Supreme Court

Susela Padmavathy Amma vs. Bharti Airtel Limited (Neutral Citation: 2024 INSC 206)

MANU/SC/0202/2024

15.03.2024

Banking

Director of Company can be liable for dishonour of cheque, if he was in charge of day-to-day affairs of the company or a signatory to the cheque

The present appeals challenge the common judgment and order passed by the High Court, whereby the High Court rejected the prayer for quashing of complaint case in connection with the offence punishable under Section 138 read with Section 142 of the Negotiable Instruments Act, 1881 (“the N.I. Act”).

The Appellant submitted that, the Appellant is an aged-lady and was not involved in the day-to-day affairs of the Company. It is submitted that even in the complaint there are no averments that the Appellant was in-charge of day-to-day affairs of the Company. It is further submitted that, the appellant was also not a signatory to the cheque in question. It was only the accused No.2 who was the signatory to the cheque. It is, therefore, submitted that the High Court has grossly erred in not allowing the petition for quashing of criminal complaints qua the appellant.

Merely because a person is a director of a company, it is not necessary that he is aware about the day-today functioning of the company. This Court held that there is no universal rule that, a director of a company is in charge of its everyday affairs. It was, therefore, necessary, to aver as to how the director of the company was in charge of day-to-day affairs of the company or responsible to the affairs of the company. The position of a managing director or a joint managing director in a company may be different. This Court further held that these persons, as the designation of their office suggests, are in charge of a company and are responsible for the conduct of the business of the company. To escape liability, they will have to prove that when the offence was committed, they had no knowledge of the offence or that they exercised all due diligence to prevent the commission of the offence.

It could thus clearly be seen that this Court has held that, merely reproducing the words of the section without a clear statement of fact as to how and in what manner a director of the company was responsible for the conduct of the business of the company, would not ipso facto make the director vicariously liable.

The only allegation against the present appellant is that the present appellant and the accused No.2 had no intention to pay the dues that they owe to the complainant. It is stated that the 2nd accused and the 3rd accused (appellant herein) are the Directors, promoters of the 1st accused being the Company. It is further averred that the 2nd accused is the authorized signatory, who is in-charge of and responsible for the day-to-day affairs of the Company, i.e., the 1st accused.

There is no averment to the effect that the present appellant is in-charge of and responsible for the day-to-day affairs of the Company. It is also not the case of the respondent that the appellant is either the Managing Director or the Joint Managing Director of the Company. It can thus clearly be seen that the averments made are not sufficient to invoke the provisions of Section 141 of the N.I. Act qua the appellant. The judgment and order passed by the High Court is quashed and set aside. Appeals allowed.

Tags : Cheque dishonour Liability Director

Share :