The Supreme Court has held that a complaint filed under Section 141 of the Negotiable Instruments Act (NI Act) for cheque dishonour does not need to state the specific administrative role of each director of the company. This ruling came in a case where HDFC Bank Ltd. filed a complaint against M/s R Square Shri Sai Baba Abhikaran Pvt. Ltd. and its directors, including Mrs. Ranjana Sharma, following a bounced cheque.
The trial Magistrate initially issued summons to all accused. However, the Bombay High Court later quashed the complaint against Sharma, saying it lacked details of her role in managing the company’s affairs. Challenging this decision, HDFC Bank moved to the Supreme Court.
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A Bench comprising Justice Manoj Misra and Justice K.V. Viswanathan set aside the High Court’s order. Writing for the Court, Justice Viswanathan highlighted that while Section 141(1) requires stating that the accused was “in charge of and responsible for the conduct of the business,” it doesn’t demand a literal recitation of the section’s words.
“What is important to note is that the repetition of the exact words of the Section in the same order, like a mantra or a magic incantation is not the mandate of the law.”
The Court pointed out that details about the specific roles of directors lie within the company’s or directors’ special knowledge. Hence, it’s up to them to prove they weren’t responsible for the company’s affairs.
“...the administrative role of each director would be within the special knowledge of the company or the director of the firm and it is for them to establish that they were not in charge of the affairs of the company.”
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The Court relied on several key judgments:
- S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla (2005) stressed that a complaint must mention that the accused was responsible for the company’s business during the offence.
- K.K. Ahuja v. V.K. Vora (2009) confirmed that a general statement of a person being “in charge of and responsible for” the business suffices at the complaint stage.
- National Small Industries Corp. Ltd. v. Harmeet Singh Paintal (2010) and S.P. Mani & Mohan Dairy v. Snehalatha Elangovan (2022) reinforced that specific allegations are not mandatory if they concern matters within the directors’ exclusive knowledge.
The complaint in this case stated that Mrs. Sharma was “responsible for the day-to-day affairs, management and working” of the company, which was deemed sufficient.
“A harmonious reading of the judgments... brings out the position that there is no obligation on the complainant to plead in the complaint as to matters within the special knowledge of the company or the directors or firm about the specific role attributed to them in the company.”
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The Court clarified that the Magistrate must be satisfied with the substance of the complaint. Defences, such as claiming ignorance or no direct role, can be presented during trial as per the proviso to Section 141.
“There is no automatic or deemed liability merely because one is a director. The burden to show involvement rests with the complainant at least through appropriate pleadings.”
Case : HDFC Bank Ltd. v. State of Maharashtra
