Recently, the two-judge bench of the Supreme Court (SC) of India clarified that a Director in charge of the company and a Director responsible to the company for the conduct of the business, under Section 141 of the Negotiable Instruments Act, 1881 (NI Act), are two different aspects. Section 141 of the NI Act illustrates the dishonor of a cheque committed by a company. The bench of Justice Abhay S. Oka and Justice Ujjal Bhuyan said that there are twin requirements for an offence to fall under Section 141 of the NI Act.
The Top Court observed, “There are twin requirements under sub-Section (1) of Section 141 of the 1881 Act. In the complaint, it must be alleged that the person, who is sought to be held liable by virtue of vicarious liability, at the time when the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company. A Director who is in charge of the company and a Director who was responsible to the company for the conduct of the business, are two different aspects. The requirement of law is that both the ingredients of sub-Section (1) of Section 141 of the 1881 Act must be incorporated in the complaint.”
The bench added, “...there is no assertion in the complaints that the appellant, at the time of commission of the offence, was in charge of the business of the company. Therefore, on a plain reading of the complaints, the appellant cannot be prosecuted with the aid of sub-Section (1) of Section 141 of the 1881 Act.” In this case, the appellant is not a signatory to the cheque; therefore, he is not liable under Section 138 of the 1881 Act. Further, it was opined, “As it is only the signatory to the cheque is liable under Section 138, unless the case is brought within the four corners of Section 141 of the 1881 Act, no other person can be held liable.”