A director of a company cannot evade vicarious liability for the ...

Directors Can't Escape Liability for Cheque Dishonor by Claiming Non-Involvement; Supreme Court Dismisses Quash Petition.

November 6, 2024

Case Laws     Indian Laws     HC

A director of a company cannot evade vicarious liability for the offence of dishonor of cheque u/s 138 of the Negotiable Instruments Act by merely claiming to be a housewife and not involved in the company's affairs. The High Court held that while exercising jurisdiction u/s 482 CrPC to quash a complaint, it must be extremely cautious and do so only in rarest of rare cases where allegations are patently absurd and inherently improbable. The Supreme Court in S.P. Mani & Mohan Dairy v. Snehalatha Elangovan clarified that Section 141 extends criminal liability to every person in charge and responsible for the company's conduct at the time of the offence. The director, being one of only three directors, cannot claim to be unaware or uninvolved in the day-to-day affairs. Such contentions are matters for trial, and in the absence of unimpeachable evidence, the summoning order cannot be quashed at this stage. The petition was dismissed.

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