sugars Marketing Pvt. Ltd.' Case (supra) after referring to
the earlier decisions of this Court including in 'K.K. Ahuja v. V.K. Vohra
and Anr. (2009) 10 SCC 48', and in 'N. Harihara Krishnan v. Godfather
Travels and Tours P. Ltd. (2018) 13 SCC 663', this Court held that the
primary liability for an offence Under Section 138 lies with the company
and the company's management is vicariously liable only under specific
conditions provided in Section 141 and for the purpose of Section 143A of
the NI Act and a signatory merely authorised to sign on behalf of the
company would not become the 'drawer' of the cheque and, therefore,
could not be directed to pay interim compensation Under Section 143A. In
the contextual situation, it is relevant to refer to paragraphs 28 to 30, 34
and 35 of 'Shri Gurudatta Sugars Marketing Pvt. Ltd.'s case to the extent
it is relevant for the purpose of this case, as under:

………………..
14. As noted earlier, Section 148 would make it clear that it empowers the
Appellate Court in an appeal by the drawer against conviction Under
Section 138, NI Act, to direct to deposit a sum which shall be a minimum
of 20% of the fine or compensation awarded by the trial Court and the
same shall be in addition to any interim compensation paid by the
Appellant Under Section 143A. When this be the position revealed from
Sections 143A and 148 there cannot be any doubt with respect to the
position that the term 'drawer' referred to in Section 148 and 143A means
'drawer of the cheque concerned'. Ergo, the question is whether the law
laid down in the decision in Shri Gurudatta Sugars Marketing Pvt. Ltd.'s
case (surpa) is applicable proprio vigore in cases involving the question of
liability to pay additional compensation, as contemplated Under Section
148(1), NI Act. The proviso to Section 148(1) itself makes it specifically
clear that the amount payable Under Section 148(1), NI Act, if the

33

Appellate Court so directs, shall be in addition to any interim
compensation paid by the Appellant concerned Under Section 143A, NI
Act. It is nobody's case that the Appellant was made to pay interim
compensation Under Section 143A, in relation to the original proceedings.
Be that as it may, the other question is whether an authorised signatory of
the cheque can be said to be the drawer of the cheque concerned? We may
hasten to add here that we were not addressed on the question whether the
Appellant herein could be saddled with the liability to pay such additional
compensation in terms of Section 148(1) by virtue of the provision Under
Section 141, NI Act which extends liability to the officers of the company
for the dishonour of a cheque and as such, we do not propose to consider
that aspect as it need be considered only when pointedly posed for
consideration based on proven facts.

15. There can be no doubt with respect to the position that Section 143A
and 148. empowers the Court trying an offence Under Section 138 and the
Appellate Court considering an appeal by a drawer against his conviction
Under Section 138 respectively to fasten liability to pay interim
compensation and additional compensation Under Section 148(1), as the
case may be, and therefore, the question whether any particular officer of
the company concerned can be made to pay interim compensation or
deposit additional compensation under the aforesaid relevant provision(s)
would depend upon the question whether he is only a signatory of the
cheque or whether he is the drawer of the cheque. It is that question with
reference to Section 143A, NI Act, that was answered as above in the
decision in Shri Gurudatta Sugars Marketing Pvt. Ltd.'s case (surpa). In
view of the analogicalness of Section 143A to Section 148, that both the
provisions are under the same Act though applicable at different stage of
proceedings Under Section 138 of NI Act and that the proviso to Section
148(1) makes it abundantly clear that deposit Under Section 148(1) of the
NI Act shall be an additional compensation paid by the Appellant Under
Section 143A thereof, it can only be said that the decision in Shri Gurudatta
Sugars Marketing Pvt. Ltd.'s case (supra) is applicable to the extent it holds
an officer of a company who is an authorised signatory of the cheque
issued by a company is not the drawer of the same subject to what is held
in the said decision with reference to Section 141, NI Act, as relates
Section 148 thereof.

16. To wit, as in the case of the position qua Section 143A, NI Act, merely
because an officer of a company concerned is the authorised signatory of
the cheque concerned by itself will not make such an officer 'drawer of the
cheque' Under Section 148, NI Act, so as to empower the Appellate Court,
in an appeal against conviction for an offence Under Section 138, NI Act,

34

to direct to deposit compensation of any sum Under Section 148(1), of the
NI Act.

