Supreme Court of India
HDFC BANK LIMITEDversusSTATE OF MAHARASHTRA AND ANR.
- Citation
- 2025 INSC 759
- Decided
- 22 May 2025
- Disposal
- Case Allowed
- Bench
- MANOJ MISRA
Holding
A complaint need not verbatim repeat the language of Section 141; it suffices that the averments, read as a whole, demonstrate that the accused was in charge of and responsible for the conduct of the company's business, making the High Court's quashing unjustified.
Summary
The appellant, HDFC Bank Ltd., filed a criminal complaint under Section 138 of the Negotiable Instruments Act against a private limited company and its three directors, including Mrs. Ranjana Sharma, for issuing a cheque that was dishonoured. The High Court of Bombay quashed the proceedings against Mrs. Sharma on the ground that the complaint did not contain the specific averments required by Section 141 to invoke vicarious liability. On appeal, the Supreme Court examined whether the complaint’s averments—stating that the directors were responsible for the day‑to‑day affairs and management of the company and that Mrs. Sharma was authorized to negotiate and sign documents—satisfied the statutory requirement of Section 141. Relying on the jurisprudence of S.M.S. Pharmaceuticals, Monaben Shah, and other precedents, the Court held that the substance of the allegations, not a verbatim repetition of the statutory language, is sufficient if it shows the accused was in charge of and responsible for the conduct of the business. Consequently, the Supreme Court set aside the High Court’s order and restored the criminal process against Mrs. Sharma. The appeal was allowed.
Issues considered
- Whether the High Court was justified in quashing the complaint against respondent No.2 on the ground of lack of necessary averments under Section 141 of the Negotiable Instruments Act.
- Whether specific averments mirroring the language of Section 141 are mandatory, or whether the substance of the complaint can satisfy the statutory requirement.
- Whether a director can be held vicariously liable under Section 141 without a detailed description of his specific role in the transaction.
Legislation cited
- Negotiable Instruments Act, 1881s. 138, s. 141
Headnote
Issue for Consideration Issue arose whether the High Court was justified in quashing the complaint insofar as respondent no.2-director of the company on the ground that necessary averments to invoke the vicarious liability against the respondent no.2 u/s.141 NI Act were lacking. Headnotes† – ss.141, 138 – Offence by companies – Vicarious liability – Necessary averments – Accused no.1 company along with respondent no.2 and other two directors approached the appellant-complainant for grant of credit facility for the working capital requirements –
Subjects
Quashing the complaintDirector of the companyNecessary avermentsVicarious liabilityGrant of credit facility for the working capitalRepay the outstanding duesCheque dishonoredCriminal proceedingsAdministrative role of each directorSpecial knowledge of the company
Judgment
[2025] 5 S.C.R. 2162 : 2025 INSC 759
HDFC Bank Limited
v.
State of Maharashtra and Anr.
(Criminal Appeal No. 2843 of 2025)
22 May 2025
[Manoj Misra and K.V. Viswanathan,* JJ.]
Issue for Consideration
Issue arose whether the High Court was justified in quashing the
complaint insofar as respondent no.2-director of the company
on the ground that necessary averments to invoke the vicarious
liability against the respondent no.2 u/s.141 NI Act were lacking.
Headnotes†
Negotiable Instruments Act, 1881 – ss.141, 138 – Offence
by companies – Vicarious liability – Necessary averments –
Accused no.1 company along with respondent no.2 and other
two directors approached the appellant-complainant for grant
of credit facility for the working capital requirements – However,
the accused failed to repay the outstanding dues – Cheque
was issued but was dishonored – Criminal proceedings u/s.138
against the company and its directors – High Court quashed
the same on the ground that there were no sufficient averments
in the complaint filed by the appellant to invoke the vicarious
liability against the respondent no.2 u/s.141 – Justification:
Held: High Court completely unjustified in quashing the proceedings
against respondent No.2 – Repetition of the exact words of the
Section in the same order, like a mantra or a magic incantation
is not the mandate of the law – What is mandated is that the
complaint should spell out that the accused sought to be arrayed
falls within the parameters of s.141(1) – Only then could vicarious
liability be inferred against the said accused, so as to proceed to
trial – Substance will prevail over form – Administrative role of each
director would be within the special knowledge of the company or
the director of the firm and it is for them to establish that they were
not in charge of the affairs of the company – Submission for the
respondent No.2 that the specific role attributed to the directors
* Author
[2025] 5 S.C.R. 2163
HDFC Bank Limited v. State of Maharashtra and Anr.
should be set out in the complaint does not merit acceptance –
Complainant is supposed to know only generally as to who are in
charge of the affairs of the company – There is no obligation on
the complainant to plead in the complaint as to matters within the
special knowledge of the company or the directors or firm about
the specific role attributed to them in the company – Averments
in the complaint set out against the respondent No.2 fulfill the
requirement of s.141(1), and this is not a case where trial against
her can be aborted by quashment of proceedings – Judgment of
the High Court set aside. [Paras 34, 38, 39]
Case Law Cited
S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and Another [2005]
Supp. 3 SCR 371 : (2005) 8 SCC 89 – relied on.
Siby Thomas v. Somany Ceramics Limited [2023] 13 SCR 821 :
(2024) 1 SCC 348 – distinguised.
