Summary
| Category | Data |
|---|---|
| Court | Supreme Court of India |
| Case Number | SLP(Crl) No.-012327 – 2025 |
| Diary Number | 41015/2025 |
| Judge Name | HON’BLE MR. JUSTICE ARAVIND KUMAR |
| Precedent Value | Reference to Larger Bench due to conflict between Coordinate Bench decisions; interim persuasive authority |
| Overrules / Affirms | Conflicting with Shri Gurudatta Sugars (2024) and Bijay Agarwal (2024) interpretations; referral for reconciliation |
| Type of Law | Criminal law – Negotiable Instruments Act, 1881 |
| Questions of Law | Whether Section 148’s deposit mandate applies only to the juristic drawer or also to directors/appellants convicted under Section 138 when the company cannot be prosecuted due to liquidation or similar legal snag. |
| Ratio Decidendi | The appellate court’s power under Section 148 must be construed purposively and in harmony with the compensatory object of the 2018 Amendment; a strict textual reading confining “drawer” to the company alone would undermine legislative intent where liquidation prevents corporate prosecution; conflicting coordinate decisions on this point cannot be reconciled and require determination by a Larger Bench; pending that decision, Section 148 deposit remains within discretionary reach. |
| Judgments Relied Upon |
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| Logic / Jurisprudence / Authorities Relied Upon by the Court |
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| Facts as Summarised by the Court | Complainant supplied steel under a 2012 MOU; purchaser’s ₹4.82 crore cheque bounced; Section 138 complaint against company and its directors filed; company wound up in 2016 leaving only director for trial; Trial Court convicted director, awarded ₹8.1 crore compensation; Appellate Court stayed sentence subject to 20% deposit under Section 148; director failed to deposit; High Court refused exemption; appeal to Supreme Court raised conflict on “drawer” definition. |
Practical Impact
| Category | Impact |
|---|---|
| Persuasive For | Supreme Court coordinate benches, High Courts, Sessions and Magistrate courts when considering Section 148 deposit applications |
| Distinguishes | Shri Gurudatta Sugars Marketing Pvt. Ltd. v. Prithviraj Sayajirao Deshmukh (2024); Bijay Agarwal v. Medilines (2024) |
| Follows | Jamboo Bhandari v. MP State Industrial Development Corp. (2023); Muskan Enterprises v. State of Punjab (2024); Surinder Singh Deswal v. Virender Gandhi (2019) |
What’s New / What Lawyers Should Note
- Appellate power under Section 148 is not automatically confined to the corporate drawer when the company faces liquidation or similar legal snag.
- A purely literal construction of “drawer” to exclude directors undermines the compensatory purpose of the 2018 Amendment.
- Courts must adopt a purposive approach to ensure Section 138 and its interim mechanisms (Sections 143A & 148) maintain practical efficacy.
- Coordinate Bench conflict on this issue has been referred to a Larger Bench, indicating unsettled law.
- Lawyers can cite this judgment to oppose mechanical exemptions for directors from deposit conditions and to argue for discretionary relief based on case-specific factors.
Summary of Legal Reasoning
- The Negotiable Instruments (Amendment) Act, 2018 introduced Sections 143A and 148 to curb dilatory appeals and secure interim relief in cheque-dishonour cases.
- Section 141 imposes vicarious liability on persons in charge when the company itself commits a Section 138 offence; prosecution against directors can proceed if corporate prosecution is blocked by liquidation.
- Section 148’s “may order” deposit requirement, construed purposively, is generally mandatory but admits limited appellate discretion in exceptional cases (per Jamboo Bhandari, Muskan Enterprises).
- Coordinate Bench decisions (Gurudatta, Bijay Agarwal) applied a literal definition of “drawer” to confine deposit liability to the company alone.
- Such strict textualism conflicts with the Amendment’s remedial object and the compensatory, quasi-criminal nature of Section 138 proceedings.
- A purposive interpretation is required to preserve legislative intent where directors effectively stand in for a non-prosecutable company.
- The divergence in Coordinate Bench rulings mandates reference to a Larger Bench for authoritative resolution.
Arguments by the Parties
Petitioner (Director-Appellant)
- Section 148 applies only to the juristic drawer; an authorised signatory/director is not the drawer.
- Gurudatta Sugars and Bijay Agarwal support strict “drawer” definition.
- Company liquidation and partial recovery by Official Liquidator render deposit against director a double recovery.
- Financial hardship and inability to deposit 20% would nullify the right of appeal.
Respondent (Complainant)
- Appellant signed the cheque and assured payment; Section 141 vicarious liability applies.
- Liquidation of company does not extinguish director’s personal criminal liability.
- Deposit condition is essential to uphold Section 148’s compensatory purpose.
- Reliance on coordinate decisions inapposite, as those signatories lacked active managerial role.
Factual Background
SAIL supplied 208 MT of steel in 2012–13; purchaser’s ₹4.82 crore cheque bounced. A Section 138 complaint was filed against the company and its directors. The company was wound up in 2016, leaving only the director for prosecution. The Trial Court convicted the director and ordered ₹8.1 crore compensation. The Appellate Court stayed the sentence subject to a 20% deposit under Section 148; failure to deposit led to a warrant. The director’s application for exemption was dismissed by the High Court, prompting the Supreme Court appeal challenging the “drawer” definition under Section 148.
Statutory Analysis
- Section 138: Offence for cheque dishonour due to insufficient funds.
- Section 141: Vicarious liability of persons in charge of a company’s business.
- Section 143A: Trial-stage interim compensation up to 20% of cheque amount.
- Section 148: Appellate-stage deposit of minimum 20% of fine/compensation, in addition to Section 143A deposits.
- 2018 Amendment’s Objects & Reasons: curb delays, provide timely relief to payees, and strengthen cheque credibility.
Procedural Innovations
- Referral of interpretive conflict on Section 148 to Larger Bench, marking a formal route for resolving split Coordinate Bench decisions.
Alert Indicators
- 🚨 Breaking Precedent – Departure from literal interpretations in Gurudatta and Bijay Agarwal
- 🔄 Conflicting Decisions – Coordinate Bench divergence on “drawer” in Sections 143A and 148