Criminal Liability of Director of Company for Offences related to Cheque Dishonour under Negotiable Instruments Act, 1881

Criminal Liability of Director of Company for Offences related to Cheque Dishonour under Negotiable Instruments Act, 1881

In case of National Small Industries Corp Ltd v. Harmeet Singh Paintal [2010] GCtR 6456 (SC) it was held that S.141 of Negotiable Instruments Act, 1881 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. 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.

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. 

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.

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.