Only Signatory/Responsible Directors Liable in Cheque Bounce Cases: SC

Hitesh Verma Vs Health Care at Home India Pvt. Ltd. & Ors. (Supreme Court of India)

Supreme Court of India, in Hitesh Verma vs. Health Care at Home India Pvt. Ltd. & Ors., ruled that a director who is not a signatory to a dishonored cheque cannot be held liable under Section 138 of the Negotiable Instruments Act, 1881, unless specific conditions under Section 141 are met. The case revolved around complaints filed against the appellant, who was accused alongside other directors of a company engaged in pharmaceutical supply. The complaints alleged that the appellant, as a director, was responsible for the company’s business operations and had directed another director to issue the cheque.

The Court emphasized the distinction between a director who is merely part of a company and a director responsible for its business conduct. Under Section 141 of the Act, liability can be imposed only if it is explicitly stated in the complaint that the accused director was in charge of and responsible for the company’s business at the time of the offense. Since the complaint lacked such an assertion against the appellant, the Court held that prosecution under Section 138 could not be sustained.

Citing judicial precedents, the Court reiterated that vicarious liability under Section 141 cannot be presumed and must be established through specific allegations in the complaint. The ruling aligns with past judgments, including S.M.S. Pharmaceuticals Ltd. vs. Neeta Bhalla & Anr., where the Court held that liability under Section 138 requires a clear statement that the director was responsible for the business’s functioning. The ruling further reinforces the principle that not all directors can be automatically held accountable for offenses under the Act.