KAMALKISHOR SHRIGOPAL TAPARIAversusINDIA ENER-GEN PRIVATE LIMITED & ANR.

                  [2025] 3 S.C.R. 91 : 2025 INSC 223

                   Kamalkishor Shrigopal Taparia
                                 v.
                India Ener-Gen Private Limited & Anr.
                 (Criminal Appeal No(s). 758-761 of 2025)
                               13 February 2025
       [B.V. Nagarathna and Satish Chandra Sharma,* JJ.]


                            Issue for Consideration
       Whether the High Court was justified in dismissing the petitions
       filed by the Appellant-an independent non-executive director under
       Section 482, CrPC seeking quashing of criminal proceedings
       initiated against him under Section 138 read with Section 141
       of the Negotiable Instruments Act, 1881. Appellant, if vicariously
       liable under Section 141.

                                   Headnotes†
       Negotiable Instruments Act, 1881 – ss.138, 141 – Appellant, an
       independent non-executive director was arrayed as an accused
       in the complaints u/s.138 alleging dishonor of cheques issued
       by the company – Appellant, if vicariously liable u/s.141:
       Held: No – A non-executive director plays a governance role and
       is not involved in the daily operations or financial management of
       the company – To attract liability u/s.141, the accused must have
       been actively in-charge of the company’s business at the relevant
       time – Mere designation as a director is not sufficient; specific role
       and responsibility must be established in the complaint – Only
       those responsible for the day-to-day conduct of business can
       be held accountable – Petitioner’s role in the accused company
       was limited to that of an independent non-executive director
       with no financial responsibilities or involvement in the day-to-day
       operations of the company – Appellant was also not a signatory
       to the dishonoured cheques – Complaints do not contain any
       specific averments detailing how the Appellant was responsible
       for the dishonoured cheques – Non-executive directors cannot
       be held liable u/s.138 unless specific evidence proves their active
       involvement – Moreover, the Appellant had later resigned from the


* Author
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      post of independent non-executive director – Impugned judgment
      set aside – Criminal proceedings against the appellant are quashed.
      [Paras 15.4, 15.3, 16-19, 21]

                              Case Law Cited
      National Small Industries Corporation Limited v. Harmeet Singh
      Paintal and Another [2010] 2 SCR 805 : (2010) 3 SCC 330;
      N.K. Wahi v. Shekhar Singh [2007] 3 SCR 883 : (2007) 9 SCC
      481; S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and Another
      [2005] Supp. 3 SCR 371 : (2005) 8 SCC 89; Pooja Ravinder
      Devidasani v. State of Maharashtra [2014] 14 SCR 1468 : (2014)
      16 SCC 1 – relied on.

                                 List of Acts
      Negotiable Instruments Act, 1881; Code of Criminal Procedure,
      1973.

                              List of Keywords
      Criminal proceedings under Section 138 read with Section
      141 of the Negotiable Instruments Act, 1881; Complaint under
      Section 138 of the Negotiable Instruments Act, 1881; Dishonor of
      cheques; Independent non-executive director; Not a signatory to
      the dishonoured cheques; Vicarious liability under Section 141 of
      the Negotiable Instruments Act, 1881; Daily operations or financial
      management of the company; Mere directorship; Day-to-day
      conduct of business; Quashing; Criminal proceedings quashed.

                             Case Arising From
      CRIMINAL APPELLATE JURISDICTION: Criminal Appeal Nos.
      758-761 of 2025
      From the Judgment and Order dated 06.08.2019 of the High Court
      of Judicature at Bombay in CRLA Nos. 116,21, 22, 255 of 2019

                          Appearances for Parties
      Neeraj Kumar Jain, Sr. Adv., Umang Shankar, Sanjay Singh,
      Siddharth Jain, Shalender Singh Negi, Advs. for the Appellant.
      Samrat Krishnarao Shinde, Siddharth Dharmadhikari, Aaditya
      Aniruddha Pande, Advs. for the Respondents.
[2025] 3 S.C.R.                                                          93

                      Kamalkishor Shrigopal Taparia v.
                    India Ener-Gen Private Limited & Anr.

                Judgment / Order of the Supreme Court

                                 Judgment

     Satish Chandra Sharma, J.

1.   Leave granted.
2.   The present appeals has been preferred against the Impugned
     common Judgment and Order dated 06.08.2019 passed by the
     High Court of Judicature at Bombay dismissing the petitions under
     Section 482 of the Code of Criminal Procedure, 1973 (the “CrPC”)
     seeking quashing of criminal proceedings initiated against the
     Appellant under Section 138 read with Section 141 of the Negotiable
     Instruments Act, 1881 (the “NI Act”).
3.   The Appellant, who was an independent non-executive director of M/s
     D.S. Kulkarni Developers Ltd., has been arrayed as an accused in
     the complaint filed under section 138 of the NI Act alleging dishonor
     of cheques issued by the company. The High Court, while dismissing
     the Appellant’s plea, observed that the role of the director is a matter
     of trial and that the complainant has made sufficient averments
     regarding the Appellant’s involvement.

