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SC held that non-executive directors cannot be held vicariously liable under Sections 138 and 141 of NI Act for dishonored cheques without specific evidence of their direct involvement in company operations. The Court emphasized that mere directorship does not create automatic liability - there must be clear proof of active participation in day-to-day business affairs and financial decisions at the relevant time. Finding no material evidence linking the appellant non-executive directors to the disputed cheque transactions or company's financial management, and noting their role was limited to governance oversight, the Court quashed the criminal proceedings against them. The appeal was allowed, reinforcing the principle that Section 141 liability requires demonstrated active involvement in company operations.
SC held that non-executive directors cannot be held vicariously liable under Sections 138 and 141 of NI Act for dishonored cheques without specific evidence of their direct involvement in company operations. The Court emphasized that mere directorship does not create automatic liability - there must be clear proof of active participation in day-to-day business affairs and financial decisions at the relevant time. Finding no material evidence linking the appellant non-executive directors to the disputed cheque transactions or company's financial management, and noting their role was limited to governance oversight, the Court quashed the criminal proceedings against them. The appeal was allowed, reinforcing the principle that Section 141 liability requires demonstrated active involvement in company operations.
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