Monaben Ketanbhai Shah and Another v. State of Gujarat and
Others [2004] Supp. 3 SCR 411 : (2004) 7 SCC 15; Sabitha
Ramamurthy and Another v. R.B.S. Channabasavaradhya [2006]
Supp. 6 SCR 126 : (2006) 10 SCC 581; A.K. Singhania v. Gujarat
State Fertilizer Company Limited and Another [2013] 9 SCR 1069 :
(2013) 16 SCC 630; Ashok Shewakramani and Others v. State of
Andhra Pradesh and Another (2023) 8 SCC 473; Ashutosh Ashok
Parasrampuriya and Another v. Gharrkul Industries Private Limited
and Others (2023) 14 SCC 770; S.P. Mani and Mohan Dairy v.
Dr. Snehalatha Elangovan [2022] 9 SCR 634 : (2023) 10 SCC
685; K.K. Ahuja v. V.K. Vora and Another [2009] 9 SCR 1144 :
(2009) 10 SCC 48; National Small Industries Corporation Limited v.
Harmeet Singh Paintal and Another [2010] 2 SCR 805 : (2010) 3
SCC 330 – referred to.
Books and Periodicals Cited
P. Ramanatha Aiyar’s Advanced Law Lexicon – referred to.
List of Acts
Negotiable Instruments Act, 1881.
List of Keywords
Quashing the complaint; Director of the company; Necessary
averments; Vicarious liability; Grant of credit facility for the working
2164 [2025] 5 S.C.R.
Supreme Court Reports
capital requirements; Repay the outstanding dues; Cheque
dishonored; Criminal proceedings; Administrative role of each
director; Special knowledge of the company.
Case Arising From
CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No.
2843 of 2025
From the Judgment and Order dated 10.01.2024 of the High Court
of Judicature at Bombay in CRLWP NO. 275 of 2022
Appearances for Parties
Advs. for the Appellant:
Arvind Nayar, Sr. Adv., Asav Rajan, Palash Singhai, Akash Saxena,
Devang Shrotriya, Kashish Chadha, Akshay Joshi.
Advs. for the Respondents:
Omkar Deshpande, Siddharth Dharmadhikari, Aaditya Aniruddha
Pande, Karansingh Rajput, Ravindra Sadanand Chingale,
Ms. Sumbul Ausaf, Dr. Rakesh Kumar, Desam Sudhakara Reddy.
Judgment / Order of the Supreme Court
Judgment
K.V. Viswanathan, J.
1. Leave granted.
2. The present appeal calls in question the correctness of the judgment
dated 10.01.2024 passed by the High Court of Judicature at Bombay
in Criminal Writ Petition No. 275 of 2022. By the said judgment, the
High Court has quashed the criminal proceedings under Section 138
of the Negotiable Instruments Act, 1881 (for short ‘NI Act’) insofar
as it was against Respondent No. 2-Mrs. Ranjana Sharma was
concerned. The proceedings have been quashed on the ground
that there were no sufficient averments in the complaint filed by
the appellant to invoke the vicarious liability against the respondent
No. 2 under Section 141 of the NI Act. Aggrieved, the appellant is
before us.
[2025] 5 S.C.R. 2165
HDFC Bank Limited v. State of Maharashtra and Anr.
BRIEF FACTS: -
3. The facts lie in a narrow compass. The respondent no. 2 - Mrs. Ranjana
Sharma along with her daughter Ms. Rachana Sharma and one Mr.
Rakesh Rajpal were directors of a company named M/s R Square
Shri Sai Baba Abhikaran Pvt. Ltd. According to the complaint filed by
the appellant, the accused no. 1 - company along with respondent no.
2 (accused no.2) and other two directors approached the appellant/
complainant for grant of credit facility in the form of Revolving Loan
Facility as Inventory Funding for the working capital requirements.
According to the appellant, loan amounts were extended and on
account of the failure of the accused to repay the outstanding dues,
the account of the company was classified as a Non-Performing
Asset on 27.03.2018 in accordance with the guidelines issued by the
Reserve Bank of India. It is the case of the appellant that a cheque
issued by the accused for a sum of Rs. 6,02,04,217/- on deposit
was dishonored for the reason “account blocked”. According to the
appellant, a legal notice was issued to all the accused. However,
the said notice was returned back as “unclaimed”. The appellant
thus prosecuted the company and the three directors and prayed
for appropriate punishment of imprisonment as well as direction to
pay fine up to double the amount of the dishonored cheque. On
16.12.2018, the Trial Court issued process to the respondents in
the complaint.
4. Since the complaint has been quashed on the ground of lack of
adequate averments, it will be necessary to extract the crucial
averments that are made in the complaint:-
“2. That, Accused No 1 is a Company registered and
incorporated under the provisions of Indian Companies
Act, 2013 [existing within the purview of Companies Act,
1956] and having it registered and corporate office at the
address mentioned aforesaid and engaged in the business
of sale of cars and spare parts manufactured by Hyundai
Motors (I) Ltd Accused Nos 2 to 4 are the Directors
of Accused No 1 Company and is responsible for its
day to day affairs, management and working of the
Accused No 1 Company furthermore the Accused No 3
is the signatory of the dishonored cheque.
2166 [2025] 5 S.C.R.
Supreme Court Reports
3. That, Accused No 1, through Accused Nos 2 to 4, had
approached the complainant above named for grant of
credit facility in the form of Revolving Loan Facility as
Inventory Funding for the working capital requirements
That after due deliberation and negotiations with
Accused Nos 2 to 4 the complainant granted the
Revolving Loan facility initially to the extent of Rs
5,00,00,000/ (Rupees Five Crores only) [Inventory
funding Rs 3.00 Crores + Inventory Funding Adhoc:
Rs 2.00 Crores vide sanction letter dated 09.08.2014
Hereto annexed and marked as Exhibit B is the copy
of said Sanction letter dated 09. 08.2014 for Revolving
Loan Facility granted to Accused No. 1.
