HC adjudicated a case involving vicarious liability under ...

Independent Directors Not Automatically Liable: Section 141 Requires Explicit Proof of Direct Involvement in Corporate Misconduct

April 8, 2025

Case Laws     Indian Laws     HC

HC adjudicated a case involving vicarious liability under Section 141 of the Negotiable Instruments Act for an Independent Director. The Court held that mere designation as a Director is insufficient to establish criminal liability. The Complaint must explicitly demonstrate the specific role and responsibility of the Director in the company's affairs. In this instance, the Independent Director was neither a cheque signatory nor involved in financial decision-making, and had resigned prior to the incident. The Court emphasized that penal provisions creating vicarious liability must be strictly construed. Consequently, the Court allowed the petition, quashing proceedings against the Independent Director due to lack of specific averments and evidence of direct involvement in the alleged offence.

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