Section 147(4)(c) of Companies Act, 1956

A Company is formed by seven friends. Name of the Company was “Chaterjee sing’s blast cutting Private Limited”. On a bill of exchange, its name appeared as “Chaterjee sing’s blast cutting Company” and the bill was accepted by the secretary of the Company. The bill dishonoured on the due date.  Who is liable to pay the amount of the bill to the payee?

Section 147(4)(c) of Companies Act, 1956 clearly give answer to this question. Where an officer of the Company sign or accepts a bill of exchange, hundi, promissory note, cheque etc on its behalf but without disclosing the name fully and in legible character, he shall be punishable with fine and shall be personally liable to the holder of the bill or pro note or cheque whatever may be, if the Company has not paid. In the given problem, the secretary of the Company omitted to mention the words “Private Limited”. This is contravention to Section 147 of Companies Act, 1956. As such the secretary would be personally liable to repay it on the date, if the Company refuses the payment.

A Similar case

Penrose v Martyr

Another case:

A bill of exchange was drawn upon a company and it was duly accepted by its two Directors. While impressing its acceptance on the bill, the word “Limited” in the name of the company did not appear in the bill. The bill was dishonoured by the company on the date of its payment. The holder demands the payment from the Directors who had accepted the bill. Will he succeed?

According to Section 147 of the Companies Act, 1956, where an officer of a company accepts a bill of exchange, on its behalf but   without describing its name fully in legible characters, he will be personally liable to repay it provided the company does not dishonour it. However, the provisions of this Section are not invoked, if such default is accidental.

In the given situation, it was clear that the stamp was longer than the bill and the omission of the word Limited was only accidental. The Directors have no intention to contravene the provisions of Section 147. They intended to make the company liable on the bill and the company is liable to honour the bill on due date.

Hence the holder of the bill cannot demand the payment from the Directors.

A Similar Case

Dermatine company Limited v. Ashworth

The Court held that the omission to mention the word “Limited” was an obvious error of the most trifling kind and was not willful or motivated by any ulterior motive and held the company liable to pay it.

In the given situation, the holder cannot demand the payment from the Directors, and they are not personally liable to pay it.