4. That, upon further request made by Accused No. 1,
complainant had enhanced the said facility from Rs
5.00 Crore to Rs. 6.00 Crores vide sanction letter dated
27.10.2015 The said facilities were further enhanced
from Ra 6.00 Crores to Rs 6.50 Crores vide sanction
letter dated 22.02.2016 and lastly the said facility was
enhanced from Rs 6.50 Crores to Rs 8.00 Crores vide
sanction letter dated 12.09.2016. Hereto annexed and
marked as Exhibit C-1 to Exhibit C-3 are the copies
of sanction letter dated 27.10.2015, 22.02.2016 and
12.09.2016 respectively
5. The Loan account of Accused No. 1 maintained
by complainant was numbered as loan account
No 02400450029354. That in consideration of grant of
the said facilities, accused(s) had executed various
loan and security documents in favor of Complainant
from time-to time inter alia accepting the terms and
conditions of respective documents It is submitted that
the Accused No. 1 lastly, amongst other, entered into Loan
agreement with Complainant on 17.09.2016 and executed
Demand Promissory Note for a sum of Rs. 8,00,00,000/-
on 20.09.2016 Hereto annexed and marked as Exhibit
‘D-1 IS the copy of Supplemental and Amendatory Loan
Agreement dated 17.09.2016 and Exhibit’ D 2” is the
Demand Promissory Note dated 20 09 2016.
[2025] 5 S.C.R. 2167
HDFC Bank Limited v. State of Maharashtra and Anr.
6. Be that as it may, the Complainant states that the
sanctioned/renewed credit facilities were duly availed and
utilized by the Accused without any demur. The Complainant
further states that after availing the aforementioned credit
facilities, Accused No. 1 failed to maintain the account with
Complainant Bank in the manner agreed to and defaulted
in making timely repayments.
7. Thus, owing to the failure on the part of Accused(s)
to repay the outstanding dues on time, thereby willfully
defaulting in the same, Complainant was constrained
to classify the account of the Accused No. 1 as a Non-
Performing Asset on 27.03.2018 in accordance with the
guidelines issued by the Reserve Bank of India from time
to time.
8. That, complainant states that despite various oral and
written requests, the Accused failed to regularize and
maintain the account. It is submitted that Accused Company
did not pay any heed to the requests and reminders of
the Complainant and willfully neglected discharging their
obligations thereby depriving the Complainant its legitimate
dues.”
(Emphasis supplied)
5. It will be noticed that in Para 2 of the complaint quoted above, it has
been categorically averred as under:
“Accused Nos. 2 to 4 are the directors of the accused
no. 1 - company and is responsible for its day-to-day
affairs, management and working of the accused
no. 1 – company. Furthermore, the accused no. 3 is
the signatory of the dishonored cheque”.
(Emphasis supplied)
6. Not only this, it is further averred in Para 3 that accused no. 1
(the company) through accused nos. 2 to 4 had approached the
complainant above named for grant of credit facility in the form of
Revolving Loan Facility as inventory funding for the working capital
requirements. It has been stated : -
2168 [2025] 5 S.C.R.
Supreme Court Reports
“That, after, due deliberation and negotiations with Accused
nos. 2 to 4, the Complainant granted the Revolving Loan
facility initially to the extent of……”.
7. In the Board resolution of the accused no. 1 - company dated
28.09.2018 annexed to the complaint the following statement occurs: -
“RESOLVED FURTHER THAT Ms. Rachana Sharma and/
or Mrs. Ranjana Sharma be and are hereby authorized
jointly and/or severally to further negotiate with HDFC
Bank and accept the revised terms and conditions the
securities on behalf of the company.”
It is further resolved as under: -
“RESOLVED FURTHER THAT the property(s) (belonging
to the Company, stipulated as security ‘owe’ me Additional
Credit Facility(ies) sanctioned by HDFC Bank shall be
mortgaged in favor of the Bank, by way of Equitable or
Registered Mortgage as may be required by HDFC Bank
and Ms. Rachana Sharma and/or Mrs. Ranjana Sharma
be to and are hereby authorized, jointly and/or severally
to be present in HDFC Bank and deposit /redeposit
the original tittle deeds of the Company’s immovable
properties with an intention to create security thereof
and to make necessary declarations on behalf of the
Company.”
(Emphasis supplied)
8. It will be seen that apart from negotiations, Mrs. Ranjana Sharma -
respondent no. 2, was also authorized to deposit the original title
deeds of the company’s immovable property. Further the board
resolution provides as under: -
“RESOLVED FURTHER THAT the draft of the document
received from HDFC Bank (a) respect credit facility (ies)
be and is/are hereby approved and Ms. Rachana Sharma
and/or Mrs. Ranjana Sharma and/or hereby authorized,
jointly and/or to execute, sign and issue all/any such
Demand Promissory notes Hypothecation Agreements,
mortgages (in such form as HDFC bank may require),
guarantees, indemnities all/any other documents,
[2025] 5 S.C.R. 2169
HDFC Bank Limited v. State of Maharashtra and Anr.
writings and instruments and all renewals and/or
amendments there to including after Acknowledgement
of Debt/balance confirmations HDFC Banks(s) may
require from time to time in this regard,
RESOLVED FURTHER THAT Ms. Rachana Sharma and/
or Mrs. Ranjana Sharma be and are hereby authorized
jointly and/or severally on behalf of the company
to file the requisite particulars of charge created in
favor of HDFC Bank with the Registrar of Companies
or any other regulatory body within the time frame
prescribed therefor,
RESOLVED FURTHER THAT Ms. Rachana Sharma and/
or Mrs. Ranjana Sharma be and are hereby authorized
jointly and/or severally to be present at the office of
Sub-Registrar for effecting the regulation of various
documents on behalf of the Company whenever
required and to do all such acts, deeds and things
as may be necessary or expedient to implement/give
effect to this resolution.
