Whalesbook
The Supreme Court of India has clarified that company directors cannot be prosecuted for cheque bounces based solely on their signatures on board resolutions. The court explained that merely signing resolutions for routine business decisions does not automatically make a director responsible for the company's financial defaults.
A bench comprising Justices Sanjay Karol and Augustine George Masih stated that signing board resolutions – which document decisions on matters like asset acquisition or personnel hiring – is not the same as being in charge of the company's daily operations. The court highlighted the absence of direct allegations in the complaint, which is a requirement under Section 141 of the Negotiable Instruments Act. This law requires an accused to be demonstrably "in charge of" and "responsible for" the company's business.
This decision provided relief to Saroj Pandey, a director at Projtech Engineering Private Limited. Pandey had appealed criminal proceedings initiated after three company cheques, totaling ₹50 lakh, were dishonoured on April 20, 2021, due to signature mismatches and alterations. Both the Additional Sessions Court and the Delhi High Court had previously declined to quash these proceedings. The Supreme Court deemed the high court's position on the quashing petition incorrect, setting aside the lower courts' decisions and ordering the proceedings against Pandey to be quashed.