S.142 NI Act | Signing Of Board Resolution Doesn't Mean Director Was Aware Of Company's Day-To-Day Affairs : Supreme Court

The Supreme Court has held that merely signing a Board Resolution does not establish that a director was in charge of and responsible for the day-to-day affairs of a company, and therefore cannot by itself justify prosecution under Section 138 of the Negotiable Instruments Act.

Allowing the appeal of a company director, the bench of Justice Sanjay Karol and Justice Augustine George Masih quashed criminal proceedings initiated against her in a cheque dishonour case, observing that there was no specific allegation demonstrating her active role in the conduct of the company's business.

Background

The case arose from a complaint under Sections 138 and 142 of the Negotiable Instruments Act after three cheques issued by the company towards payment for iron and steel were dishonoured on the ground that the drawer's signatures differed and there were alterations on the instruments. Legal notice was issued and summons were subsequently issued by the Magistrate against the company and its directors.

The appellant, one of the directors of the company, challenged the summoning order. The revisional court and the High Court refused to quash the proceedings, holding that her signing of a Board Resolution indicated involvement in the company's day-to-day management.

Mere Directorship Or Signing Resolution Insufficient

Setting aside the High Court's reasoning, the Supreme Court reiterated that liability of a director under Section 141 of the Negotiable Instruments Act requires a specific averment that the person was in charge of and responsible for the conduct of the company's business at the relevant time.

Reference was made to the judgments in N. Vijay Kumar v. Vishwanath Rao N. 2025 INSC 537, K.S. Mehta v. Morgan Securities & Credits (P) Ltd, Hitesh Verma v. Health Care at Home (India) (P) Ltd.

The Court observed that a Board Resolution is typically signed by directors for major policy decisions and does not imply knowledge or participation in routine operational transactions. It held that the absence of any direct allegation regarding the appellant's role in the day-to-day affairs of the company was fatal to the prosecution.

"a Board Resolution is a document that is signed by the members of the Board of Directors for decisions taken or conclusions arrived at for matters placed before the Board for consideration and decision. This may be inter alia regarding hiring of personnel at management levels, acquisition or liquidation of assets affecting the overall position of the assets and liabilities of the Company or any other such major directional issue. This, however, does not in any manner mean that each and every member of the Board of Directors is aware of all decisions taken in the everyday transactions that are involved in running a business concern."

The bench emphasised that the statutory requirement is not satisfied merely by establishing the person's designation as a director, and that deemed liability cannot be inferred without specific factual assertions.

The Court also noted that there was no direct allegation in the complaint against the appellant that she was in charge of, and responsible for the conduct of business of the company.

Section 482 CrPC Not Barred After Revision

The Court also disagreed with the High Court's view that once a revision petition has been filed, a subsequent petition under Section 482 of the Code of Criminal Procedure on the same grounds is restricted.

Relying on earlier precedents, the Court clarified that the inherent powers of the High Court under Section 482 CrPC remain available to prevent miscarriage of justice and cannot be curtailed solely because revisional jurisdiction was invoked earlier.

Holding that the essential ingredients for prosecuting the appellant were not satisfied, the Supreme Court quashed the criminal proceedings against her, while clarifying that its observations were confined to her case and would not affect the trial against the other accused persons.

Case : Saroj Pandey v. Govt of NCT of Delhi

Citation : 2026 LiveLaw (SC) 349

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