RESOLVED FURTHER THAT Ms. Rachana Sharma and/
or Mrs. Ranjana Sharma be and are thereby authorized
jointly and/or severally to affix the Common Seal of
the company on all the agreement documents writing
and instruments and all renewals/amendments after
Acknowledgement of debt/barar (sic.) conditions there of
mentioned above as may be required by HDFC Bank in
conformity with provisions of the Articles of Association,
the Companies Act, 1956 and the Companies Act, 2013
of the Companies (sic.)”
(Emphasis supplied)
9. Under the resolution, the respondent no. 2-Ranjana Sharma
was authorized to sign demand promissory notes, hypothecation
agreements, mortgages, guarantees and indemnities and any other
documents, writings and instruments, as may be required, from time
to time. Further, respondent no. 2 was also authorized to file the
requisite particulars of charge created in favor of the bank with the
Registrar of Companies. The respondent no. 2 was also authorized
2170 [2025] 5 S.C.R.
Supreme Court Reports
to be present at the office of Sub-Registrar for registration of various
documents and also authorized to affix the common seal on all the
relevant documents.
10. In the sanction letter dated 22.02.2016 which was also annexed
to the complaint, under the head “Security for Inventory Funding
(AUIF)”, the performance guarantee of the directors - Ms. Rachana
Sharma and respondent no. 2 - Mrs. Ranjana Sharma were required
to be given. This clause occurs in the further sanction letter dated
12.09.2016 also.
11. It is in this background that the correctness of the judgment of the
High Court needs to be appreciated.
12. We have heard learned Senior Counsel/Counsel for the parties
and perused the records. Learned Senior Counsel for the appellant
contends that a perusal of the averments in the complaint read with
the documents filed leave no manner of doubt that the respondent
no. 2 - Ranjana Sharma was in charge of, and was responsible for
the conduct of the business of the company inasmuch as she had
participated in the negotiations and was authorized to sign all the
relevant documents and her performance guarantee was also taken.
In view of this, learned Senior Counsel contends that the High Court
was not justified in quashing the complaint insofar as the respondent
no. 2 - Ranjana Sharma was concerned.
13. Learned Senior Counsel for the appellant contends that respondent
No.2-Mrs.Ranjana Sharma is the Director of the Accused No.1-
Company and she submitted a personal guarantee and also signed
a supplemental continuing guarantee dated 17.09.2016 for the loan
transaction. It is submitted that the Company is a family-run private
entity. Learned Senior Counsel for the appellant relied upon certain
judgments of this Court in support of his submission.
14. In response, learned counsel for the respondent No.2 submitted
that the averments in the complaint fell short of the requirement
mandated in S.M.S. Pharmaceuticals Ltd. vs. Neeta Bhalla and
Another, (2005) 8 SCC 89; that the words “was in charge of” and
“was responsible to the company for the conduct of the business
of the company” cannot be read disjunctively and the same ought
to be read conjunctively; that as held in Siby Thomas vs. Somany
Ceramics Limited, (2024) 1 SCC 348 if it is not averred in the
[2025] 5 S.C.R. 2171
HDFC Bank Limited v. State of Maharashtra and Anr.
complaint that the accused was “in charge of the conduct of the
business” at the relevant time, the prosecution must fail; and that
not only the basic averment as enshrined in Section 141 of the NI
Act has to be incorporated in the complaint but also the specific role
should be attributed to the persons who are directors or employees
of the company. Learned counsel for the respondent also relied on
certain other judgments which will be dealt with in the course of the
discussion herein below.
QUESTION FOR CONSIDERATION: -
15. In the above background, the question that arises for consideration
is whether the High Court was justified in quashing the complaint
insofar as respondent no. 2 – Mrs. Ranjana Sharma was concerned
on the ground that necessary averments were lacking?
ANALYSIS AND REASONING: -
16. Section 141(1) of the NI Act along with its provisos reads as under:-
“141. 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 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.
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.”
2172 [2025] 5 S.C.R.
Supreme Court Reports
17. It will be noticed that Section 141 of the NI Act employs the phrase
“was in charge of, and was responsible to the company for the
conduct of the business of the company”. Insofar as the aspect of
vicarious liability is concerned, in the present case, the averments
made are to the following effect:-
“Accused Nos. 2 to 4 are the Directors of Accused No.1
Company” and
“Is responsible for its day-to-day affairs, management and
working of the Accused No.1-Company”
18. The real question is, is the above averment along with the other
averments in the complaint sufficient to meet the tests laid down
by this Court in the leading judgment of S.M.S. Pharmaceuticals-I
(supra).
19. Before we advert to S.M.S. Pharmaceuticals-I (supra), it will be
useful to refer to the meaning of the word “in charge of”. P. Ramanatha
Aiyar’s Advanced Law Lexicon defines the word “in charge of” as
follows:-
“A person “in charge of” and responsible to the company
for the conduct of the business of the company must be
a person in overall control of the day-to-day business of
the company or firm”.
