Answer By law4u team
In a corporate cheque bounce case, the role of the authorized signatory is crucial because they are the ones who sign the cheque on behalf of the company. Under Section 138 of the Negotiable Instruments Act, 1881, both the company and its authorized signatory can be held legally accountable if a cheque issued by the company bounces due to insufficient funds or other reasons. Liability of the Authorized Signatory Primary Responsibility: The authorized signatory is personally liable along with the company since they issued the cheque. Criminal Proceedings: If a complaint is filed under Section 138, both the company and the signatory may face criminal prosecution. Director’s Liability: If the authorized signatory is a director, managing director, or key officer, they may be prosecuted unless they prove they had no knowledge of the transaction. Defenses Available: The signatory had no knowledge of the dishonor. The cheque was issued without proper authorization. The cheque was presented after its validity expired. Legal Consequences Imprisonment up to 2 years or fine up to twice the cheque amount, or both. A court may grant bail but conviction can lead to criminal records. The company may face business restrictions or loss of credibility.
