The Kerala High Court held that cheque dishonour directors not held vicariously liable if company found not guilty of crime under NI Act
Title: Afsal Hussain v. K.S. Muhammed Ismail & Anr.
Decided on: 14 November, 2023
+ CRL.REV.PET NO. 1060 OF 2008
CORAM: HON’BLE Justice Sophy Thomas
Introduction
The Kerala High Court ruled that, in cases where the company is not proved to have committed the offense, the directors of the company cannot be found guilty of a crime under Section 138 of the Negotiable Instruments Act (NI Act), which is known as “Dishonour of Cheque.”
Facts of the Case
In the current case, the Managing Director of Omnitech Information Systems Pvt. Ltd., the revision-petitioner, was sued by the first respondent for dishonouring a Rs. 10 lakh cheque that the latter had sent to the former. In the complaint, the Company was listed as the first accused, the Managing Director/revision-petitioner as the second accused, and the other Directors as the other accused parties. According to Section 138 of the NI Act, the trial court found all of the accused guilty. The first accused firm was fined, and the other accused directors—including the revision petitioner—were sentenced to simple imprisonment and a fine. The Appellate Court only maintained the conviction of the revision-petitioner, even though his substantive sentence was lowered, while clearing the other respondents—including the firm.
Courts analysis and decision
The revision-petitioner issued the check in his capacity as the company’s managing director, the court stated. It was determined that the Managing Director could not be held accountable for any offenses committed by the Company after the appellate court cleared the company of all charges. As a result, it overturned the contested ruling and cleared the revisionist of any wrongdoing.
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Written by- Hargunn Kaur Makhija