20. It will be seen that the averment made in the complaint, in the present
case, clearly uses the phrase “responsible for its day-to-day affairs,
management and working of the Accused No.1 Company”, which
going by the dictionary meaning set out hereinabove in substance
is the same as “in charge of and was responsible to the Company
for the conduct of the business of the Company”.
21. Read in the background of the other averments, the above averment
clearly fulfils the requirement of Section 141. The contention of the
learned counsel for the respondent no. 2, however, is that actual
words mentioned in Section 141 in the same form be employed in
the complaint, for the complaint to be sustained. Learned Counsel
placed strong reliance on S.M.S. Pharmaceuticals-I (supra).
22. To answer this issue, a closer look at the judgment in S.M.S.
Pharmaceuticals-I (supra) needs to be undertaken. S.M.S.
[2025] 5 S.C.R. 2173
HDFC Bank Limited v. State of Maharashtra and Anr.
Pharmaceuticals -I (supra) arose out of a reference by a two-Judge
Bench of this Court. This Court, in the said judgment, set out for
determination the following questions: -
“(a) Whether for purposes of Section 141 of the Negotiable
Instruments Act, 1881, it is sufficient if the substance of
the allegation read as a whole fulfil the requirements of the
said section and it is not necessary to specifically state in
the complaint that the person accused was in charge of, or
responsible for, the conduct of the business of the company.
(b) Whether a director of a company would be deemed
to be in charge of, and responsible to, the company for
conduct of the business of the company and, therefore,
deemed to be guilty of the offence unless he proves to
the contrary.
(c) Even if it is held that specific averments are necessary,
whether in the absence of such averments the signatory
of the cheque and or the managing directors or joint
managing director who admittedly would be in charge of
the company and responsible to the company for conduct
of its business could be proceeded against.”
23. The following principles are deducible from the said judgment.
(i) “Section 141 contains conditions which have to be
satisfied before the liability can be extended to officers of
a company. Since the provision creates criminal liability,
the conditions have to be strictly complied with. The
conditions are intended to ensure that a person who is
sought to be made vicariously liable for an offence of which
the principal accused is the company, had a role to play
in relation to the incriminating act and further that such
a person should know what is attributed to him to make
him liable”. [See Para 4]
(ii) “There is nothing which suggests that simply by being
a director in a company, one is supposed to discharge
particular functions on behalf of a company. It happens
that a person may be a director in a company but he may
not know anything about the day-to-day functioning of the
company. As a director he may be attending meetings of
2174 [2025] 5 S.C.R.
Supreme Court Reports
the Board of Directors of the company where usually they
decide policy matters and guide the course of business
of a company. It may be that a Board of Directors may
appoint sub-committees consisting of one or two directors
out of the Board of the company who may be made
responsible for the day-to-day functions of the company.
These are matters which form part of resolutions of
the Board of Directors of a company. Nothing is oral.
What emerges from this is that the role of a director
in a company is a question of fact depending upon
the peculiar facts in each case. There is no universal
rule that a director of a company is in charge of its
everyday affairs”. [See Para 8]
(Emphasis supplied)
(iii) “Mere use of a particular designation of an officer without
more, may not be enough by way of an averment in a
complaint. When the requirement in Section 141, which
extends the liability to officers of the company, is that such
a person should be in charge of and responsible to the
company for conduct of business of the company, how can
a person be subjected to liability of criminal prosecution
without it being averred in the complaint that satisfies
those requirements. Not every person connected with
a company is made liable under Section 141. Liability
is cast on persons who may have something to do
with the transaction complained of. A person who is
in charge of and responsible for conduct of business
of a company would naturally know why the cheque
in question was issued and why it got dishonoured”.
[See Para 8]
(Emphasis supplied)
(iv) “What is required is that the persons who are sought to be
made criminally liable under Section 141 should be, at the
time the offence was committed, in charge of and responsible
to the company for the conduct of the business of the
company. Every person connected with the Company
shall not fall within the ambit of the provision. It is only
[2025] 5 S.C.R. 2175
HDFC Bank Limited v. State of Maharashtra and Anr.
those persons who were in charge of and responsible for
the conduct of business of the company at the time of
commission of an offence, who will be liable for criminal
action. It follows from this that if a director of a company
who was not in charge of and was not responsible for the
conduct of the business of the company at the relevant
time will not be liable under the provision”. [See Para 10]
(Emphasis supplied)
(v) “Therefore, in order to bring a case within Section 141 of
the Act, the complaint must disclose the necessary facts
which make a person liable”. [See Para 12]
24. After setting out the above principles, this Court in S.M.S.
Pharmaceuticals-I (supra), cited a whole host of judgments of
various High Courts and this Court, including the judgment of this
Court which was then the latest in line, namely, Monaben Ketanbhai
Shah and Another vs. State of Gujarat and Others, (2004) 7
SCC 15. This Court in S.M.S. Pharmaceuticals-I (supra) cited
Monaben Ketanbhai Shah (supra) which had held that it was not
necessary to reproduce the language of Section 141 verbatim in the
complaint since the complaint was required to be read as a whole.
Monaben Ketanbhai Shah (supra) had held that if the substance
of the allegations made in the complaint fulfil the requirements of
Section 141, the complaint has to proceed and is required to be tried
with. It was further held in Monaben Ketanbhai Shah (supra) that
in construing a complaint, a hypertechnical approach should not be
adopted and the laudable object of preventing bouncing of cheques
and sustaining the credibility of commercial transactions had to be
borne-in-mind.
