SC determined that a director who is not a signatory to a ...

Director Not Liable for Dishonored Cheque Under Section 138 Without Meeting Section 141 Requirements for Vicarious Liability

March 6, 2025

Case Laws     Indian Laws     SC

SC determined that a director who is not a signatory to a dishonored cheque cannot be held liable under Section 138 of the 1881 Act unless Section 141 requirements are met. Section 141(1) mandates two distinct conditions: the person must be both in charge of and responsible for company's business conduct when the offense occurred. The complaints failed to establish that the appellant was in charge of company business at the relevant time. Without meeting these twin requirements and absent being a cheque signatory, vicarious liability cannot be imposed on the director under Section 138. Appeal allowed, director absolved of liability.

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