{"id":239115,"date":"2020-11-12T16:36:28","date_gmt":"2020-11-12T11:06:28","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=239115"},"modified":"2020-11-12T16:42:51","modified_gmt":"2020-11-12T11:12:51","slug":"madras-hc-can-a-non-executive-director-who-is-not-responsible-for-day-to-day-affairs-of-company-be-made-vicariously-liable-for-offence-committed-by-company-courts-interpretation-in-light-of-s","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2020\/11\/12\/madras-hc-can-a-non-executive-director-who-is-not-responsible-for-day-to-day-affairs-of-company-be-made-vicariously-liable-for-offence-committed-by-company-courts-interpretation-in-light-of-s\/","title":{"rendered":"Madras HC | Can a ‘Non-Executive Director’ who is not responsible for day-to-day affairs of company be made vicariously liable for offence committed by company? Court’s interpretation in light of S. 141 NI Act"},"content":{"rendered":"

Madras High Court:\u00a0<\/strong>G.K. Ilathiraiyan, J., while addressing the instant matter, observed that, a person who is inducted as the Non-Executive Director of an accused company and not responsible for the day-to-day affairs of the company, he\/she cannot be vicariously liable for the offence committed by the company.<\/p>\n

Petitioners Counsel submitted that the petitioner was arrayed as Accused 3 on the complaint filed by the respondents for the offences punishable under Section 138 of Negotiable Instruments Act, 1881.<\/p>\n

Magistrate took cognizance as against the petitioner when there was absolutely no specific allegation against the petitioner to attract the offences under Section 141 of NI Act<\/a> and issued summon without application of mind.<\/p>\n

Petitioner being merely Director of the company was not liable to be prosecuted for the offences under Section 141 of NI Act.<\/p>\n

Further, it was stated that the respondent cannot presume every Director knows about the transaction while fastening criminal liability as against the Director of the Company.<\/p>\n

\n
\n
\n

To attract the offences under Section 141 of NI Act as against the petitioner, the complainant should have specifically averred in the complaint that at the time of offence the petitioner was in charge of and responsible for the conduct and the business of the company.<\/p>\n

\n
\n
\n

Adding to its contention, it was also stated that if a person who was in charge of the day to day management of the company or by stating that he \/ she was in charge of affairs of the company cannot be vicariously made liable under Section 141(1) of NI Act.<\/p>\n

Counsel for the petitioner Nithyaesh Natraj and Counsel for the respondent R. Prasanna Vineeth Durai.<\/p>\n

Dishonour of Cheque<\/span><\/h3>\n

On the Complaint lodged, in total there were 4 accused of the offences punishable under Sections 138 and 141 of NI Act. It was alleged that the accused persons had already availed term loan from the complainant to the tune of Rs 65 lakhs. Accused towards partial discharge of their liability issued eight cheques in favour of the respondent but the same were returned dishonoured on being presented for the reason “account closed”<\/strong>.<\/p>\n

Respondent after serving statutory notice under Section 138 of NI Act, initiated proceedings for the offences punishable under Sections 138 and 141 of NI Act against the accused persons.<\/p>\n

\n
\n
\n

Respondent made allegation foisting liability on the petitioner in the complaint as follows:<\/p>\n

\u201cthe second accused being the Managing Director and the third accused being one of the Director who are respectively in charge of the managing all such business activities of the first accused company and also running the day to day affairs naturally aware about their liability\u201d.<\/em><\/p>\n

Analysis and Decision<\/span><\/h3>\n

Bench stated that Section 141 of the NI<\/a> Act does not make all the Directors liable for the offence. The person sought to be made liable should be <\/span>in charge and responsible for the conduct of the business of the company <\/span>at the relevant time.<\/span><\/p>\n

Therefore, it was stated that there is no\u00a0deemed\u00a0<\/strong>liability of the Director in such case.<\/p>\n

Several Supreme Court decisions have held that the complaint has to specifically say as to how and in what manner Director was responsible for the conduct of the business of the company.<\/span><\/p>\n

Court held that unfortunately, in the impugned complaint, the allegation did not satisfy the requirements of Section 141 of the NI Act.<\/p>\n

Further, on perusal of the complaint, Court observed that the petitioner was inducted as the Non-Executive Director of the first accused company, therefore the petitioner was not responsible for the day to day affairs of the company and hence cannot be made liable vicariously for the offence committed by the company.<\/p>\n

Therefore, the Court, in order to secure ends of justice, opined to necessarily interfere with the proceedings in exercise of its jurisdiction under Section 482 of CrPC.<\/p>\n