25. After setting out the holding in Monaben Ketanbhai Shah (supra),
this Court in S.M.S. Pharmaceuticals-I (supra) in para 18 held as
follows:-
“18. To sum up, there is almost unanimous judicial opinion
that necessary averments ought to be contained in a
complaint before a person can be subjected to criminal
process. A liability under Section 141 of the Act is sought
to be fastened vicariously on a person connected with a
company, the principal accused being the company itself.
2176 [2025] 5 S.C.R.
Supreme Court Reports
It is a departure from the rule in criminal law against
vicarious liability. A clear case should be spelled out
in the complaint against the person sought to be
made liable. Section 141 of the Act contains the
requirements for making a person liable under the
said provision. That the respondent falls within the
parameters of Section 141 has to be spelled out.
A complaint has to be examined by the Magistrate in
the first instance on the basis of averments contained
therein. If the Magistrate is satisfied that there are
averments which bring the case within Section 141,
he would issue the process. We have seen that merely
being described as a director in a company is not
sufficient to satisfy the requirement of Section 141.
Even a non-director can be liable under Section 141
of the Act. The averments in the complaint would
also serve the purpose that the person sought to
be made liable would know what is the case which
is alleged against him. This will enable him to meet
the case at the trial.”
(Emphasis supplied)
26. Thereafter, in para 19, the conclusion was recorded in the following
terms:-
“19. In view of the above discussion, our answers to the
questions posed in the reference are as under:
(a) It is necessary to specifically aver in a complaint under
Section 141 that at the time the offence was committed,
the person accused was in charge of, and responsible for
the conduct of business of the company. This averment
is an essential requirement of Section 141 and has to be
made in a complaint. Without this averment being made
in a complaint, the requirements of Section 141 cannot
be said to be satisfied.
(b) The answer to the question posed in sub-para (b)
has to be in the negative. Merely being a director of a
company is not sufficient to make the person liable
[2025] 5 S.C.R. 2177
HDFC Bank Limited v. State of Maharashtra and Anr.
under Section 141 of the Act. A director in a company
cannot be deemed to be in charge of and responsible
to the company for the conduct of its business. The
requirement of Section 141 is that the person sought to
be made liable should be in charge of and responsible
for the conduct of the business of the company at the
relevant time. This has to be averred as a fact as there
is no deemed liability of a director in such cases.
(c) The answer to Question (c) has to be in the affirmative.
The question notes that the managing director or joint
managing director would be admittedly in charge of the
company and responsible to the company for the conduct
of its business. When that is so, holders of such positions
in a company become liable under Section 141 of the Act.
By virtue of the office they hold as managing director or
joint managing director, these persons are in charge of and
responsible for the conduct of business of the company.
Therefore, they get covered under Section 141. So far
as the signatory of a cheque which is dishonoured is
concerned, he is clearly responsible for the incriminating act
and will be covered under sub-section (2) of Section 141.”
(Emphasis supplied)
27. Hence, it is very clear that the conclusion in para 19(a) in S.M.S.
Pharmaceuticals-I (supra) has to be read with the other holdings
in judgment especially the ratio extracted hereinabove culminating
in para 18. Merely reading para 19(a) to contend that what is
required is parroting of the words of the section for a complaint to
be sustained is completely unjustified. Para 19(a) does not mention
that the words of the Section 141 has to be mechanically parroted. In
fact, the cases that we discuss hereinbelow have expressly rejected
the said contention.
28. After the reference in S.M.S. Pharmaceuticals-I (supra) was
answered by the three-Judge Bench and before the case of the
said parties could be taken up for disposal by the two judge Bench,
came the judgment in Sabitha Ramamurthy and Another vs.
R.B.S.Channabasavaradhya, (2006) 10 SCC 581. This Court, after
noticing S.M.S. Pharmaceuticals-I (supra), held that it was not
2178 [2025] 5 S.C.R.
Supreme Court Reports
necessary for the complainant to specifically reproduce the wordings
of the section but what was required was a clear statement of fact
so as to enable the Court to arrive at a prima facie opinion that the
accused are vicariously liable. Such vicarious liability can be inferred
only if the requisite statements, which are required to be averred in
the complaint petition are made so as to make the accused therein
vicariously liable for the offence committed by the company. It was
also held that before a person can be made vicariously liable, strict
compliance with the statutory requirements should be insisted.
On facts, the Court found that the averments did not meet the
requirements in the said case.
29. Thereafter, came the judgment in S.M.S. Pharmaceuticals Ltd. vs.
Neeta Bhalla and Another, (2007) 4 SCC 70 (hereinafter referred
to as S.M.S. Pharmaceuticals-II (supra). Referring to para 18
and 19 of the order in the three-Judge Bench reference in S.M.S.
Pharmaceuticals-I (supra) and following the judgment in Sabitha
Ramamurthy (Supra), the averments in the complaint were tested
and it was found that the complaint petition when read in its entirety,
the averments therein fell short of the requirements to implicate the
respondent-accused in that case.
