[BREAKING] Cheque Dishonour | Supreme Court Doubts Precedent Exempting Convicted Company Directors From S.148 NI Act Deposit; Refers To Larger Bench

In an important legal development, the Supreme Court today doubted two of its earlier judgments which held that the director or the authorised signatory of a company convicted under Section 138 of the Negotiable Instruments Act, 1881 cannot be directed to make the deposit before the appellate Court as per Section 148 of the Act for suspension of sentence.

Disagreeing with the precedents, a bench comprising Justice Aravind Kumar and Justice NV Anjaria observed that a blanket exemption cannot be given to the company's convicted director/authorised signatory from making the deposit under Section 148 of the NI Act. Such an exemption should be decided based on the factual circumstances of each case, the bench observed.

However, in view of the fact that the earlier precedents were delivered by benches of equal strength, the present bench, as a matter of judicial discipline, refrained from overruling them and instead chose to refer them to a larger bench for an authoritative reconsideration.

The present bench expressed inability to concur with the views expressed in Bijay Agarwal Versus M/s Medilines(2024) and Shri Gurudatta Sugars Marketing Pvt. Ltd. v. Prithviraj Sayajirao Deshmukh & Ors. (2024).

In Bijay Agarwal, it was held that an authorised signatory of a company which issued the cheque cannot be regarded as the "drawer" of the cheque, and hence cannot be directed to make the deposit. This conclusion was based on the reasoning that the liability to make the deposit under Section 148 has been imposed upon the "drawer" of the cheque. In Shri Gurudatta Sugars, the Court held that the company's signatory is not liable to pay the interim compensation under Section 143A of the NI Act.

Issue in the present case

The present bench was considering an appeal filed by one Bharat Mittal, an ex-director of a company named Ispat Private Ltd, challenging the Rajasthan High Court's refusal to exempt him from the deposit under Section 148 NI Act.

The bench explained the issue before it as follows : "The question that arises is whether under Section 138 read with Section 141 of NI Act, the appellate deposit contemplated under Section 148 can be directed against a convicted director or authorised signatory or whether such deposit is confined to the juristic drawer in all situations."

The bench observed that a person who is in charge of the affairs of the conduct of the company is vicariously liable for the offence under Section 138 of the NI Act when a cheque issued by the company gets dishonoured. The bench added that such a person, who is in the managerial control of the company, is effectively the "drawer" of the cheque. It also noted that the appellate court possesses only a limited discretion to be exercised in exceptional circumstances to exempt an appellant from making a deposit contemplated under Section 148 NI Act.

Disagreeing with the view in Bijay Agarwal, the bench observed :

"If Sections 143A and 148 are interpreted in the manner adopted in Bijay Agarwal, then in every scenario, such as the present one, where the company cannot be prosecuted owing to legal impediment, the person in charge of the control of the company and its entire business and effectively acted as a drawer on its behalf, would escape the requirement of making appellate deposit on the technical ground of not being a 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 mechanism of Section 148. This would render the purpose and intent of Sections 143A and 148 wholly nugatory. The compensatory and remedial objects 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. Such an outcome would never be the intent of the legislature."

The bench added :

"We are of the considered view that the director of a company cannot be granted 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."

However, since the precedents were rendered by coordinate benches, the bench refer the matter to the Chief Justice of India to constitute a larger bench for an authoritative pronouncement.

To be updated after the judgment is uploaded.

Case :  BHARAT MITTAL Vs STATE OF RAJASTHAN | SLP(Crl) No. 12327/2025