Section 141 liability needs specific complaint averments

The Supreme Court examined when office bearers of a society can be prosecuted along with the drawer of a dishonoured cheque under Sections 138 and 141 of the Negotiable Instruments Act.

The complaint arose from financial transactions between M/s Mansi Finance (Chennai) Ltd. and a registered educational society. The appellant alleged that the society and its office bearers borrowed Rs. 4.50 crore in tranches, executed promissory notes, and later issued a cheque for Rs. 5,12,61,500 towards repayment. The cheque was dishonoured with the endorsement “Account Blocked”. A statutory notice followed, but payment was not made.

The complaint named several office bearers and functionaries of the society, including the present respondents, and specifically stated that accused nos. 2 to 9 were persons in charge of and responsible for the conduct of the society’s day-to-day business affairs. The respondents approached the High Court under Section 482 CrPC. The High Court quashed the proceedings against them, holding that the complaint did not contain sufficient particulars to attract vicarious liability under Section 141 NI Act.

The Supreme Court considered the scope of Section 141 and the need for foundational averments. It accepted the principle that prosecution of persons other than the drawer or signatory requires specific pleading that they were in charge of and responsible for the conduct of the business. At the same time, the Court looked beyond a bare reading of the complaint and examined the surrounding circumstances and documentary material.

On that basis, the Court found sufficient foundational facts to continue the prosecution against respondent nos. 1, 2 and 4. It held that the complaint and accompanying material prima facie disclosed their participation in the underlying financial transactions. However, the Court found no such basis for respondent no. 3 and upheld the quashing as against that respondent.

The appeal was therefore partly allowed. The High Court’s order was set aside insofar as it related to respondent nos. 1, 2 and 4, and the complaint in S.T.C. No. 1980 of 2023 was restored against them. The quashing was maintained for respondent no. 3.

The practical takeaway is that Section 141 NI Act liability still depends on specific, role-based averments, but courts may also test those averments against the surrounding record before quashing at the threshold.