Supreme Court cures mischief in Cheque Bounce law.

A Bench comprising Hon’ble justices Mr. Sathavisam and Mr. H.L Dattu of Supreme Court of India’s cures mischief of Section 41 of Negotiable Instrument Act in case involving National Small Industries Corporation which did not distinguish between unclean and unclean delinquent directors of a company.<p>

Managing Director or Joint Managing director can presumed to be responsible and in charge of affairs of business of a company therefore vicariously liable for bouncing of cheque. No specific averment necessary in compliant to this effect.<p>

But no presumption in law exists as to directors of a company as to their vicarious liability so far cheque bounce cases are concerned... Complainant must plead and prove that director sought to be arraigned was indeed responsible and in charge of affairs of the company therefore in knowledge of the cheque that has bounced.<p>

Section 141 of Negotiable Instrument Act relates to companies:

"<em>141. Offences by companies.
1[Offences by companies.

(1) If the person committing an offence under section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and proceeded against and punished accordingly];

Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence.

2["Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter.]

(2) Notwithstanding anything contained in sub-section (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attribute to, any neglect on the part of, any director, Manager, secretary, or other office of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. Explanation: For the purpose of this section. -

(a) "Company" means any body corporate and includes a firm or other association of individuals; and

(b) "Director", in relating to a firm, means a partner in the firm.</em>"

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