30. To the same effect is the judgment of this Court in A.K. Singhania
vs. Gujarat State Fertilizer Company Limited and Another, (2013)
16 SCC 630, wherein this Court categorically ruled as under:-
“14. From a plain reading of the aforesaid provision it is
evident that every person who at the time the offence was
committed was in charge of and responsible to the company
shall be deemed to be guilty of the offence under Section
138 of the Act. In the face of it, will it be necessary to
specifically state in the complaint that the person accused
was in charge of and responsible for the conduct of the
business of the company? In our opinion, in the case of
offence by the company, to bring its Directors within the
mischief of Section 138 of the Act, it shall be necessary
to allege that they were in charge of and responsible
to the conduct of the business of the company. It is
a necessary ingredient which would be sufficient to
proceed against such Directors. However, we may add
that as no particular form is prescribed, it may not be
[2025] 5 S.C.R. 2179
HDFC Bank Limited v. State of Maharashtra and Anr.
necessary to reproduce the words of the section. If
reading of the complaint shows and the substance of
accusation discloses necessary averments, that would
be sufficient to proceed against such of the Directors
and no particular form is necessary. However, it may
not be necessary to allege and prove that, in fact, such
of the Directors have any specific role in respect of the
transaction leading to issuance of cheque. Section 141 of
the Act makes the Directors in charge of and responsible
to the company “for the conduct of the business of the
company” within the mischief of Section 138 of the Act and
not particular business for which the cheque was issued.
We cannot read more than what has been mandated in
Section 141 of the Act.”
(Emphasis supplied)
31. In Ashok Shewakramani and Others vs. State of Andhra
Pradesh and Another, (2023) 8 SCC 473, a judgment relied upon
by Respondent No.2, the averments did not satisfy the ingredients
of Section 141 and this Court observed that all that was averred in
that case (the first set of appeal therein) was that the accused were
liable for the transactions of the company and they were fully aware
of the issuance of the cheque and dishonor of the cheque. This Court
held that even taking a broad and liberal view of the pleadings in
the complaint, there was no compliance with the requirements of
Section 141 (1). In the second set of appeals therein the accused
directors were not even described as directors of the first accused
company therein. On that simple ground proceedings were quashed.
In the third set of appeals therein, insofar as the directors were
concerned who were accused nos. 4 to 7 an omnibus averment was
made in the following terms.
“(1) It is submitted that the complainant is the proprietor of
Chakra Cotton Traders, doing business in cotton, resident
of bearing Door No. 3/917-1, Sri Chackra Nilayam, YMR
Colony, Proddatur Town-516 360, Kadapa District, A.P.
Accused 1 is the private limited Company concerned
and registered under the Companies Act. Accused 2
is Chairman of Accused 1. Accused 3 is the Managing
Director of Accused 2 and Accused 4 to 7 are the Directors
2180 [2025] 5 S.C.R.
Supreme Court Reports
of Accused 1 Company and Accused 2 to 7 are managing
the Company and busy with day-to-day affairs of the
Company and all are managing the Company and also in
charge of the Company and all are jointly and severally
liable for the acts of Accused 1 Company.”
Considering these averments the Court while quashing the
proceedings held that merely because somebody is managing the
affairs of company, per se they do not become in charge of the
conduct of the business of the company or the person responsible
for the company for the conduct of the business of the company. It
was further held that the averment that the accused were busy with
the day-to-day affairs was also insufficient to attract the ingredients
of Section 141(1). Proceeding further, the Court held that merely
averring that the accused were in-charge of the company was neither
here nor there as such averment was insufficient to conclude that
the accused were responsible to the company for the conduct of the
business. This is vastly different from the averments in the present
case wherein it is clearly averred that the respondent no. 2 was
responsible for the day-to-day affairs, management and working of
the accused no. 1 company.
32. Ashok Shewakramani (supra) turned on the special facts of that
case. This is more so since the averments in the complaint therein
extracted hereinabove lumping the role of the directors with others
and making omnibus averments, was found to be insufficient to attract
the vicarious liability under Section 141(1) of the NI Act.
33. In Ashutosh Ashok Parasrampuriya and Another vs. Gharrkul
Industries Private Limited and Others, (2023) 14 SCC 770, after
noticing that the averments in the complaint were to the effect
that the directors of the accused company were responsible for its
business and all the appellant-accused therein were involved in the
business of the company and are responsible for all the affairs of
the company, this Court held that reading the complaint as a whole,
the ingredients of Section 141 were satisfied.
34. What is important to note is that the repetition of the exact words of
the Section in the same order, like a mantra or a magic incantation is
not the mandate of the law. What is mandated is that the complaint
should spell out that the accused sought to be arrayed falls within the
parameters of Section 141(1) of the NI Act. Only then could vicarious
[2025] 5 S.C.R. 2181
HDFC Bank Limited v. State of Maharashtra and Anr.
liability be inferred against the said accused, so as to proceed to
trial. Substance will prevail over form.
35. Strong reliance is placed on Siby Thomas (supra) by learned counsel
for the respondent No.2 to contend that in the absence of the words
“was in charge of”, the present case against respondent No.2 cannot
be proceeded. We are unable to countenance the said submission.
This Court, in Siby Thomas (supra), on facts, found that on an overall
reading of the complaint it did not disclose any clear and specific role
to the appellant-accused therein. It was further held that what was
averred was only that the accused being partners are responsible for the
day-to-day conduct of business of the company. This is vastly different
from the averments in the present case as discussed hereinabove. In
this case, it is clearly averred that the respondent No.2 along with the
accused Nos. 3 and 4 being directors were responsible for its day-to-
day affairs, management and working of accused No.1 - Company.
Hence, the judgment in Siby Thomas (supra) can be of no help to
the respondent No.2 as the case turned on its own facts.
