Section 89 company protection does not let a company recover from its bank for bona fide honouring of authorised cheques.

Section 89 of the Indian Companies Act, 1913 protects a company against liability on a negotiable instrument unless it is made, drawn, accepted or endorsed in the company's name or by a person acting under express or implied authority. That protection concerns enforcement of the instrument itself, not a dispute between a company and its bank over cheques honoured from the company's account. Where the bank pays cheques issued by persons known to be authorised to operate the account and acts bona fide, the company cannot invoke section 89 to recover the amounts merely because the cheques would not have been enforceable as instruments against the company.

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Issues: Whether the company could recover from its bank amounts paid on cheques which did not strictly disclose on their face that they were drawn on behalf of the company and which, according to the company, did not comply with section 89 of the Indian Companies Act, 1913.

Analysis: Section 89 protects a company against enforcement of a negotiable instrument unless it is made, drawn, accepted or endorsed in the name of, or by or on behalf of, the company by a person acting under express or implied authority. That requirement makes the instrument ineffective against the company where it is defectively drawn. But the provision operates in the context of liability on the instrument itself and does not govern a dispute between a company and its bank over cheques honoured from the company's account. Where the bank acts on cheques issued by the persons known to be authorised to operate the account and pays them bona fide, the company cannot invoke section 89 to compel repayment merely because the cheques would not have been enforceable against the company if presented as claims on the instrument.

Conclusion: The company could not rely on section 89 to recover the money from the bank, and the bank was not liable to repay the amounts honoured on the cheques.

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