Mere Designation as Director Not Sufficient for Vicarious Liability Under Negotiable Instruments Act, Rules Calcutta High Court
In a significant ruling, the Calcutta High Court has quashed the proceedings against Sanjeeva Shukla, a Director of Credforce Asia Limited, in a case concerning the dishonour of a cheque. The court emphasized that mere designation as a Director does not automatically attract vicarious liability under Sections 138 and 141 of the Negotiable Instruments Act, 1881. Justice Shampa Dutt (Paul) presided over the matter and delivered the judgment on August 28, 2026.
The proceedings stemmed from a complaint filed under Sections 138 and 141 of the Negotiable Instruments Act, alleging that a cheque issued by Credforce Asia Limited was dishonoured. Sanjeeva Shukla, one of the Directors, was named in the complaint solely based on his designation. However, the complaint failed to allege that Shukla was in charge of and responsible for the conduct of the business of the company at the time of the alleged offence.
Justice Paul highlighted the necessity of specific and unambiguous allegations regarding a Director’s role in the conduct of a company's business to establish vicarious liability. The court reiterated that the legal provision must be interpreted strictly, and both conditions of being "in charge of" and "responsible to the company" must be cumulatively satisfied to impose liability under Section 141.
The court referenced several Supreme Court judgments, including Aneeta Hada v. Godfather Travels & Tours (P) Ltd. and Sunil Bharati Mittal v. CBI, underscoring the principle that vicarious liability cannot be presumed by mere virtue of holding a directorial position. Specific roles and acts must be clearly alleged in the complaint to proceed with prosecution under Sections 138/141 of the Act.
The absence of such foundational pleadings in the case led the court to conclude that continuing the proceedings against Shukla would constitute an abuse of process. Consequently, the Calcutta High Court quashed the proceedings in respect of Sanjeeva Shukla, setting a precedent for the rigorous application of statutory requirements under the Negotiable Instruments Act.
Bottom Line:
A Director cannot be held vicariously liable under Sections 138/141 of the Negotiable Instruments Act, 1881, unless the complaint specifically alleges that the Director was "in charge of and responsible for the conduct of the business of the Company" at the time of the alleged offence. Mere designation as a Director is insufficient to attract liability.
Statutory provision(s): Sections 138 and 141 of the Negotiable Instruments Act, 1881; Section 482 of the Criminal Procedure Code, 1973
Sanjeeva Shukla @ Sanjiv Shukla v. Aradhana Nirman LLP, (Calcutta) : Law Finder Doc id # 2969005