17. In the decision in 'Jamboo Bhandari v. Madhya Pradesh State Industrial
Development Corporation Limited and Ors. (2023) 10 SCC 446' this Court
held that an Appellate Court in an appeal against conviction Under Section
138, NI Act, could not place a condition to deposit an amount invoking the
power Under Section 148(1), NI Act, mechanically without considering
whether the case falls within exceptional circumstances. In view of the said
exposition of law, the Appellate Court ought to have considered the
aforesaid aspects as it would certainly be an exceptional circumstance to
exempt the Appellant who is not the 'drawer' of the cheque concerned to
deposit the amount payable Under Section 148(1) by an Appellant who is
the 'drawer' of the cheque. In the case on hand, the High Court has failed
to consider these crucial aspects in the light of the dictum laid down by
this Court in the decisions referred supra while considering the application
for suspension of sentence for the conviction Under Section 138 of the NI
Act in the pending appeal.

18. The upshot of the discussion is that these appeals should succeed and
consequently, it is allowed. The impugned common order dated
09.01.2024 passed by the High Court of Karnataka at Bengaluru in
Criminal Petition Nos. 13095/2023 and 13153/2023 is set aside.
Accordingly, the orders dated 10.11.2023 passed by the Principal City
Civil & Sessions Judge at Bangalore respectively in Criminal Appeal No.
1537/2023 and 1536/2023 stands quashed and set aside to the extent it put
the condition to deposit of 20% of the fine amount payable under orders in
CC Nos. 13937/2023 and 13938/2013, passed by the Court of XXXVI
Additional Chief Metropolitan Magistrate, Bangalore City and restore the
orders dated 10.11.2023 suspending the sentence of the appellant in both
the cases, with the condition(s) imposed qua.



53. Thus, in conclusion, this Court in Bijay Agarwal held that the interpretation
of the expression ‘drawer’ as elucidated in Gurudatta for the purposes of
Section 143A is equally applicable to the same expression occurring in
Section 148 of the NI Act.





35

D. ANALYSIS

54. We have carefully examined the statutory text of Sections 7, 143A, and 148
of the NI Act. When read in conjunction with the legislative intent, the
statutory scheme makes it evident that both Sections 143A and 148
particularly Section 148, which contemplates a post-conviction deposit are
compensatory in nature, and are designed to further the underlying object of
proceedings under Section 138 of the Act.
55. We have carefully considered the decision in Shri Gurudatta Sugars
Marketing Pvt. Ltd. v. Prithviraj Sayajirao Deshmukh & Ors. (supra),
wherein this Court held that the expression ‘drawer’ in Section 143A must
be construed strictly in accordance with the definition contained in Section
7 of the Act. The ratio proceeds on the premise that an offence under Section
138 is criminal in nature and, therefore, the term ‘drawer’ in Section 143A
must be confined to the juristic drawer of the cheque, and cannot extend to
directors or authorised signatories, for the latter do not become the ‘drawer’
merely because the company cannot be prosecuted owing to a legal
impediment. Similarly, in Bijay Agarwal v. Medilines , this Court, following
the reasoning in Gurudatta , reiterated that the expression ‘drawer’ appearing
in Section 148 must also be construed strictly, and held that both Sections
143A and 148 operate only against the drawer of the cheque, and that an
authorised signatory does not assume the character of the drawer merely by
signing the cheque on behalf of the company.
56. The decisions in Gurudatta Sugars and Bijay Agarwal , both rendered by
Coordinate Benches of this Court, proceed on the premise that Sections 143A
and 148, being penal in nature, must be construed strictly. In both decisions,
it has been held that the expression ‘drawer’ must be confined to the meaning
assigned under the statutory text, namely, that the drawer is the company
itself, and that such definition cannot, in any circumstance, be extended to

