Saturday, October 9, 2021

Cheque bounce cases- When can company Directors be summoned? Supreme Court explains

The Supreme Court explained the circumstances in which Directors of a company can be summoned or held vicariously liable for cases initiated under Section 138 of the Negotiable Instruments Act (NI Act) i.e. cheque bounce cases. (Ashutosh Ashok Parasrampuriya and anr v. M/s Gharrkul Industries Pvt. Ltd. and ors).

The Court, in the present case, went on to explain that in order for the process to be initiated against a company director "it is necessary to aver in the complaint filed under Section 138 read with Section 141 of the NI Act that at the relevant time when the offence was committed, the Directors were in charge of and were responsible for the conduct of the business of the company."

The Court added that such an averment assumes importance because it is "the basic and essential averment which persuades the Magistrate to issue process against the Director."

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