In a recent Judgement the Apex Court
clarified a complex question that whenever a cheque bounces or gets dishonoured
irrespective of it being issued by a Company, Trust, or Society who faces
criminal liability? Does the person who physically signs the cheque, the
authorized signatory, bear personal responsibility, or does the liability rest
solely on the institution?
On 12.05.2026, the Supreme Court of
India in K. Ranganayakulu v. State of Telangana & Ors. (2026 INSC
555), a Division Bench comprising Justice Prashant Kumar Mishra and
Justice N.V. Anjaria ruled that administrative titles cannot shield
individuals from criminal prosecution if they act as the exclusive financial
face of an organization.
The matter originated from a Memorandum of
Understanding (MOU) signed in 2009 between a power utility company (now
TSSPDCL) and an NGO named TIMES. Under the MOU, the NGO was outsourced the task
of collecting domestic electricity bill payments.
The Appellant, K. Ranganayakulu, signed the
agreement in his capacity as the Treasurer of the NGO and was tasked
with remitting the collected cash back to the utility via cheques or online
transfers on the next working day. When the cheques executed by him were bounced due to insufficient funds, the utility
initiated criminal proceedings under Section 138 of the Negotiable
Instruments Act, 1881.
The Appellant argued that as a mere
authorized signatory and Treasurer not the owner or Chairman he was not the
legal "drawer" of the cheque and could not be held vicariously liable
under strict interpretation of penal laws. The Supreme Court rejected this
defense. The Court said if the NGO has made the Appellant as its front face by
authorizing him to sign all the negotiable instruments and to make payment it
is only the Appellant who shall be responsible for all the consequences thereof,
because the Operating Agreement did not recognize any other executive entity or
office bearer for these financial transactions, the Court held that the
authorized signatory cannot casual hide behind an organizational veil. While
the Apex Court upheld the conviction, it took a pragmatic approach regarding
the sentence, recognizing the Appellant’s role as an office bearer rather than
a principal owner.