36

include directors, authorised signatories, or other individuals acting on
behalf of the company.
57. Having analysed the aforesaid judgments in detail, we find that the reasoning
adopted therein rests predominantly upon an unduly literal construction of
the statutory language, without sufficient engagement with the nature of the
provisions or the legislative intent underlying their enactment. For the
reasons set out hereinafter, we find it difficult to concur with the outcome of
conclusions reached in Gurudatta Sugars and Bijay Agarwal . In our
considered view, a harmonious construction of these provisions is required
which aligns with and gives effect to the intent of the legislature.
I. THE OVERLY LITERAL INTERPRETATION OF “DRAWER” IN
GURUDATTA AND BIJAY AGARWAL IS NOT PREFEERED OVER
PURPOSIVE INTERPRETATION WHICH ALIGNS WITH THE
INTENTION OF THE LEGILATURE
58. Before we proceed to articulate our reasons, it is necessary to advert to the
nature of the offence contemplated under Section 138 of the Act, for such
appreciation aids in construing the provisions in a purposive manner
consistent with the legislative intent. The character of the offence and the
remedial object underlying the statutory scheme form an indispensable
backdrop for interpreting Sections 143A and 148 in their proper perspective.
59. Firstly, the nature of the proceedings in Section 138 of the Act. It is now
too well settled that proceedings under Section 138 of the NI Act are
predominantly compensatory and remedial in the nature of criminal
proceedings, intended to uphold the sanctity of cheque-based transactions
and ensure that the payee is compensated for the financial loss arising from
25
such dishonour. This Court in the case of R. Vijayan v. Baby and another ,

25
(2012) 1 SCC 260

37

held that the object of the offences under Section 138 of the NI Act appears
to be both punitive as also compensatory and restitutive in nature. More
26
recently, in Meter and Instruments (P) Ltd. v. Kanchan Mehta , it was
reiterated that Section 138 embodies a remedial statute and the preliminary
object of the provision is compensatory, punitive element being mainly with
the object of enforcing the compensatory element. In Kaushalya Devi
27
Massand v. Roopkishore Khore , this Court held that the “offence under
Section 138 of the Negotiable Instruments Act, 1881, is almost in the nature
of civil wrong which has been given criminal overtones.” This Court in the
28
case of P.Mohanraj and Ors v. Shah Brothers Ispat Private Ltd has held
that the offence under Section 138 of the Act is quasi-criminal in nature. We
have no hesitation in holding that both the provisions i.e. Sections 143A and
148 are compensatory in nature and they are couched in the form of a penal
statute, therefore the provisions cannot be said to be purely penal in nature.
60. Secondly, Purposive interpretation is preferred over the literal
interpretation to align the statute with the intention of the legislature: This
Court has consistently applied the principles of purposive interpretation for
the provisions governing the offences under Section 138 of the Negotiable
Instruments Act to align the compensatory and remedial nature of the
proceedings under Section 138 with the intention of the legislature, which is
of paramount importance. This Court has consistently held that the offence
under Section 138 of the Negotiable Instruments Act must be construed
through a purposive interpretative lens, having regard to the mischief sought
to be remedied by the statute. The legislative intent underlying Chapter XVII
is to confer credibility, stability, and sanctity upon commercial transactions
by ensuring that negotiable instruments particularly cheques serve as

26
(2018) 1 SCC 560
27
(2011) 4 SCC 593
28
(2021) 6 SCC 258

38

reliable substitutes for cash. Consequently, courts have consistently declined
to adopt a narrow, technical, or hyper-literal interpretation that would enable
the drawer of a dishonoured cheque to defeat the compensatory object of the
provision. Instead, the interpretation must advance the twin purposes of
deterring the practice of issuing cheques without sufficient funds and
ensuring speedy and effective recovery of the cheque amount.
60.1 The purposive orientation has shaped judicial approaches on several
aspects of Section 138, including service of notice, deemed receipt,
territorial jurisdiction, and vicarious liability under Section 141. Courts
have repeatedly held that procedural requirements cannot be construed
in a manner that would undermine the remedial, compensatory, and
quasi-civil nature of the offence. The Supreme Court, in a line of
29
decisions such as NEPC Micon Ltd. Vs. Magma Leasing Ltd. , C.C.
30
Alavi Haji v. Palapetty Muhammed , Meters and Instruments
31
Private Limited and Ors. Vs. Kanchan Mehta , Harman Electronics
32
(P) Ltd. and Ors. Vs. National Panasonic India Pvt. Ltd. , Dashrath
33
Rupsingh Rathod Vs. State of Maharashtra, K.K. Ahuja Vs. V.K.
34
Vora (supra) and MSR Leathers Vs. S. Palaniappan and Ors. has
affirmed that interpretation of Section 138 of the Act must facilitate the
achievement of the statute’s objective by curbing dilatory tactics,
promoting expedition, and protecting the payee’s right to realise the
debt. Thus, purposive interpretation ensures that Section 138 remains

