Liability under S. 141, Negotiable Instruments Act cannot be fastened to a person only on the ground that he was a director in defaulting company

Delhi High Court: A Single Judge Bench comprising of Sanjeev Sachdeva, J, allowed a petition wherein the petitioner had challenged the order whereby he was summoned in a complaint filed under Section 138 of the NI Act.

The petitioner had been a director of the accused company. The cheque in question was in the furtherance of the accused company’s business. The petition argued that he had already tendered his resignation months before the issuance of the cheque and had stopped participating in board meetings and decision making. The issue before the Court was whether the complainant had made out a case for proceeding under Section 141 against the petitioner, who has been named a director. The Court noted that liability under Section 141 is vicariously fastened on a person who is in-charge and responsible to the company for the conduct of business of the company. The Court noted that though the petitioner was a director by virtue of his resignation being accepted on a date later than the issuance of the cheque, he could not be said to be responsible for the conduct of the accused company’s business. The Supreme Court in SMS Pharmaceuticals v. Neeta Bhalla, (2005) 8 SCC 89 held that the complaint must disclose necessary facts which make a person liable. The complainant had not fulfilled this mandate and had merely fastened liability on the petitioner by virtue of him being a director. Petition allowed. [Manoj Kumar Gupta v. Barclays Bank,  2018 SCC OnLine Del 6587, decided on 16.01.2018]

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