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Legal Case Shots

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Legal Case Shots is a searchable database of Supreme Court of India judgments, each broken down into the case type, the court's key holding, and a practical lesson learnt, with the full judgment available as a PDF for citation or deeper reading.

Criminal LawSupreme Court of India

Ashok Shewakramani & Ors. vs. State of Andhra Pradesh & Anr.

Criminal Appeal · 2023 INSC 692Decided 3 Aug 2023
Criminal Appeal No. 879 of 2023
Abhay S. Oka · Sanjay Karol

Background

The appellants were directors (not managing directors or signatories of the dishonoured cheques) of companies against which the second respondent had filed multiple cheque-bounce complaints under Section 138 of the Negotiable Instruments Act. The High Court had dismissed the appellants' petitions seeking to quash these complaints. The appellants argued that the complaints failed to make the specific averments required by Section 141(1) of the Act to fix vicarious liability on non-signatory directors, and in one set of complaints, also that the mandatory statutory demand notice had never actually been served on them.

Decision Breakdown

The Supreme Court held that Section 141(1) requires a complaint to specifically allege that the director was, at the time of the offence, "in charge of, and responsible to the company for the conduct of its business", and that the two conditions must be read together, not separately. Merely alleging that directors were "aware" of the transactions, "liable" for them, "managing the company," or "busy with day-to-day affairs" does not meet this threshold. Since none of the complaints contained the required specific averments, and in the lead case the demand notice itself had admittedly not been served (a precondition under Section 138(c)), the Court quashed the complaints against all the appellants across all six connected appeals.

Lesson Learnt

A company director cannot be dragged into a cheque-bounce criminal case merely by vague allegations of general awareness or involvement in the company's affairs: a complaint must specifically plead that the director was actually in charge of and responsible for the business at the relevant time, or the case against that director will not survive.

Ashok Shewakramani & Ors. vs. State of Andhra Pradesh & Anr. – Legal Case Shots | LegalAware