The learned
Metropolitan Magistrate, Kurla, while dismissing the complaints, has
erroneously held that the cases should have been filed against Borkar or
Barve. As per the admission given by PW2, the bank employee, he was
not an authorised signatory to these cheques issued of the Sangli Urban
Cooperative bank. The learned Metropolitan Magistrate, Kurla ought to
have appreciated that the bank memos, which were produced by the
complainant, disclosing the reason for dishonouring the cheques were
either 'funds insufficient' or 'stop payment'. Nowhere it was mentioned that
the cheques were dishonoured because they were not signed by the
authorised signatory. That apart, the Supreme Court in the case of Laxmi
Dyechem (supra) has considered this issue at length. The instances of
giving different reasons of dishonour of the cheques are taken into
account extensively by the Supreme Court and it held that the reasons
which are given for insufficient funds or different terminologies which are
used by the bank at the time of dishonouring of the cheques are to be
considered cumulatively as the reason to dishonour the cheque is
insufficient funds and they are to be cumulatively considered that it is a
dishonour of cheque within the meaning of section 138 of the Negotiable
Instruments Act. The drawer in order to avoid the payment is likely to
change his signature or deliberately may commit some mistake and,
therefore, the cheque can be bounced, when the funds are insufficient. In
paragraph 15 of the judgment in Laxmi Dyechem (supra), the Supreme
Court has observed thus:
“Just as dishonour of a cheque on the ground that the account has
been closed is a dishonour falling in the first contingency referred to
under section 138, so also dishonour on the ground that the
signatures do not match or that the image is not found, which too,
implies that the specimen signatures do not match with the
signatures on the cheque, would constitute a dishonour within the
meaning of section 138 of the Negotiable Instruments Act. …..”
“…..There is in our view, no qualitative difference between the
situation where the dishonour takes place on account of substitution
by a new set of authorised signatories resulting in the dishonour of
the cheques already issued and another situation in which the
drawer of the cheque changes his own signatures or closes the
account or issues instructions to the bank not to make payment.”
9. In the present cases, many cheques were signed by witness PW3
Santosh Borkar, who was accounts executive of Garware Synthetics
Limited at Mira Road, Thane. The cases decided by the learned
Metropolitan Magistrate, Kurla, Mumbai has held that the cheques were
not signed by the authorised signatory as Mr.Borkar was not authorised
signatory nor Mr.Borkar is made an accused. All the complaints fail as the
complainant could not bring the case under the ambit of section 138 of N.I.
Act. On this point, the evidence of PW2 Bipin Mukundlal Shah and
evidence of Borkar is to be seen. Mr.Shah was working as an officer in
Sangli Cooperative Bank Limited, Fort branch, Mumbai. Garware Nylons
opened account No.1037 in the name of Garware Synthetics Limited on
16.9.1999 and as per their record, Mr.Nihar Garware can singly operate
the account and P.N. Murthy, Barve and Mollya have to operate the said
account jointly either two of them. However, on 24.2.2003, Garware
Synthetics informed change of operations of the said account and as per
their record, Mr.Borkar was not an authorised signatory for operating the
said account. He also said that the subject matter of the said cheques
when deposited for clearance, there was no sufficient balance in the
account of Garware Synthetics Limited and as it was found insufficient,
they did not verify further about the authorisation of the signature or
whether the signature differs. He has further submitted that if there is a
sufficient balance in the account of the drawer then the bank officers
further verify the signature of the cheques and as there were no sufficient
funds they did not verify the signatures. On this background, evidence of
Mr.Borkar, though is inconsistent, it cannot be said to be false. He
admitted that he signed all those cheques. He said that he has mentioned
that he is an authorised signatory of Garware company. He has authority
to sign the cheques and issued the cheques and therefore he has signed
those cheques he was told. He deposed that he did not know whether
Garware company had informed the bank about his authorisation or not.
He is not aware whether there is any resolution in his name to operate the
bank account or not is passed or not? Thus, the evidence of the PW2 on
the authorisation of signatory is true and hence, reliable evidence of
Mr.Borkar on that point that he was asked to issue the cheques and he
believed that he was authorised to sign and issue the cheques, cannot be
doubted. Mr.Borkar was instructed to sign the cheques and issue the
cheques. He has deposed that at one place, these being accommodation
cheques, he was asked to sign. Naturally, he was not aware about the
internal decisions of the Board of Directors of the company whether they
passed any resolution authorising him or not. He had no knowledge.
