Director’s liability in case of dishonour of cheque discussed

Supreme Court: In the present appeal, under special leave, against the decision of the Bombay High Court which rejected the petition of the appellant for quashing complaints, filed against her under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881 accruing vicarious liability for the dishonored cheques granted in the name of company of which she was a director, was allowed.

The counsel for the appellant argued that the appellant was a mere house-wife and had no active role in the working of the company or decisions of the board as a non-executive director. Moreover on the time of issuing of cheques the appellant had resigned from the functions of company, and new directors were appointed in her place, all the more her resignation was approved by the board of directors and she was arbitrarily dragged into criminal proceedings despite the knowledge of the said fact.

The respondent argued that the resignation of the appellant was a disputed. The respondents had made loans made to the company based on her personal guarantee as director of the company, cheques in lieu of payment of which were dishonored.

The bench headed by Sudhansu Jyoti Mukhopadhyay and N.V. Ramana,JJ., held that to pose vicarious liability on appellant it was necessary to object specific averments towards her. Liability does not arise only because of the reason that the person is director of the said company if the person was not active in everyday working of the company and decisions of the board as laid down by the Court vide its decision in National Small Industries Corporation v. Harmeet Singh Paintal, (2010) 3 SCC 330.  Moreover, from the evidence it was quite clear that the appellant had not been a director when the cheques were issued from the fact that they did not had sign of the appellant. Further the respondents included names of new directors in the complaint but did not excluded the name of the appellant which signifies the intentional abuse of the process of law. It rapped the High Court and Trial Court for allowing the criminal proceedings and said that criminal proceedings cannot be instituted as a matter of course and the trial and appellate judge had to consider the allegations made and evidence cautiously before calling on such proceedings. Pooja Ravinder Devidasani v. State of Maharashtra2014 SCC OnLine SC 1020, decided on 17.12.2014

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