Individuals cannot be accused in a cheque case against a company solely due to their role in managing the company's business : Supreme Court
The Supreme Court in the matter of Ashok Shewakramani Vs. State of Andhra Pradesh clarified that individuals can be held vicariously liable under Section 141 of the Negotiable Instruments Act, 1881 when a company faces accusations under Section 138 for dishonoring cheques due to insufficient funds. This liability applies only to those who were both 'in charge of' and 'responsible to the company for the conduct of its business' at the time of the offense.
The Court emphasized that mere management involvement or day-to-day affairs do not automatically trigger liability under Section 141. The Court stressed that the accused must have held a higher responsibility within the company. It underscored the conjunctive reading of the phrases 'was in charge of' and 'was responsible to the company for the conduct of the business of the company.'
The case revolved around directors accused under Section 138. The complainant argued that they were liable due to their awareness of transactions and dishonored cheques. However, the Court ruled that the requirements of Section 141 were not met. The Court noted that being 'in charge of' the company is insufficient; being 'responsible for the conduct of the business' is the crucial criterion.