Thus, he bonafide signed the cheques and issued them to the party i.e.,
the complainant. Under such circumstances, when the employee of a
particular company is given an understanding that he is authorised to sign
and issue the cheques and he acts accordingly under the bonafide belief,
then, that cheque is to be considered, if bounced, as covered under the
requirement of section 138 of the NI Act. Considering the ratio laid down
by the Supreme Court in Laxmi Dychem (supra), if the cheques are
signed and issued under the instructions of the Board of Directors of the
company and if dishonoured for want of insufficient funds, then the
defence that signature differs is not available to the drawer of the cheques
in the proceedings under section 138 of the NI Act. It is unlikely on the
part of the drawee to have knowledge of the internal resolutions of the
accused company as to in whose favour they were passed giving
authorisation. The Supreme Court thus wanted to plug in this possible
mischief on the part of the drawer to escape the liability under section 138
of the N.I. Act. The drawer can deliberately change his signature with a
view to avoid the liability to pay and postpone the payment and so also
may direct any employee in his establishment to sign the cheques to avoid
immediate payment. Thus, in the present case, in a similar situation
where Mr.Borkar was not authorised to sign and issue the cheques on the
point of evidence of Mr.Borkar, cannot be said to be false. The fact
remains that he was not an authorised signatory. The evidence of the bank
officer (PW2) is to be accepted on this point and the learned Metropolitan
Magistrate, Kurla, though has believed and held that Mr.Borkar was not
authorised signatory, he failed to appreciate that the cheques were
bounced for want of funds insufficient and therefore, such dishonouring of
the cheques was very much covered under section 138 of the Act.
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPLICATION NO.230 OF 2012
M/s.K.M. Enterprises ... Applicant
Vs.
M/s.Garware Synthetics Ltd. & Ors. ... Respondents
CORAM: MRS.MRIDULA BHATKAR, J.
DATE: SEPTEMBER 26, 2014
Citation; 2015 CRLJ(NOC)397 Bom
Print Page
Metropolitan Magistrate, Kurla, while dismissing the complaints, has
erroneously held that the cases should have been filed against Borkar or
Barve. As per the admission given by PW2, the bank employee, he was
not an authorised signatory to these cheques issued of the Sangli Urban
Cooperative bank. The learned Metropolitan Magistrate, Kurla ought to
have appreciated that the bank memos, which were produced by the
complainant, disclosing the reason for dishonouring the cheques were
either 'funds insufficient' or 'stop payment'. Nowhere it was mentioned that
the cheques were dishonoured because they were not signed by the
authorised signatory. That apart, the Supreme Court in the case of Laxmi
Dyechem (supra) has considered this issue at length. The instances of
giving different reasons of dishonour of the cheques are taken into
account extensively by the Supreme Court and it held that the reasons
which are given for insufficient funds or different terminologies which are
used by the bank at the time of dishonouring of the cheques are to be
considered cumulatively as the reason to dishonour the cheque is
insufficient funds and they are to be cumulatively considered that it is a
dishonour of cheque within the meaning of section 138 of the Negotiable
Instruments Act. The drawer in order to avoid the payment is likely to
change his signature or deliberately may commit some mistake and,
therefore, the cheque can be bounced, when the funds are insufficient. In
paragraph 15 of the judgment in Laxmi Dyechem (supra), the Supreme
Court has observed thus:
“Just as dishonour of a cheque on the ground that the account has
been closed is a dishonour falling in the first contingency referred to
under section 138, so also dishonour on the ground that the
signatures do not match or that the image is not found, which too,
implies that the specimen signatures do not match with the
signatures on the cheque, would constitute a dishonour within the
meaning of section 138 of the Negotiable Instruments Act. …..”
“…..There is in our view, no qualitative difference between the
situation where the dishonour takes place on account of substitution
by a new set of authorised signatories resulting in the dishonour of
the cheques already issued and another situation in which the
drawer of the cheque changes his own signatures or closes the
account or issues instructions to the bank not to make payment.”
