Directors responsibility in cheque bounced cases

DIRECTORS RESPONSIBILITY IN CHEQUE BOUNCED CASES

Here is the gist of the far reaching Judgment of the Apex Court Hon'ble Justice Mr Sathasivam Bench on the liability of Directors in Check Bouncing Cases. Ref National Small Industries Corp. Ltd. .... Appellant (s) Versus Harmeet Singh Paintal & Anr. .... Respondent(s) WITH CRIMINAL APPEAL NO. 337 OF 2010 (Arising out of S.L.P. (Crl.) No. 1079 of 2008) ON THE LIABILITY OF DIRECTORS IN CHEQUE BOUNCING CASES .


As per the Judgment the following principles emerge :

(i) The primary responsibility is on the complainant to
make specific averments as are required under the law in
the complaint so as to make the accused vicariously
liable. For fastening the criminal liability, there is no
presumption that every Director knows about the
transaction.
(ii) Section 141 does not make all the Directors liable for
the offence. The criminal liability can be fastened only on
those who, at the time of the commission of the offence,
were in charge of and were responsible for the conduct of
the business of the company.
(iii) Vicarious liability can be inferred against a company
registered or incorporated under the Companies Act, 1956
only if the requisite statements, which are required to be
averred in the complaint/petition, are made so as to make
accused therein vicariously liable for offence committed by
company along with averments in the petition containing
that accused were in-charge of and responsible for the
business of the company and by virtue of their position
they are liable to be proceeded with.
(iv) Vicarious liability on the part of a person must be
pleaded and proved and not inferred.

(v) If accused is Managing Director or Joint Managing
Director then it is not necessary to make specific averment
in the complaint and by virtue of their position they are
liable to be proceeded with.
(vi) If accused is a Director or an Officer of a company
who signed the cheques on behalf of the company then
also it is not necessary to make specific averment in
complaint.
(vii) The person sought to be made liable should be incharge
of and responsible for the conduct of the business
of the company at the relevant time. This has to be
averred as a fact as there is no deemed liability of a
Director in such cases.


With Regards


VS Rajan Associates,
Advocates & Notaries,
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