Supreme Court clarifies liability for bounced cheques

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The question of who can be said to be persons “in charge of, and … responsible to the company for the business of the company” as referred to in section 141 of the Negotiable Instruments Act, 1881 (the NI Act), recently arose for consideration before the Supreme Court in the case of KK Ahuja v VK Vora & Anr.

Ahuja had filed two complaints against Vora and others under section 138 of the NI Act, in which nine parties were accused: the company, the chairman, four directors, the vice president (finance), the general manager and the deputy general manager. The deputy general manager, VK Vora, filed a petition before Delhi High Court to quash the proceedings against him on the ground that he was not “in charge of and … responsible to the company for the conduct of the business of the company”.

Cheque_-_Gold_tonedThe court granted the petition on the ground that Vora was neither a signatory to the cheques nor a party to the decision to allow the cheques to be dishonoured.

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The update of court judgments is compiled by Bhasin & Co, Advocates, a corporate law firm based in New Delhi. The authors can be contacted at lbhasin@bhasinco.in, lbhasin@vsnl.com or lbhasin@gmail.com. Readers should not act on the basis of this information without seeking professional legal advice.

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