Recently, the Supreme Court clarified that an authorised signatory who signs and issues cheques on behalf of an organisation may be treated as the “drawer” of the cheque and held liable for its dishonour under Section 138 of the Negotiable Instruments Act. The Court made the observation in a case involving an NGO treasurer who was tasked with issuing cheques and making payments under an agreement with a power distribution company. The Court makes it clear that liability may attach not merely because of a person's designation, but because of the responsibilities vested in them concerning the issuance of cheques and financial transactions.
The controversy arose from a 2009 agreement under which TIMES NGO undertook the collection of electricity bill payments for the then Andhra Pradesh Central Power Distribution Company. The treasurer signed the memorandum of understanding and was authorised to remit collections through cheque or RTGS. When a cheque issued in this arrangement was dishonoured, criminal proceedings were initiated under Section 138 of the NI Act. Before the Apex Court, the Appellant argued that he was merely an authorised signatory acting on behalf of the NGO and therefore could not be treated as the drawer of the cheque. The Respondent power utility countered that the MOU specifically made the treasurer responsible for signing negotiable instruments and making payments, thereby attracting statutory liability.
The Division Bench of Justice Prashant Kumar Mishra and Justice N.V. Anjaria rejected the Appellant’s contention and upheld the conviction. The Court noted that the MOU placed responsibility for payment obligations squarely on the appellant and did not cast such liability on any other office bearer of the NGO.
Emphasising the practical effect of the arrangement, the Court observed, “If the NGO i.e. TIMES has made the appellant as its front face by authorizing him to sign all the negotiable instruments and to make payment of the account to APCPDCL through cheque/RTGS online transaction, it is only the appellant who shall be responsible for all the consequences thereof.”
The Court concluded that, by virtue of the terms of the MOU, the appellant effectively became the drawer of the cheque on behalf of the NGO. While sustaining the conviction, the bench modified the sentence in view of the fact that the appellant was only the treasurer of the society. He was directed to pay a fine of ₹1.5 crore to the power distribution company within two months, failing which he would undergo rigorous imprisonment for one year.
Case Title: K Ranganayakulu Vs. State of Telangana & Ors.
Case No.: Criminal Appeal No.2472 of 2026
Coram: Hon'ble Mr. Justice Prashant Kumar Mishra, Hon'ble Mr. Justice N.V. Anjaria
Advocate for the Petitioner: Sr. Adv. Santosh Kumar, AOR Shekhar Kumar, Adv. Vijay Kumar, Adv. Vemula Raghuraman, Adv. Pradeepkumar R, Adv. B Shenbegam, Adv. Vipin Poria, Adv. Vishal Tiwari, Adv. Dhruv Singh
Advocate for the Respondent: Sr. Adv. Ravi Shankar Jandhyala, AOR Devina Sehgal, AOR Sravan Kumar Karanam, Adv. Yatharth Kansal, Adv. Srikanth Varma Mudunuru, Adv. Kumar Abhishek, Adv. P. Venkatraju, Adv. Srilekha Pujari, Adv. M. Harshini, Adv. G. Sushmita
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