     BACKGROUND
4.   The Appellant was appointed as an additional independent non-
     executive director on 02.01.2008 and subsequently designated as
     an independent non-executive director on 27.09.2008. Vide the
     resolution passed at the annual general meeting held on 30.09.2014,
     and formally confirmed through a letter dated the same day, the
     Appellant was reappointed as an independent non-executive director.
     Notedly, the Appellant had no role in the financial operations or
     key-management of the company.
5.   The company allegedly availed two loans from Respondent
     No. 1 during 2016-2017, amounting to ₹56,00,000/- and ₹70,00,000/-
     respectively. As repayment, the company issued various cheques,
     which were dishonoured due to insufficient funds. Pertinently, the
     Appellant neither signed nor authorised the issuance of these
     cheques.
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6.    The details of the dishonoured cheques are as follows:
      1.   Cheque No. 455494, dated 24.11.2016, amounting to ₹8,00,000/-.
      2.   Cheque No. 455495, dated 25.12.2016, amounting to
           ₹8,00,000/-.
      3.   Cheque No. 455496, dated 25.01.2017, amounting to
           ₹8,00,000/-.
      4.   Cheques No. 455497, 455498, 455499, and 455500, dated
           28.02.2017, amounting to ₹10,00,000/- each.
7.    Importantly, the cheques were not signed by the Appellant, and in
      two out of the four criminal cases, the demand notices were initially
      not addressed to the Appellant. It was only in the second set of
      demand notices that the Appellant’s name appeared, along with
      all directors, independent directors, non-executive directors, and
      additional directors.
8.    The Appellant resigned from the position of independent non-executive
      director on 03.05.2017. His resignation was duly notified to the
      Registrar of Companies through Form DIR-11 and Form DIR-12,
      with effect from the same date.
9.    The following complaints under Section 138 NI Act were filed against
      the company before the Learned Metropolitan Magistrate 28th Court,
      Esplanade, Mumbai:
      1.   Complaint No. 66/SS of 2017, filed on 31.07.2017, qua Cheque
           No. 455494.
      2.   Complaint No. 645/SS of 2017, filed on 23.02.2017, qua Cheque
           No. 455495.
      3.   Complaint No. 697/SS of 2017, filed on 07.04.2017, qua Cheque
           No. 455496.
      4.   Complaint No. 1595/SS of 2017, filed on 22.05.2017, qua
           Cheque No(s). 455497, 455498, 455499, and 455500.
10. The High Court dismissed the Appellant’s applications under Section
    482 CrPC (Criminal Application Nos. 21, 22, 116 & 255 of 2019)
    seeking quashing of the proceedings pending before Learned
    Metropolitan Magistrate 28th Court, Esplanade, Mumbai.
[2025] 3 S.C.R.                                                          95

                      Kamalkishor Shrigopal Taparia v.
                    India Ener-Gen Private Limited & Anr.

     SUBMISSION BY THE PARTIES
11. The learned counsel for the Appellant argued that the Appellant was
    a non-executive director and had no involvement in the financial
    affairs of the company. The complaints do not provide any specific
    averments detailing his role in the dishonoured cheques.
12. It was submitted that the Appellant had resigned from the company
    well before the offence occurred and that making him liable for an
    act committed post-resignation was a misuse of the legal process.
    Section 141 of the NI Act establishes vicarious liability only upon
    directors who were in-charge of and responsible for the conduct of
    the business of the company at the relevant time.
13. On the contrary, the learned counsel for the Respondent(s) submitted
    that the High Court rightly observed that the role of the Appellant
    was a matter to be examined during the trial. The Respondent(s)
    counsel argued that the vicarious liability under Section 141 of the
    NI Act could extend to directors, regardless of their executive or
    non-executive status.
14. The Respondent(s) further submitted that the Appellant, by virtue of
    his directorship, was part of the decision-making apparatus of the
    company, therefore, could not escape liability at the pre-trial stage.

