Dishonor of cheque case - vicarious liability of directors u/s ...

Directors escape liability in cheque bounce case due to lack of evidence on role.

Case Laws     Indian Laws

August 29, 2024

Dishonor of cheque case - vicarious liability of directors u/s 138 read with Sections 141 and 142 of Negotiable Instruments Act. Court held specific, unambiguous averments required in complaint to establish director's role and responsibility for company's conduct. Mere designation insufficient; complainant must show how accused was in charge of day-to-day affairs. Section 141 raises legal fiction of vicarious liability but strict compliance with statutory requirements necessary. Complaint lacked specific allegations against petitioner directors, who were non-executive/independent directors. Sections 138 and 141 aimed at enhancing credibility of negotiable instruments, not misuse. Penal provisions to be strictly construed. Complaint insufficient to attract Section 141, hence summoning order against petitioners quashed. Petition allowed.

View Source