Managing Director Who Signed Dishonoured Cheques & Handled Day-To-Day Affairs Vicariously Liable U/S 141 NI Act: Kerala High Court

The Kerala High Court recently clarified that the managing director, who signed the dishonoured cheques and was in charge of the day-to-day affairs of a company accused of Section 138 of the Negotiable Instruments Act, is vicariously liable in the offence.Justice M.B. Snehalatha dismissed a revision petition filed by the 2nd accused in a cheque bounce case for which he was found guilty along with the accused company in which he was the managing director.The petitioner, as managing director, was in charge and responsible for the daily affairs of the accused company. The accused purchased cement from the complainant company and issued 3 cheques of Rs. 2 lakhs each in partial discharge of the amount due. These cheques got dishonoured due to insufficient funds and the complainant sent lawyer notice to the accused demanding the amount mentioned in the cheques.The accused sent a reply notice, in which it was agreed that the amounts would be paid. However, on failure to do so, the complainant proceeded with the case. Before the trial court the accused denied liability and the issuance of the cheques in discharge of any debt. The petitioner was sentenced to one year imprisonment and directed to pay Rs. 6 lakhs as compensation.The petitioner preferred an appeal and the Sessions Court upheld the conviction but modified the sentence so that the petitioner had to undergo imprisonment only till the rising of the court. It, however, did not modify the compensation awarded. It was then that the petitioner came before the High Court.The Court noted that the cheques were issued from the account maintained by the complainant company and that in the reply notice, the accused had admitted the transaction, seeking time for payment. Thus, it was found that the complainant proved that the accused the cheque in discharge of the liability.Further, the petitioner had also admitted that he was the Managing Director and that the accused used to purchase cement from the company as well as that the amounts due were part of the transaction.The Court then looked into Section 141, which deals with offences committed by companies. It also referred to the Apex Court decision in Hitesh Verma v. Health Care at Home India Pvt. Ltd., wherein it was clarified that there are twin requirements under the provision: the complaint must allege that the person who is alleged to be vicariously was in charge of and was responsible to the company for its conduct of business when the offence was committed.“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. 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. The person sought to be made liable should be in charge 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,” the Court remarked.Considering the case at hand, the Court felt that these aspects were proved. Therefore, it dismissed the revision petition and upheld the sentence and conviction passed in appeal.Case No: Crl.Rev.Pet. No. 92 of 2019Case Title: V.J. Joseph v. The India Cements Limited and Ors.Citation: 2026 LiveLaw (Ker) 79Counsel for the petitioner: P. Muraleedharan (Irimpanam), M.A. Augustine, P. Sreekumar (Thottakkattukara), Soumya James, Thomas JacobCounsel for the respondents: K. Srikumar (Sr.), K. Moni, K. Manoj Chandran, Maya M.N. – Public ProsecutorClick to Read/Download Judgment

Managing Director Who Signed Dishonoured Cheques & Handled Day-To-Day Affairs Vicariously Liable U/S 141 NI Act: Kerala High Court

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Managing Director Who Signed Dishonoured Cheques & Handled Day-To-Day Affairs Vicariously Liable U/S 141 NI Act: Kerala High Court

K. Salma Jennath

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K. Salma Jennath

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