#Director liability cheque bounce

The Supreme Court ruled that directors cannot be prosecuted under Section 141 of the Negotiable Instruments Act merely for holding directorship unless there is specific evidence of their day-to-day involvement in the company’s affairs, particularly in issuing the dishonoured cheque. This judgment reinforces the need for precise averments in complaints to establish vicarious liability, protecting directors from frivolous prosecutions.

Punjab & Haryana High Court rules that directors cannot be held liable under Section 138 of the Negotiable Instruments Act merely by virtue of their position. Liability attaches only if they were actively involved in the company's affairs or the cheque's issuance, and resignation before the cheque date absolves them entirely. This clarifies the scope of vicarious liability for directors in cheque bounce cases.