Question
Q: What if an authorised signatory signs the cheque? (Not liable)
Answer
A:
If a cheque is signed by an authorised signatory on behalf of a company, the company itself is primarily liable for a cheque bounce under Section 138 of the Negotiable Instruments Act, 1881. The authorised signatory is usually not personally liable, because he signs the cheque only in his official capacity as a representative of the company.
Legal Position
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Section 141 NI Act makes the company the principal offender when a company-issued cheque is dishonoured.
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The authorised signatory is not personally responsible just for signing the cheque.
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However, if the signatory is also a director or officer in charge of the company’s financial affairs, liability may extend to him, but only in that managerial role.
Example
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If an employee signs a company cheque as an authorised signatory, the company is liable, not the employee personally.
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If a director who is actively managing the company signs the cheque, then both the company and that director can be prosecuted.
Key Takeaway
An authorised signatory who signs a cheque on behalf of a company is not personally liable for cheque bounce. The company is primarily liable, and only those directors or officers responsible for the company’s day-to-day financial operations may also face liability under Section 141 NI Act.
.By Advocate BK Singh
(Delhi High Court)
