TaxTMI 
TaxTMI 
ANALYSIS OF SECTION 141 OF THE NEGOTIABLE INSTRUMENTS ACT, 1881
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....NALYSIS OF SECTION 141 OF THE NEGOTIABLE INSTRUMENTS ACT, 1881<br>By: - DR.MARIAPPAN GOVINDARAJAN<br>Other Topics<br>Dated:- 13-8-2026<br>The Negotiable Instruments Act, 1881 ('Act' for short) provides the consequences of dishonour of cheques. Section 141 of the Act provides the offences committed by Companies. Section 141(1) of the Act provides that if the person committing an offence under Section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. The said person will not be punis....
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....hed if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence. The second proviso to this section provides that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this chapter. Section 141(2) of the Act provides that where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributabl....
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....e to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. Section 138 of the Act creates the offence of dishonour of cheque. Section 141 of the Act extends criminal liability to every person who, at the time the offence was committed, was in-charge of and responsible to the company or association for the conduct of its business. In SMS Pharmaceuticals Ltd. Versus Neeta Bhalla- 2007 (2) TMI 311 - Supreme Court, the Supreme Court held that it is necessary to aver in the complaint that at the time the offence was omitted, the ....
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....person accused was in-charge of and responsible for the conduct of the business of the company. A clear case should be spelled out in the complaint against the person sought to be made liable. Section 141 of the Act contains the requirements for making a person liable under the said provision. That the respondent falls within the parameters of Section 141 has to be spelled out. A complaint has to be examined by the Magistrate in the first instance on the basis of averments contained therein. If the Magistrate is satisfied that there are averments which bring the case within Section 141, he would issue the process. We have seen that merely being described as a director in a company is not sufficient to satisfy the requirement of Section 141.....
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.... The Supreme Court further held that merely being a director of a company is not sufficient to make the person liable under Section 141 of the Act. A director in a company cannot be deemed to be in charge of and responsible to the company for the conduct of its business. The requirement of Section 141 is that 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. So far as the signatory of a cheque which is dishonoured is concerned, he is clearly responsible for the incriminating act and will be covered under Section 141(2) of the Act. In National Small I....
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....ndustries Corpn. Ltd. Versus Harmeet Singh Paintal - 2010 (2) TMI 590 - Supreme Court , the Supreme Court has distinguished the case of persons who are in charge of and responsible for the conduct of the business of the company at the time of the offence. The persons who are merely holding the post in a company and are not in charge of and responsible for the conduct of the business of the company. Further, in order to fasten the vicarious liability in accordance with Section 141, the averment as to the role of the Directors concerned should be specific. The description should be clear and there should be some unambiguous allegations as to how the Directors concerned were alleged to be in charge of and were responsible for the conduct and a....
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....ffairs of the company. The Supreme Court stressed that 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. For fastening the criminal liability, there is no presumption that every Director knows about the transaction. Vicarious liability on the part of a person must be pleaded and proved and not inferred. In HDFC BANK LIMITED Versus STATE OF MAHARASHTRA AND ANR. - 2025 (5) TMI 1743 - Supreme Court the Supreme Court has clarified that the complaint need not mechanically reproduce the exact phraseology of Section 141 of the Act if the substance of the allegations, read as a whole, discloses the factual basis for such liabili....
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....ty. In 'M/s. Mansi Finance (Chennai) Ltd. Versus M. Lalitha And Others. - 2026 (5) TMI 1581 - Supreme Court, the appellant, in this case, the appellant is a finance company. The first respondent is the Educational Society registered under the Registration Act. The second respondent is the President of the society and the signatory of the cheque in question. Other respondents are the functionaries of the Society. The respondent Society approached the appellants and borrowed an amount of Rs.4.50 crores for the development of educational institutions and business activities. Promissory notes were accused for this and the second respondent and others are participating in the financial arrangements. On 31.07.2018 a Memorandum of Understanding....
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.... was executed in which the terms of repayment of the loan. The said loan was not repaid. Later a cheque for Rs.5.12 crores was issued to the appellant by the respondents. The appellant submitted the said cheque in the bank. On 19.11.2019 the cheque was returned as dishonoured with remarks 'Account blocked'. The appellant issued a statutory demand. Since no payment was made the appellant instituted a criminal case before the Metropolitan Magistrate, Chennai against the respondents under Section 138 and 141 of the Act. The respondents filed a Criminal Original Petition before the High Court with the prayer to quash the criminal proceedings against them. The High Court quashed the same. Against this order of High Court, the appellant challe....
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....nged the order of High Court before the Supreme Court in the present criminal appeal. The second respondent is the authorised signatory for the said cheque. The appellant contended that the respondent no.3, being an Executive Member and part of the Managing Committee of the Society, was entrusted with the affairs of the Society and, therefore, liable under Section 141 of the Act. The Supreme Court did not accept this contention and observed that there is no deemed liability merely by virtue of holding an office or position in the company or society. The complaint must disclose the factual basis showing that the person sought to be prosecuted was in-charge of and responsible for the conduct of the business of the entity at the relevant ti....
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....me. There is no specific averment or material connecting respondent No. 3 with the transaction in question has been brought on record. The Supreme Court held that the High Court, in our view, was justified in quashing the proceedings against respondent No. 3. However, it failed to notice the material distinction qua respondent Nos. 1, 2 and 4 and erred in extending the same relief to them despite the prima facie material disclosing their participation in the underlying transaction. The Supreme Court considered the surrounding circumstances, coupled with the documentary material, prima facie disclosing participation of respondent Nos. 1, 2 and 4 in the underlying financial transactions, constitute sufficient foundational material to justi....
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....fy continuation of the prosecution against them. the complaint discloses sufficient foundational facts to proceed against respondent Nos. 1, 2 and 4, but not against respondent No. 3. The impugned order, therefore, warrants interference only to the limited extent indicated above. The Supreme Court partly allowed the appeal. The Supreme Court upheld the order of High Court quashing the criminal complaint against the respondent No.3 and set aside the order in respect of respondent 1, 2 and 3. =============<br> Scholarly articles for knowledge sharing by authors, experts, professionals ....