29
(1999) 4 SCC 253
30
(2007) 6 SCC 555
31
(2018) 1 SCC 560
32
(2009) 1 SCC 720
33
(2014) 9 SCC 129
34
(2013) 1 SCC 177

39

an effective mechanism for maintaining commercial discipline rather
than a technical arena for avoiding liability.
61. We have already adverted to the legislative intent underlying the introduction
of Sections 143A and 148 in an earlier part of this judgment. We now proceed
to elucidate why the purposive interpretation of Section 148 of the NI Act
more faithfully advances that legislative intent, as opposed to the strict
textual construction adopted in Bijay Agarwal . A purposive approach
ensures that the provision operates in harmony with the compensatory and
remedial objectives of the statute, rather than being constrained by an unduly
narrow reading of the term ‘drawer’.
62. This Court, in Gurudatta and Bijay , adopted a strict interpretation of the
statute while construing the expression ‘drawer’. While such an
interpretation may be warranted where the provision in question is purely
criminal in nature, this Court in P. Mohanraj v. Shah Brothers Ispat Pvt.
Ltd. has categorically held that proceedings under Section 138 of the
Negotiable Instruments Act, read with Section 141, are quasi-criminal in
character. In matters where the proceedings partake the character of a quasi-
criminal in nature, this Court has consistently observed including in
35
Abhilash Vinodkumar Jain v. Cox & Kings (India) Ltd. , that a purposive
interpretation, aligned with and in furtherance of the legislative intent, is to
be preferred. The interpretative approach must therefore be guided not by a
rigid literalism, but by the object sought to be achieved by the statute.
63. Thus, in a factual scenario where the company is non-existent and
proceedings under Section 138 read with Section 141 of the Act are instituted
against the persons responsible for its affairs, a strict construction of the
definition of ‘drawer’ under Section 7 so as to confine it exclusively to the

35
(1995) 3 SCC 732

40

company would amount to an unduly narrow interpretation, running contrary
to the legislative intent underlying Sections 143A and 148. It is significant
that when the amendment inserting Sections 143A and 148 was enacted, the
definition of ‘drawer’ was left unchanged. To deny the complainant the
benefit of the remedial framework introduced by the amendment, merely by
relying on a definition framed at the time of the original enactment and
without construing it in the light of the purpose sought to be achieved by the
legislature, would, in our considered view, amount to a misinterpretation of
the statute.
64. While an insistence on corporate separateness may accord with the principles
of strict interpretation, it fails to account for the economic realities of cheque
transactions, wherein the acts of authorised signatories and directors embody
the volition of the company itself. A purposive and harmonised construction
one that extends interim liability to the responsible officers where the
corporate entity is shielded by a legal impediment which more effectively
advances the legislative objective of protecting the payee and preserving the
credibility of negotiable instruments is to be eschewed. Such an
interpretation, in our view, would be consistent with both the remedial nature
of the provisions and the over-arching purpose of the statutory scheme.
65. If Sections 143A and 148 are to be interpreted in the manner adopted in
Gurudatta and Bijay Agarwal , then, in every scenario such as the present
one where the company cannot be prosecuted owing to a legal impediment,
a person like the appellant, who controlled the entire business of the
company and effectively acted as the drawer on its behalf, would escape the
requirement of making the appellate deposit on the technical ground of not
being the ‘drawer’, even though he remains prosecutable and liable to
conviction. Such an interpretation would result in a situation where, despite
the company being beyond the reach of prosecution, the individual
responsible for its affairs cannot be compelled to comply with the remedial

41

mechanism under Section 148. This would render the purpose and intent
underlying Sections 143A and 148 wholly nugatory. The compensatory and
remedial object of these provisions which are meant to safeguard the
interests of the complainant and to ensure meaningful relief during the
pendency of proceedings would be reduced to a lifeless statutory form,
devoid of practical efficacy. In our considered view, such an outcome could
never have been the intention of the legislature.
II. DEPARTURE FROM THE LEGISLATIVE INTENT OF 2018
AMENDMENT ACT.
66. The legislative intent for enacting the amendments is as follows:
“As a result of this, injustice is caused to the payee of a dishonoured cheque
who has to spend considerable time and resources in court proceedings to
realize the value of the cheque. Such delays compromise the sanctity of
cheque transactions.
(2). It is proposed to amend the said Act with a view to address the issue
of undue delay in final resolution of cheque dishonour cases so as to
provide relief to payees of dishonoured cheques and to discourage
frivolous and unnecessary litigation which would save time and money.
The proposed amendments will strengthen the credibility of cheques and
help trade and commerce in general by allowing lending institutions,
including banks, to continue to extend financing to the productive sectors
of the economy.”

