Merely Being a Director Does Not Imply Liability for Company’s Conduct: Supreme Court Quashes Cheque Dishonour Complaint Against Corporate Director

In a significant judgment, the Supreme Court of India has quashed criminal complaints against Susela Padmavathy Amma, a director of Fibtel Telecom Solutions, in connection with an offence punishable under Section 138 read with Section 142 of the Negotiable Instruments Act, 1881. The apex court emphasized that mere directorship in a company does not imply responsibility for its day-to-day operations or conduct.

The legal crux of the judgment was to ascertain the liability of a company director under Section 138 read with Section 142 of the Negotiable Instruments Act, particularly when the director is not involved in the daily affairs or a signatory of the contentious cheques.

Fibtel Telecom Solutions, represented by its director Manju Sukumaran Lalitha and another director Susela Padmavathy Amma, had furnished post-dated cheques to Bharti Airtel Limited, which were later dishonored. The High Court had dismissed the plea to quash criminal complaints against Amma, leading to the current appeal.

The Court observed, “mere position as a director does not automatically entail responsibility for day-to-day operations or the company’s business conduct.” This perspective hinges on the specifics of each case, where a director’s role is a matter of fact. “A director cannot be made liable unless, at the material time, he was in-charge of and was also responsible to the company for the conduct of its business,” the bench added.

The Court specifically stated, “the law laid down Is that for making a Director of a Company liable for the offences committed by the Company under Section 141 of the Act, there must be specific averments against the Director showing as to how and in what manner the Director was responsible for the conduct of the business of the Company.”

Decision In light of the insufficient averments to establish Susela Padmavathy Amma’s role in the conduct of the company’s business or her responsibility for the offence, the Supreme Court quashed the criminal complaints against her.

 Date of Decision: March 15, 2024

Susela Padmavathy Amma vs M/S Bharti Airtel Limited