Only the person who has signed a cheque or is authorised to sign a cheque can be prosecuted, if it is dishonoured.
That’s what the Bombay High Court said on Friday while quashing the prosecution initiated against Viral Filaments Ltd by a magistrate.
In 1998, Arvind Degvekar made a deal with the firm, which said it would repay him his money with interest.
The firm gave Degvekar a cheque signed by Shri Balaram, sole proprietor of Sinca Fibers. Balaram had issued the cheque discharging the financial liability of Viral Filaments. But when the cheque was dishonoured, Degvekar sent a notice to the firm demanding his money.
Degvekar lodged a private complaint with a metropolitan magistrate under the Negotiable Instruments Act.
In 2001, the magistrate initiated prosecution against Viral Filaments, Balaram and Sinca Fibers. Only Viral Filaments challenged it before the HC.
It claimed that the cheque was neither signed by it nor was it authorised to sign it. Lawyer Shyam Marwadi urged the HC to quash the prosecution as the firm had no control over Balaram’s account.
Justice VR Kingaonkar said the firm had handed over the cheque signed by Balaram as authorised signatory of the Sinca Fibers.
“For the purpose of Section 138, criminal action could be taken only against the drawer [who has signed the cheque],” he said, adding Degvekar can avail civil remedy for recovery of the amount due.