Authorized signatory acting as the entity’s primary representative under MOU remains liable under Section 138.

The Appellant served as the Treasurer of a non-governmental organization (NGO) named TIMES.

The NGO entered into a Memorandum of Understanding (MOU) dated 30.07.2009 with Respondent No. 2 (APCPDCL, now TSSPDCL) for the collection of electricity bills from domestic consumers.

The Appellant was the sole signatory on the MOU on behalf of the NGO.

Following a default in remittances, a cheque signed by the Appellant as Treasurer of the NGO was dishonored.

The High Court convicted the Appellant under Section 138 of the Negotiable Instruments Act, 1881 (NI Act), sentencing him to one year of rigorous imprisonment and a fine of Rs. 1,50,00,000.

The Appellant challenged the conviction, arguing that as an authorized signatory and not the "drawer" in an individual capacity, he could not be held vicariously liable under the penal statute.

1. Whether an authorized signatory of an NGO/Society, who is the sole signatory to an MOU and the cheque, can be held liable as the "drawer" under Section 138 of the NI Act.

2. Whether the term of imprisonment can be modified considering the Appellant's specific role as a Treasurer.

Section 138 of the Negotiable Instruments Act, 1881, regarding the liability of a "drawer" of a cheque.

Principles of vicarious liability in penal statutes, which generally require strict interpretation.

(2024) 7 SCR 1211 regarding authorized signatories.

Principle of contractual responsibility emanating from the “Memorandum of Understanding” (MOU), specifically Clauses 7, 20, and 28, which dictated the remittance and guarantee obligations of the NGO.

The Court rejected the Appellant’s defense that he was merely an authorized signatory and not the "drawer." It reasoned that the relationship between the parties was governed by an MOU where the Appellant was the exclusive signatory and the "front face" of the NGO.

Under Clauses 7, 20, and 28 of the MOU, the NGO stood as a guarantor for financial losses, and the Appellant was the individual responsible for all rights and liabilities arising from the agreement.

The Court observed that the MOU did not cast liability on the Chairman or any other entity; in practice, the document recognized the Appellant as the person responsible for transactions with the electricity department.

Consequently, even though he was the Treasurer, for the purpose of the NI Act, he remained the drawer responsible for the consequences of the dishonored cheque because the MOU identified no other responsible party.

Acknowledging the Appellant's status as a Treasurer rather than the owner, the Court deleted the substantive sentence of one year of rigorous imprisonment.

The Appellant was directed to pay a fine of Rs. 1.5 crore to Respondent No. 2 within two months. In default of payment, the Appellant shall undergo one year of rigorous imprisonment.

The appeal was allowed in part only to the extent of the sentence modification.