36. The other aspect of the matter canvassed by the learned counsel
for the respondent No.2 is that not only are the basic averments as
enshrined in Section141 to be mandatorily incorporated but also the
specific role be attributed to the persons who are mere directors
or employees of the company. We are unable to agree with the
submission of the learned counsel.
37. Recently, this Court in S.P. Mani and Mohan Dairy vs. Dr. Snehalatha
Elangovan, (2023) 10 SCC 685, after reiterating the principle that it
was not necessary to reproduce the language of Section 141 verbatim
in the complaint further reiterated the holding in K.K.Ahuja vs. V.K.
Vora and Another, (2009) 10 SCC 48. In K.K. Ahuja (supra), it
was held that insofar as the director was concerned, an averment in
the complaint that he was in charge of, and was responsible to the
company, for the conduct of the business of the company was enough
and no further averment was necessary though some particulars will
be desirable. Thereafter, this Court in S.P. Mani (supra), in para
58.2 of the judgment concluded as under:-
“58.2. The complainant is supposed to know only generally
as to who were in charge of the affairs of the company
or firm, as the case may be. The other administrative
matters would be within the special knowledge of the
2182 [2025] 5 S.C.R.
Supreme Court Reports
company or the firm and those who are in charge of it.
In such circumstances, the complainant is expected to
allege that the persons named in the complaint are in
charge of the affairs of the company/firm. It is only the
Directors of the company or the partners of the firm, as
the case may be, who have the special knowledge about
the role they had played in the company or the partners
in a firm to show before the Court that at the relevant
point of time they were not in charge of the affairs of
the company. Advertence to Sections 138 and Section
141, respectively, of the NI Act shows that on the other
elements of an offence under Section 138 being satisfied,
the burden is on the Board of Directors or the officers in
charge of the affairs of the company/partners of a firm
to show that they were not liable to be convicted. The
existence of any special circumstance that makes them not
liable is something that is peculiarly within their knowledge
and it is for them to establish at the trial to show that at
the relevant time they were not in charge of the affairs
of the company or the firm.”
38. As was rightly held therein, the administrative role of each director
would be within the special knowledge of the company or the
director of the firm and it is for them to establish that they were not
in charge of the affairs of the company. In view of this, the contention
of the learned counsel for the respondent No.2 that the specific role
attributed to the directors should be set out in the complaint does
not merit acceptance. Reliance has been placed on National Small
Industries Corporation Limited vs. Harmeet Singh Paintal and
Another, (2010) 3 SCC 330 by the learned counsel for the respondent
No.2 in support of the proposition canvassed. We are unable to
countenance the said submission. If the learned counsel by the
said submission seeks to contend that the complainant in a Section
138 complaint is obliged to plead administrative matters which are
especially within the knowledge of the company and the directors,
then he is completely wrong in the understanding of the ingredients
of Section 141. As held in K.K. Ahuja (supra) and reiterated in S.P.
Mani (supra), the complainant is supposed to know only generally as
to who are in charge of the affairs of the company. Harmeet Singh
Paintal (supra) when it holds in para 22 that
[2025] 5 S.C.R. 2183
HDFC Bank Limited v. State of Maharashtra and Anr.
“further, in order to fasten the vicarious liability in
accordance with Section 141, the averment as to the
role of the Directors concerned should be specific. The
description should be clear and there should be some
unambiguous allegations as how the Directors concerned
were alleged to be in charge of and were responsible for
the conduct of the affairs of the company”
should be understood to only mean vis-à-vis the transaction
concerning the issue of the cheque, in question, which are within the
knowledge of the complainant. K.K. Ahuja (supra) where it holds that
“in the case of a Director, secretary or manager [as defined
in Section 2(24) of the Companies Act] or a person referred
to in clauses (e) and (f) of Section 5 of the Companies Act,
an averment in the complaint that he was in charge of, and
was responsible to the company, for the conduct of the
business of the company is necessary to bring the case
under Section 141(1) of the Act. No further averment would
be necessary in the complaint, though some particulars will
be desirable. They can also be made liable under Section
141(2) by making necessary averments relating to consent
and connivance or negligence, in the complaint, to bring
the matter under that sub-section”
sets out the correct legal position. A harmonious reading of the
judgments in K.K. Ahuja (supra), Harmeet Singh Paintal (supra)
and S.P. Mani (supra) brings out the position that there is no obligation
on the complainant to plead in the complaint as to matters within the
special knowledge of the company or the directors or firm about the
specific role attributed to them in the company.
39. Applying the said legal position to the facts of the present case, it is
found that the averments in the complaint set out hereinabove against
the respondent No.2 – Mrs. Ranjana Sharma fulfill the requirement
of Section 141(1) of the NI Act, and this is not a case where trial
against her can be aborted by quashment of proceedings. The
High Court was completely unjustified in quashing the proceedings
against her.
40. The appeal is, accordingly, allowed and the judgment of the High
Court of Judicature at Bombay dated 10.01.2024 in Criminal Writ
2184 [2025] 5 S.C.R.
Supreme Court Reports
Petition No. 275 of 2022 is set aside. Consequently, the order dated
16.12.2019 issuing process to respondent No.2 in proceeding in
C.C. No. 2486/SS/2019 is restored to the file of the Metropolitan
Magistrate, 7th Court, Bhiwandi, Dadar, Mumbai to be proceeded
with in accordance with law.
Result of the case: Appeal allowed.
†
Headnotes prepared by: Nidhi Jain
Search Indian case law
Ask in plain English, not just keywords. 25,000 AI words free, no card.
Try "Quashing the complaint"Sign in to search