Independent director, who is not a signatory shall not be liable for cheque bounce: Delhi HC

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  • Last Updated on 26 December, 2022

cheque bounce

Case Details: Prakash Chand v. State - [2022] 145 519 (HC-Delhi)

Judiciary and Counsel Details

    • Ms Swarana Kanta Sharma, J.
    • Sanjay RelanMs Smitee Relan, Advs. for the Petitioner.
    • Satish KumarDevashish Bhadauriya, Advs. for the Respondent.

Facts of the Case

In the instant case, the question was raised whether an Independent Director can be held liable for cheque bounce by the company when he was not the signatory of the cheque & only general allegations were made in the complaint?

High Court Held

The High Court observed that where only general allegations had been made against all the directors of the accused company that they were in charge of managing the day-to-day affairs of the company and there were no specific averments or allegations carving out a specific role in relation to conduct of the business of the accused company, a director cannot be made vicariously liable criminally for the dishonour of cheque of the company not signed by him and there being a material on record to show that he was an independent director in the company .

The High Court, further observed that such mere general allegation or a bald assertion may be sufficient to implicate the Managing directors as well as those who are signatories to the cheque, but not the other directors or persons, especially independent or non-executive directors.

The Hon’ble High Court held that, in absence of any specific averments or allegations carving out a specific role attributable to the petitioner, merely making bald statements that all the accused persons/directors were in charge and responsible for the day-to-day affairs of the company, does not suffice to make the petitioner herein vicariously liable for dishonouring of the cheques.

The High Court, further held that the vicarious prosecution of independent director for cheque bounce by co. to be quashed when he was not signatory of cheque & only general allegations made in complaint.

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