NI Act | Managing Director who signed Cheques and ran Daily Operations liable under Section 141

Siddharth Raghuvanshi

The Kerala High Court has refused to interfere with the conviction of a company’s Managing Director in a cheque dishonour case, affirming that a signatory who was in charge of day to day affairs cannot evade liability under the Negotiable Instruments Act. The ruling reinforces the settled position on vicarious liability of company officials in cheque bounce prosecutions.

The case arose from a commercial transaction in which a private company purchased cement from a manufacturing firm on credit. Towards partial repayment of outstanding dues, the company issued three cheques of Rs.2 lakh each, signed by its Managing Director. When the cheques were returned unpaid for insufficient funds, statutory notice was issued, which the accused acknowledged but failed to comply with.

The trial court convicted both the company and its Managing Director under Section 138 of the NI Act, imposing compensation of Rs.6 lakh. While the Sessions Court reduced the substantive sentence to imprisonment till the rising of the court, it retained the compensation. The Managing Director then approached the High Court, challenging both conviction and sentence.

Dismissing the revision, the High Court held that the evidence clearly established the accused’s role as Managing Director and his control over the company’s affairs at the relevant time. The Court noted that the accused had admitted the business transactions, the outstanding liability, and the issuance of cheques, including in his reply notice.

Relying on Section 141 of the NI Act and recent Apex Court precedent, the Court reiterated that liability attaches where the complaint specifically avers, and evidence proves, that the accused was “in charge of, and responsible for the conduct of the business of the company.” Finding no perversity in the appreciation of evidence, the Court confirmed the conviction and sentence, directing execution of the sentence.

Case Title: V. J. Joseph vs. The India Cements Limited & Anr.

Case No.: Public Interest Litigation (PIL) No. – 1118 Of 2025

Coram: Justice J.J. Munir

Advocate for Petitioner: Adv. P. Muraleedharan (Irimpanam), M. A. Augustine, P. Sreekumar (Thottakkattukara), Soumya James, Thomas Jacob

Advocate for Respondent: Adv. K. Srikumar (SR.), K. Moni, K. Manoj Chandran Maya M. N (Public Prosecutor)