In a noteworthy ruling, the Supreme Court of India upheld the conviction of an NGO Treasurer under Section 138 of the Negotiable Instruments Act, 1881, holding that an authorised signatory who is made the "front face" of an organisation for all financial transactions effectively becomes the "drawer" of the cheque and cannot escape criminal liability under the NI Act merely by claiming to be a Treasurer rather than the owner or Chairman.
The case arose from a Memorandum of Understanding (MOU) dated July 30, 2009 between TIMES NGO and Respondent No. 2, under which TIMES was entrusted with the outsourced collection of electricity bills of domestic consumers on behalf of APCPDCL (now Telangana CPDCL). The Appellant, K. Ranganayakulu, had signed the MOU in his capacity as Treasurer of TIMES and was also the authorised signatory for all cheques and RTGS transactions under the arrangement. When the cheque issued by him on behalf of TIMES was dishonoured, a complaint was filed under Section 138 of the NI Act. The Trial Court convicted the Appellant, and the High Court of Telangana confirmed the conviction, sentencing him to one year's rigorous imprisonment and a fine of Rs. 1.5 crore, with a default sentence of one additional year's rigorous imprisonment. The High Court also directed his appearance to serve the remaining sentence. Aggrieved, the Appellant approached the Supreme Court.
The Appellant's senior counsel, Mr. Santosh Kumar, argued that since the Appellant was merely an authorised signatory signing on behalf of the company/NGO, he could not be treated as the "drawer" of the cheque. He urged that penal statutes must be interpreted strictly, especially in matters of vicarious liability, and that an authorised signatory does not ipso facto become personally liable under Section 138 NI Act. Reliance was placed on the Supreme Court's ruling reported at (2024) 7 SCR 1211: 2024 INSC 551.
Respondent No. 2's senior counsel, Mr. Ravi Shankar Jandhyala, countered that the Appellant had personally signed the MOU as Treasurer, was the sole identified face of TIMES in all financial dealings with APCPDCL, and that under the express terms of the MOU, all responsibilities — financial and otherwise — were vested solely in the Appellant.
The Court undertook a careful analysis of the MOU's terms, particularly Clauses 7, 20 and 28, which imposed exclusive obligations of remittance, financial guaranty and accountability on TIMES through the Appellant. The Court observed that the MOU did not recognise any other entity — including the Chairman — as being responsible for transactions with APCPDCL. Since the NGO had made the Appellant its "front face" by authorising him to sign all negotiable instruments and effect all payments, he effectively became the drawer of the cheque in practice, regardless of his formal designation. Accordingly, the Court declined to interfere with the conviction. However, acknowledging that the Appellant was only the Treasurer and not the owner or Chairman, the Court found it appropriate to modify the sentence by deleting the initial one year's rigorous imprisonment while retaining the fine of Rs. 1.5 crore, payable within two months, failing which he would undergo one year's rigorous imprisonment as default sentence.
The Supreme Court partly allowed the appeal — upholding the conviction under Section 138 NI Act but modifying the sentence to fine only of Rs. 1.5 crore, payable to Telangana CPDCL/TSSPDCL within two months, with default rigorous imprisonment of one year if not paid.
Case Details:
Case No.: Criminal Appeal No. 2472 of 2026 (arising from SLP (Crl.) No. 1915 of 2025)
Bench: Justice Prashant Kumar Mishra & Justice N.V. Anjaria
Appellant: K. Ranganayakulu
Respondents: State of Telangana & Ors.
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