Specific Role of Director Need Not Be Detailed in Cheque Dishonour Complaint: Supreme Court Clarifies Vicarious Liability u/s 141 of NI Act [Read Judgement]

In a recent judgment, the Supreme Court of India held that a cheque dishonour complaint under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881, does not require a detailed description of the specific role played by a director to establish vicarious liability.

The case arose out of a criminal complaint filed by HDFC Bank Limited against R Square Shri Sai Baba Abhikaran Pvt. Ltd. and its directors, including Mrs. Ranjana Sharma, after a cheque for Rs. 6.02 crore issued by the company was dishonoured with the reason “account blocked.”

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The company had availed a revolving loan facility from the bank, which eventually reached Rs. 8 crore. Upon default, the bank initiated proceedings under the NI Act, but the Bombay High Court quashed the complaint against Mrs. Sharma on the ground that it lacked adequate averments to attract Section 141 liability.

HDFC Bank challenged the High Court’s decision, arguing that the complaint, along with annexed documents such as board resolutions and personal guarantees, clearly showed Mrs. Sharma’s involvement in the day-to-day affairs and financial dealings of the company. They argued that she was not only a director but also actively participated in negotiations, was authorised to sign key documents, and had furnished a personal guarantee.

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The respondent’s counsel argued that the complaint did not use the specific statutory phrase “in charge of and responsible for the conduct of the business” and that, in the absence of such wording, the case must be quashed. They relied on S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and Siby Thomas v. Somany Ceramics case arguing that strict compliance with statutory language was necessary.

The bench comprising Justice Manoj Misra and Justice K.V. Viswanathandisagreed with this rigid interpretation and observed that the substance of the complaint showed sufficient material to infer that the respondent was indeed in charge of and responsible for the conduct of the company’s business.

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The court explained that statutory language need not be mechanically repeated if the essence of the requirement is otherwise met. It clarified that directors cannot escape liability merely because the complaint does not parrot the section verbatim. What matters is whether the complainant has alleged that the director was functionally and operationally involved in the business conduct at the time of the offence.

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The court further observed that administrative roles and internal arrangements are matters within the special knowledge of the company and its directors, and complainants cannot be expected to plead them with precision.

Setting aside the High Court’s decision, the Supreme Court restored the Trial Court’s order issuing process against Mrs. Ranjana Sharma. The case will now proceed on merits before the Metropolitan Magistrate, Bhiwandi.

To Read the full text of the Order CLICK HERE

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