67. The interpretation adopted in the aforesaid decisions rests upon an overly
literal construction of the statutory language and fails to give effect to the
remedial intent underlying the 2018 Amendment. Sections 143A and 148
were enacted to provide interim monetary relief to payees during the
pendency of cheque-dishonour proceedings, thereby addressing the long-
standing problem of procedural delay and frivolous defences. To confine the
application of these provisions to the company alone defeats their
compensatory purpose, particularly in cases where the company is under a
legal impediment and is unable to discharge its liabilities. Such an

42

interpretation amounts to a departure from the true legislative intention, in
our considered view.
68. In cases where there is no legal impediment in prosecuting a company, or
where the prosecution is directed against a natural person, the statutory
requirement to make payment under Sections 143A and 148 applies without
exception. To then completely exempt an accused person of a company that
is shielded by a legal snag from the obligation to make such payment despite
standing on the same footing as those who are otherwise are required to
comply with the deposits would create an artificial and unwarranted
distinction. Such a differential treatment between two categories of accused
persons, similarly situated in all material respects, runs contrary to the very
purpose for which the legislature introduced the amendment.
69. It must be emphasised that, while interpreting Sections 143A and 148 of the
Act, due regard must be had to the legislative intent underlying their
enactment. The object behind the introduction of these provisions was to
address the problem of undue delay in the final resolution of cheque-
dishonour cases, to provide meaningful interim relief to the payees of
dishonoured cheques, and to discourage frivolous and vexatious defences,
thereby conserving judicial time and resources. The amendments were
enacted with the larger purpose of strengthening the credibility of cheque
transactions and promoting trade and commerce, by ensuring that lending
institutions and banks retain the confidence to extend financial assistance to
productive sectors of the economy.
70. To deny the complainant the benefit of these amendments merely because
the criminal proceedings are instituted against the directors of a non-existent
company, and not against the company itself owing to a legal impossibility
or impediment, would be to deprive lenders and payees of the very relief that
the amendment sought to secure. Such an interpretation would run counter

43

to the legislative intent and would effectively defeat the purpose of the
amendment.
E. CONCLUSION
71. Therefore, in order to answer the question formulated in Paragraph 8, we are
of the considered view that a director of a company cannot be granted a
blanket exemption from the deposit contemplated under Section 148 of the
Act, as suggested in Bijay Agarwal . Whether such exemption is warranted
must necessarily depend upon the factual matrix of each individual case.
72. With utmost respect to our learned esteemed brothers that decided Shri
Gurudatta Sugars Marketing Pvt. Ltd. v. Prithviraj Sayajirao Deshmukh
& Ors. and Bijay Agarwal v. Medilines , we find ourselves unable to concur
with the interpretation adopted therein. In our considered view, the
reasoning in those decisions does not fully address the issue formulated, and
the construction placed upon the statutory provisions appears to depart from
the textual scheme as well as the legislative intent. As a Bench of co-equal
strength, we are bound by the principles of judicial discipline and, therefore,
cannot take a different view on our own. In light of the substantial
interpretative question involved, we deem it appropriate that the matter
would require to be considered by a Larger Bench.
73. As indicated above, we are unable to concur with the decisions in Gurudatta
and Bijay Agarwal for the reasons hereinbefore recorded. We consider it
necessary to clarify that our observations are confined solely to the outcome
of those decisions insofar as they adopt a strict interpretation of the
provisions, which has the effect of granting a blanket exemption from the
deposit contemplated under Section 148 to the category of persons referred
to in Section 141 of the Act in situations where the company cannot be
prosecuted. We have not, even for a moment, expressed any disagreement

44

with the settled principles reaffirmed in those decisions such as the doctrine
of corporate separateness or the proposition that an authorised signatory of
a company cannot be equated with the ‘drawer’ of the cheque for the
purposes of prosecution.
74. In our considered view, the issue identified herein requires an authoritative
pronouncement by a Larger Bench of this Court on the following question:
i.
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?
75. Accordingly, we direct that the papers be placed before Hon’ble the Chief
Justice for constitution of a Larger Bench to resolve the interpretative
conflict.


.……………………………., J.
[ARAVIND KUMAR]



.……………………………., J.
[N.V. ANJARIA]

New Delhi;
th
December 18 , 2025.



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