The law regarding the liability of a director for an offence u/s ...

Vicarious liability: Directors liable for company's offences under NI Act only if in charge of day-to-day affairs & management.

Case Laws     Indian Laws

July 11, 2024

The law regarding the liability of a director for an offence u/s 138 of the Negotiable Instruments Act committed by a company is well-established. Section 141, being a penal provision, must be strictly construed. Only directors who were in charge of the day-to-day affairs and responsible for the conduct of the company's business can be held liable. The word 'in-charge of business' implies having overall control of the day-to-day business. To establish vicarious liability, the complainant must show that the director was associated with the day-to-day affairs and management. A director cannot be accused based on a cursory statement or vague averment. The appropriate pleadings/averments will be determined case-by-case. In the present case, the complaint contained necessary averments in line with Section 141, stating that the petitioner, along with other directors, was jointly and severally responsible and in charge of the company's business and management. The petition was dismissed.

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