Hence, the Criminal Original Petitions were allowed and the proceedings on the file of Metropolitan Magistrate were ordered to be quashed as far as the petitioner was concerned, whereas, for other accused, the trial court has been directed to complete the trial. [Vijaya Arun v. New Link Overseas Finance Ltd., Crl. OP Nos. 5, 8 & 11 of 2020, decided on 18-08-2020]<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Madras High Court:\u00a0G.K. Ilathiraiyan, J., while addressing the instant matter, observed that, a person who is inducted as the Non-Executive Director of <\/p>\n","protected":false},"author":8808,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3,10],"tags":[44063,2862,29785,2567,23584,36936,20481],"class_list":["post-239115","post","type-post","status-publish","format-standard","hentry","category-casebriefs","category-highcourts","tag-director-of-company","tag-dishonour_of_cheque","tag-law","tag-Madras_High_Court","tag-section-138-ni-act","tag-section-141-ni-act","tag-vicarious-liability"],"yoast_head":"\nMadras HC | Can a 'Non-Executive Director' who is not responsible for day-to-day affairs of company be made vicariously liable for offence committed by company? 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Maheshwari has\u2026","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/09\/Supreme-Court-1.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/09\/Supreme-Court-1.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/09\/Supreme-Court-1.png?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/09\/Supreme-Court-1.png?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/09\/Supreme-Court-1.png?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":268324,"url":"https:\/\/www.scconline.com\/blog\/post\/2022\/06\/13\/dishonour-of-cheque-partner-partnership-vicarious-liability-negotiable-instruments-act-section-141-section-138-supreme-court-judgments-legal-research-updates-news\/","url_meta":{"origin":239115,"position":1},"title":"Dishonour of cheque| Partner cannot be held to be vicariously liable when partnership firm is not tried as primary offender: SC","author":"Prachi Bhardwaj","date":"June 13, 2022","format":false,"excerpt":"Supreme Court: Explaining the law on vicarious liability under the Negotiable Instruments Act, 1881, the bench of Ajay Rastogi and Sanjiv Khanna*, JJ has held that while Section 141 of the NI Act extends vicarious criminal liability to officers associated with the company or firm when one of the twin\u2026","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/06\/MicrosoftTeams-image-200.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/06\/MicrosoftTeams-image-200.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/06\/MicrosoftTeams-image-200.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/06\/MicrosoftTeams-image-200.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/06\/MicrosoftTeams-image-200.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":375445,"url":"https:\/\/www.scconline.com\/blog\/post\/2026\/02\/11\/del-hc-non-executive-director-liability-section-141-ni-act\/","url_meta":{"origin":239115,"position":2},"title":"Whether a Non-Executive Director can be held vicariously liable under Section 141 NI Act? Delhi HC answers","author":"Ritu","date":"February 11, 2026","format":false,"excerpt":"\u201cMere bald cursory statement in a Complaint that the Director (arrayed as an accused) is in charge of and responsible to the company for the conduct of the business of the Company without anything more as to the role of the Director, is not sufficient.\u201d","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"Section 141 NI Act","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2026\/02\/Section-141-NI-Act.webp?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2026\/02\/Section-141-NI-Act.webp?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2026\/02\/Section-141-NI-Act.webp?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2026\/02\/Section-141-NI-Act.webp?resize=700%2C400&ssl=1 2x"},"classes":[]},{"id":266662,"url":"https:\/\/www.scconline.com\/blog\/post\/2022\/05\/10\/when-no-offence-is-attributable-to-company-it-is-not-possible-to-attach-liability-on-managing-director-section-138-ni-act-dishonour-of-cheque-liability\/","url_meta":{"origin":239115,"position":3},"title":"When no offence is attributable to Company, it is not possible to attach liability on Managing Director by deeming provisions of S. 141 of the NI Act: Del HC","author":"Bhumika Indulia","date":"May 10, 2022","format":false,"excerpt":"Delhi High Court: Asha Menon, J., held that if no offence is attributed to the company, its Directors and other persons responsible for the conduct of its business cannot be saddled with any liability. The petitioner had filed a complaint under Section 138 of the Negotiable Instruments Act, 1881 against\u2026","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/01\/Delhi_New-logo.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/01\/Delhi_New-logo.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/01\/Delhi_New-logo.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/01\/Delhi_New-logo.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/01\/Delhi_New-logo.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":273998,"url":"https:\/\/www.scconline.com\/blog\/post\/2022\/09\/19\/section-141-ni-act-dishonour-cheque-burden-proof-vicarious-liability-quashment-director-partner-complainant-supreme-court-legal-research-updates-news\/","url_meta":{"origin":239115,"position":4},"title":"Dishonour of Cheque – S. 141 NI Act| Complainant only supposed to have general knowledge of person(s) in charge of company\/firm; Burden on Director\/Partner to prove their innocence: SC\u00a0","author":"Prachi Bhardwaj","date":"September 19, 2022","format":false,"excerpt":"\u201cQuashing of a complaint is a serious matter. Complaint cannot be quashed for the asking. For quashing of a complaint, it must be shown that no offence is made out at all against the Director or Partner.\u201d","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/09\/MicrosoftTeams-image-75-1-1.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/09\/MicrosoftTeams-image-75-1-1.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/09\/MicrosoftTeams-image-75-1-1.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/09\/MicrosoftTeams-image-75-1-1.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/09\/MicrosoftTeams-image-75-1-1.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":231311,"url":"https:\/\/www.scconline.com\/blog\/post\/2020\/06\/24\/dishonour-of-cheque-mp-hc-director-managing-director-joint-director-other-officers-and-employees-of-a-company-can-not-be-prosecuted-under-s-138-of-ni-act-unless-the-company-is-impleaded-as-an-acc\/","url_meta":{"origin":239115,"position":5},"title":"[Dishonour of Cheque] MP HC | Director\/MD\/JD\/other officers and employees of a company can not be prosecuted under S. 138 of NI Act unless the company is impleaded as an accused","author":"Bhumika Indulia","date":"June 24, 2020","format":false,"excerpt":"Madhya Pradesh High Court:\u00a0Rajendra Kumar Srivastava, J., while addressing a matter with regard to dishonour of cheque held that, Director\/Managing Director\/Joint Director\/other officers and employees of company can not be prosecuted under Section 138 of NI Act unless the company is impleaded as an accused Petitioner is aggrieved with the\u2026","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]}],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts\/239115","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/users\/8808"}],"replies":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/comments?post=239115"}],"version-history":[{"count":0,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts\/239115\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/media?parent=239115"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/categories?post=239115"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/tags?post=239115"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}