In a significant ruling, the Supreme Court of India has held that it is not mandatory for a complaint under the Negotiable Instruments Act to detail the specific administrative role of company directors in cheque dishonour cases. The verdict reinforces that a general statement about the director being in charge of company affairs is sufficient to proceed against them.
The judgment was delivered by a Division Bench comprising Justice Manoj Misra and Justice K.V. Viswanathan in the case of HDFC Bank Ltd. v. State of Maharashtra [2025 LiveLaw (SC) 624]. The case involved a dishonoured cheque issued by M/s R Square Shri Sai Baba Abhikaran Pvt. Ltd., leading to a complaint by HDFC Bank against the company and its directors, including Mrs. Ranjana Sharma.
The Magistrate had initially issued process against all the accused. However, the Bombay High Court later quashed proceedings against Sharma, citing the absence of specific allegations regarding her role in the company’s day-to-day operations.
Challenging this decision, HDFC Bank approached the Supreme Court via a Special Leave Petition. The apex court set aside the High Court’s ruling, reinstating the Magistrate’s order.
Justice Viswanathan, writing the judgment, clarified that under Section 141(1) of the Negotiable Instruments Act, it is enough for the complaint to make a general averment that the director was “in charge of and responsible for the conduct of the business of the company.” The Court emphasized that parroting the statutory language verbatim is not necessary; material compliance is sufficient.
“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 judgment stated.
The Court also remarked that determining a director’s exact role is within the special knowledge of the company or the director concerned. It is up to the accused to prove that they were not involved in the company’s affairs.
The respondent had relied on the earlier decision in National Small Industries Corporation Ltd. vs. Harmeet Singh Paintal [(2010) 3 SCC 330], but the Supreme Court distinguished it, stating that a complainant is not expected to plead administrative details that are beyond their knowledge.
Citing precedents like K.K. Ahuja and S.P. Mani, the Court reiterated that a general allegation about being in charge of the company’s affairs is adequate to trigger prosecution under Section 138 read with Section 141 of the Act.
However, the Court also clarified that there is no automatic liability merely due to someone being a director. The complainant bears the burden of presenting proper averments to establish a prima facie case.
With this ruling, the Supreme Court has clarified an important aspect of cheque bounce litigation, making it easier for complainants to bring directors to trial without needing intricate details about internal company roles.