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Section 141 of NI Act – Vicarious liability of Directors for dishonour cheque of the Company

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On 27.3.2018, the appellant HDFC Bank had declared the account of the Company as NPA.    The company had taken credit facility from the appellant.

 

The cheque of Rs.6,02,04,217/- issued by the accused was dishonoured.

The appellant filed section 138 NI Act complaint against the company and its Directors that the accused nos. to 4 are responsible for day to day affairs, management and working of accused no.1 company and that accused no.3 is the signatory of the dishonoured cheque.

The High Court had quashed the complaint against respondent no.2 accused on the ground that necessary averments were lacking in the complaint.

The meaning of the term of “In charge of “employed in Section 141 means “A person in overall control of the day to day business of the company”.

HELD that the averments in the complaint clearly fulfils the requirements of section 141 of the NI Act.  There is no universal rule that a director of a company is in charge of its everyday affairs. 

Every person connected with a company shall not fall within the ambit of section 141.   Liability is cast on persons who may have something to do with the transaction complained of.   A person who is in charge of and responsible for conduct of business of a company would naturally know why the cheque in question was issued and why it got dishonoured. It is only those persons who were in charge of and responsible for the conduct of business of the company at the time of commission of an offence who will be liable for criminal action.

It is not necessary to reproduce the language of Section 141 verbatim in the complaint since the complaint is required to be read as a whole.

What is important to note is that the repetition of the exact words of the Section in the same order, like a mantra or a magic incantation is not the mandate of the law.  

Judgment dated 22.5.2025 of the Supreme Court of India in SLP (Criminal) No.6964 of 2024 of HDFC Bank Limited     Vs.   State of Maharashtra and another

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