K Ranganayakulu Vs State of Telangana & Ors.
The case is between K Ranganayakulu & State of Telangana & Ors., embodying a critical question of Law, i.e., Whether an authorised signatory of a society/NGO, who signs a cheque on behalf of the organisation as its Treasurer under a contractual arrangement, can be held liable as the ‘drawer’ of the cheque under Section 138 of the Negotiable Instruments Act, 1881 (NI Act), and whether strict interpretation of penal statutes would preclude the imposition of vicarious liability on such a signatory?
The facts of the case were that the appellant, K Ranganayakulu, was the Treasurer of TIMES NGO, which had entered into an MOU with APCPDCL (now Telangana CPDCL) for the collection of electricity bills of domestic consumers. The appellant had signed the MOU as Treasurer and was exclusively authorised to sign all negotiable instruments and remit payments to APCPDCL. A cheque signed by him on behalf of TIMES was dishonoured, leading to his conviction by the High Court under Section 138 of the NI Act, with rigorous imprisonment of one year and a fine of Rs. 1,50,00,000/- (Rupees One Crore Fifty Lakhs Only).
The Supreme Court declined to interfere with the conviction, holding that although the appellant was merely the Treasurer of TIMES, the MOU placed sole financial responsibility on him, casting no liability on the Chairman or any other functionary of the NGO. By authorising the appellant to sign all negotiable instruments and make payments, TIMES had made him its ‘front face’, effectively rendering him the drawer of the cheque for the purposes of the NI Act. The Court, however, partially modified the sentence considering his limited role, directing him to pay the fine of Rs. 1.5 crore within two months, failing which he shall undergo rigorous imprisonment of one year as default sentence.
The significance of this case lies in its caution to individuals who sign financial instruments on behalf of organisations: designation alone does not insulate a person from criminal liability under the NI Act if the underlying contract places sole financial accountability on them. The ruling reinforces that courts will look beyond formal titles to the actual contractual framework in determining who is the effective drawer of a cheque, setting an important precedent for liability of authorised signatories in NGOs, societies, and similar entities.