Directors cleared in cheque bounce

The Delhi High Court recently reiterated that in order to prosecute directors of a company for issuing cheques without sufficient fund in the bank, it must be shown that they were in charge and responsibile for the day-to-day affairs of the company. Merely naming them is not enough under the provisions of the Negotiable instruments Act. In this case, Jwala Devi Enterprises vs Fadi El Jaouni and others, it criminal complaints were field under the Act for prosecution of directors of a company.

The magistrate issued process but on appeal, the sessions judge quashed the complaints. Thereafter, the payees moved the High Court it dismissed the appeals stating that the accused were not stated to be signatories to the cheques.  “They cannot be roped in merely because they have been directors of the accused company. The general averments that they were responsible for all the business dealings and for the circumstances leading to the dishonour of the cheques or that they had given any assurance as to the cheques do not suffice,” the judgment explained.