The Supreme Court of India has ruled that company directors cannot be prosecuted in cheque bounce cases solely because they signed a board resolution.
The Court also held that the Delhi High Court erred in stating that a petition under Section 482 of the CrPC cannot be entertained merely because a trial court had refused to consider a revision application against a summoning order.
“In the present case, the only basis for alleging the appellant’s involvement in the company’s day-to-day affairs is that she signed board resolutions. This is not convincing,” a bench of Justices Sanjay Karol and Augustine George Masih observed.
The bench said a board resolution is a document signed by directors to record decisions taken on matters placed before the board, such as hiring senior personnel, acquisition or disposal of assets, or other major policy decisions. However, this does not imply that every director is aware of or involved in routine business operations.
“Moreover, there is not even a whisper of a direct allegation against the appellant in the complaint. As held in earlier judgments, such a direct allegation is essential for invoking Section 141 of the Negotiable Instruments Act, which requires that the accused be ‘in charge of’ and ‘responsible for’ the conduct of the company’s business,” the bench added.
The ruling came while allowing an appeal filed by Saroj Pandey, a director of Projtech Engineering Private Limited, who challenged the decisions of the Additional Sessions Court and the Delhi High Court refusing to quash criminal proceedings against her under the Negotiable Instruments Act, 1881. The case arose after three cheques issued by the company, dated April 20, 2021, amounting to ₹50 lakh, were dishonoured due to a mismatch in the drawer’s signatures and certain alterations.
Justice Sanjay Karol said the high court’s view on the maintainability of a quashing petition was incorrect. The Court set aside the impugned judgment on both counts and ordered that the proceedings against Saroj Pandey be quashed.