9. In the present cases, many cheques were signed by witness PW3
Santosh Borkar, who was accounts executive of Garware Synthetics
Limited at Mira Road, Thane. The cases decided by the learned
Metropolitan Magistrate, Kurla, Mumbai has held that the cheques were
not signed by the authorised signatory as Mr.Borkar was not authorised
signatory nor Mr.Borkar is made an accused. All the complaints fail as the
complainant could not bring the case under the ambit of section 138 of N.I.
Act. On this point, the evidence of PW2 Bipin Mukundlal Shah and
evidence of Borkar is to be seen. Mr.Shah was working as an officer in
Sangli Cooperative Bank Limited, Fort branch, Mumbai. Garware Nylons
opened account No.1037 in the name of Garware Synthetics Limited on
16.9.1999 and as per their record, Mr.Nihar Garware can singly operate
the account and P.N. Murthy, Barve and Mollya have to operate the said
account jointly either two of them. However, on 24.2.2003, Garware
Synthetics informed change of operations of the said account and as per
their record, Mr.Borkar was not an authorised signatory for operating the
said account. He also said that the subject matter of the said cheques
when deposited for clearance, there was no sufficient balance in the
account of Garware Synthetics Limited and as it was found insufficient,
they did not verify further about the authorisation of the signature or
whether the signature differs. He has further submitted that if there is a
sufficient balance in the account of the drawer then the bank officers
further verify the signature of the cheques and as there were no sufficient
funds they did not verify the signatures. On this background, evidence of
Mr.Borkar, though is inconsistent, it cannot be said to be false. He
admitted that he signed all those cheques. He said that he has mentioned
that he is an authorised signatory of Garware company. He has authority
to sign the cheques and issued the cheques and therefore he has signed
those cheques he was told. He deposed that he did not know whether
Garware company had informed the bank about his authorisation or not.
He is not aware whether there is any resolution in his name to operate the
bank account or not is passed or not? Thus, the evidence of the PW2 on
the authorisation of signatory is true and hence, reliable evidence of
Mr.Borkar on that point that he was asked to issue the cheques and he
believed that he was authorised to sign and issue the cheques, cannot be
doubted. Mr.Borkar was instructed to sign the cheques and issue the
cheques. He has deposed that at one place, these being accommodation
cheques, he was asked to sign. Naturally, he was not aware about the
internal decisions of the Board of Directors of the company whether they
passed any resolution authorising him or not. He had no knowledge.
Thus, he bonafide signed the cheques and issued them to the party i.e.,
the complainant. Under such circumstances, when the employee of a
particular company is given an understanding that he is authorised to sign
and issue the cheques and he acts accordingly under the bonafide belief,
then, that cheque is to be considered, if bounced, as covered under the
requirement of section 138 of the NI Act. Considering the ratio laid down
by the Supreme Court in Laxmi Dychem (supra), if the cheques are
signed and issued under the instructions of the Board of Directors of the
company and if dishonoured for want of insufficient funds, then the
defence that signature differs is not available to the drawer of the cheques
in the proceedings under section 138 of the NI Act. It is unlikely on the
part of the drawee to have knowledge of the internal resolutions of the
accused company as to in whose favour they were passed giving
authorisation. The Supreme Court thus wanted to plug in this possible
mischief on the part of the drawer to escape the liability under section 138
of the N.I. Act. The drawer can deliberately change his signature with a
view to avoid the liability to pay and postpone the payment and so also
may direct any employee in his establishment to sign the cheques to avoid
immediate payment. Thus, in the present case, in a similar situation
where Mr.Borkar was not authorised to sign and issue the cheques on the
point of evidence of Mr.Borkar, cannot be said to be false. The fact
remains that he was not an authorised signatory. The evidence of the bank
officer (PW2) is to be accepted on this point and the learned Metropolitan
Magistrate, Kurla, though has believed and held that Mr.Borkar was not
authorised signatory, he failed to appreciate that the cheques were
bounced for want of funds insufficient and therefore, such dishonouring of
the cheques was very much covered under section 138 of the Act.
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPLICATION NO.230 OF 2012
M/s.K.M. Enterprises ... Applicant
Vs.
M/s.Garware Synthetics Ltd. & Ors. ... Respondents
CORAM: MRS.MRIDULA BHATKAR, J.
DATE: SEPTEMBER 26, 2014
Citation; 2015 CRLJ(NOC)397 Bom
