Kiran Raj

The Supreme Court has quashed criminal proceedings against a company director in multiple cheque bounce cases filed under Section 138 of the Negotiable Instruments Act, 1881 (NI Act). The court ruled that a director cannot be held liable merely by virtue of their position unless the complaint specifically alleges that they were in charge of and responsible for the company’s business at the time of the alleged offense. The court set aside the orders taking cognizance against the director, stating that the complaints failed to meet the statutory requirements necessary to establish vicarious liability under Section 141 of the NI Act.

The case arose from multiple complaints filed by M/s Health Care at Home India Pvt. Ltd. against various accused, including the company and its directors, for dishonored cheques. The appellant, Hitesh Verma, was named as accused No. 3. The complaints alleged that the cheques were issued by Accused No. 2 under instructions from the appellant on behalf of the company to discharge outstanding liabilities. However, it was undisputed that the appellant was not a signatory to the dishonored cheques.

Challenging the proceedings, the appellant argued that he could not be held liable under Section 138 of the NI Act unless it was established that he was responsible for the company’s affairs at the time of the alleged offense. He submitted that the complaints only identified him as a director without attributing any specific role in the issuance of the cheques or the management of the company’s daily business operations. The High Court dismissed his challenge, holding that since the complaints stated he was responsible for the company’s business, he could be prosecuted under the NI Act. The appellant then approached the Supreme Court.

The Supreme Court, comprising Justice Abhay S. Oka and Justice Ujjal Bhuyan, examined the statutory requirements under Section 141(1) of the NI Act. The court explained that the provision contains two essential conditions: the accused must have been in charge of the company’s business at the time of the offense, and they must have been responsible for its conduct. The bench stated that "a Director who is in charge of the company and a Director who was responsible to the company for the conduct of the business, are two different aspects. The requirement of law is that both ingredients of sub-Section (1) of Section 141 of the 1881 Act must be incorporated in the complaint."

The court found that the complaints did not assert that the appellant was managing the company’s business when the alleged offense occurred. It observed that "on a plain reading of the complaints, the appellant cannot be prosecuted with the aid of sub-Section (1) of Section 141 of the 1881 Act." The absence of specific allegations linking the appellant to the conduct of the company’s financial transactions led the court to conclude that he could not be held liable under the NI Act. The judgment further stated that "as the appellant is not a signatory to the cheque, he is not liable under Section 138 of the 1881 Act. As it is only the signatory to the cheque who is liable under Section 138, unless the case is brought within the four corners of Section 141, no other person can be held liable."

The Supreme Court set aside the High Court’s order and quashed the proceedings against the appellant in the cheque bounce cases. It stated that its ruling applied only to the present appellant and did not affect the trial against the other accused. The court noted that "we make it clear that we have made no adjudication on the merits of the complaints and all issues are left open to be decided by the Trial Court."

Case Title: Hitesh Verma v. M/s Health Care at Home India Pvt. Ltd. & Ors.
Case Numbers: Criminal Appeal Nos. 462-468 of 2025 
Bench: Justice Abhay S. Oka and Justice Ujjal Bhuyan

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