     ANALYSIS AND FINDINGS
15. This Court has consistently held that a mere designation as a director
    does not conclusively establish liability under section 138 read
    with section 141 of the NI Act. Liability is contingent upon specific
    allegations demonstrating the director’s active involvement in the
    company’s affairs at the relevant time.
     15.1. This Court in National Small Industries Corporation Limited
           v. Harmeet Singh Paintal and Another (2010) 3 SCC 330
           observed:
            “13. Section 141 is a penal provision creating vicarious
            liability, and which, as per settled law, must be strictly
            construed. It is therefore, not sufficient to make a bald
            cursory statement in a complaint that the Director (arrayed
            as an accused) is in charge of and responsible to the
            company for the conduct of the business of the company
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      without anything more as to the role of the Director. But the
      complaint should spell out as to how and in what manner
      Respondent 1 was in charge of or was responsible to the
      accused Company for the conduct of its business. This is
      in consonance with strict interpretation of penal statutes,
      especially, where such statutes create vicarious liability.
                                  x-x-x
      22. Therefore, this Court has distinguished the case of
      persons who are incharge of and responsible for the
      conduct of the business of the company at the time of the
      offence and the persons who are merely holding the post
      in a company and are not in charge of and responsible
      for the conduct of the business of the company. 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 to how the Directors concerned were alleged to be
      in charge of and were responsible for the conduct and
      affairs of the company.
                                  x-x-x
      39. From the above discussion, the following principles
      emerge: (i) The primary responsibility is on the complainant
      to make specific averments as are required under
      the law in the complaint so as to make the accused
      vicariously liable. For fastening the criminal liability, there
      is no presumption that every Director knows about the
      transaction.
      (ii) Section 141 does not make all the Directors liable for
      the offence. The criminal liability can be fastened only on
      those who, at the time of the commission of the offence,
      were in charge of and were responsible for the conduct
      of the business of the company.
      (iii) Vicarious liability can be inferred against a company
      registered or incorporated under the Companies Act, 1956
      only if the requisite statements, which are required to
      be averred in the complaint/petition, are made so as to
[2025] 3 S.C.R.                                                             97

                      Kamalkishor Shrigopal Taparia v.
                    India Ener-Gen Private Limited & Anr.

            make the accused therein vicariously liable for offence
            committed by the company along with averments in the
            petition containing that the accused were in charge of
            and responsible for the business of the company and by
            virtue of their position they are liable to be proceeded with.
             (iv) Vicarious liability on the part of a person must be
            pleaded and proved and not inferred.
             (v) If the accused is a Managing Director or a Joint
            Managing Director then it is not necessary to make
            specific averment in the complaint and by virtue of their
            position they are liable to be proceeded with.
            (vi) If the accused is a Director or an officer of a company
            who signed the cheques on behalf of the company then
            also it is not necessary to make specific averment in
            the complaint.
            (vii) 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.”
     15.2. In N.K. Wahi v. Shekhar Singh (2007) 9 SCC 481 this Court
           in (Para:8) observed:
            “8. To launch a prosecution, therefore, against the alleged
            Directors there must be a specific allegation in the
            complaint as to the part played by them in the transaction.
            There should be clear and unambiguous allegation as to
            how the Directors are in-charge and responsible for the
            conduct of the business of the company. The description
            should be clear. It is true that precise words from the
            provisions of the Act need not be reproduced and the
            court can always come to a conclusion in facts of each
            case. But still, in the absence of any averment or specific
            evidence the net result would be that complaint would
            not be entertainable.”
     15.3. In S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and Another
           (2005) 8 SCC 89, this Court laid down that mere designation
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            as a director is not sufficient; specific role and responsibility
            must be established in the complaint.
      15.4. In Pooja Ravinder Devidasani v. State of Maharashtra
            (2014) 16 SCC 1 this Court while taking into consideration that
            a non-executive director plays a governance role, and are not
            involved in the daily operations or financial management of
            the company, held that to attract liability under section 141 of
            the NI Act, the accused must have been actively in-charge of
            the company’s business at the relevant time. Mere directorship
            does not create automatic liability under the Act. The law has
            consistently held that only those who are responsible for the
            day-to-day conduct of business can be held accountable.
16. Upon perusal of the record and submissions of the parties, it is
    evident that the Appellant was neither a signatory to the dishonoured
    cheques nor was he actively involved in the financial decision-making
    of the company. Moreover, he resigned from the post of independent
    non-executive director on 03.05.2017, duly notified through Form
    DIR-11 and DIR-12 to the Registrar of Companies.
17. The complaints do not contain any specific averments detailing how
    the Appellant was responsible for the dishonoured cheques.
18. Petitioner’s role in the accused company was limited to that of an
    independent non-executive director, with no financial responsibilities
    or involvement in the day-to-day operations of the company.
    Furthermore, he was not responsible for the conduct of its business.
19. The legal precedents cited above, including Pooja Ravinder (supra),
    clearly hold that non-executive directors cannot be held liable under
    section 138 NI Act unless specific evidence proves their active
    involvement.

      CONCLUSION
20. In view of the above observations, the Appellant cannot be held
    vicariously liable under section 141 of the NI Act. The complaint
    does not meet the mandatory legal requirements to implicate him.
21. Accordingly, the Impugned Judgment and Order dated 06.08.2019
    of the High Court is set aside, and the criminal proceedings against
    the Appellant in Complaint No. 66/SS, 645/SS, 697/SS, 1595/SS (all)
[2025] 3 S.C.R.                                                  99

                      Kamalkishor Shrigopal Taparia v.
                    India Ener-Gen Private Limited & Anr.

     of 2017 pending against the present Applicant before the Learned
     Metropolitan Magistrate 28th Court, Esplanade, Mumbai are hereby
     quashed.
22. The appeals are allowed. No order as to costs.

     Result of the case: Appeals allowed.



     †
         Headnotes prepared by: Divya Pandey