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M/s Mansi Finance (Chennai) Ltd. v. M. Lalitha & Ors.

Criminal Appeal · 2026 INSC 547Decided 26 May 2026
Crl.A. No.-002849-002849 - 2026 (arising from S.L.P. (Crl.) No. 13907 of 2024)
Justice Prashant Kumar Mishra · Justice N.V. Anjaria

Background

A finance company had lent Rs. 4.5 crore to an educational society, backed by promissory notes and a Memorandum of Understanding. When the society's cheque for repayment (over Rs. 5.12 crore with interest) bounced with the endorsement "Account Blocked," the company filed a criminal complaint under Sections 138/141 of the Negotiable Instruments Act against the society and several of its office bearers, including the four respondents (Vice-President, Treasurer, Executive Member and Manager). The Madras High Court quashed the complaint against all four respondents, holding the complaint's allegations against them were vague and "omnibus," not showing specifically how each was in charge of the society's affairs. The finance company appealed.

Decision Breakdown

The Supreme Court held that Section 141 NI Act liability cannot be based on mere designation as an office bearer, the complaint must show a specific factual link to the transaction, but found the High Court had wrongly applied a blanket approach to all four respondents instead of assessing each individually. It found that the Vice-President, Treasurer, and Manager (respondents 1, 2 and 4) had personally signed the MoU, the dishonoured cheque, or the promissory notes, which was sufficient prima facie material to let the prosecution proceed against them, whether they were actually "in charge of" the society's affairs being a matter for trial. However, for the Executive Member (respondent 3), the complaint contained only a general assertion of his office-bearer status with no document bearing his signature or any specific link to the transaction, so quashing was upheld only as to him. The appeal was thus partly allowed, restoring the complaint against three of the four respondents.

Lesson Learnt

In cheque-bounce prosecutions against office bearers of a company or society, criminal liability cannot be fastened merely by virtue of a person's title or position, but where a person's own signature appears on the underlying loan documents, MoU, or the cheque itself, that is sufficient factual foundation for the case to proceed to trial, even if the complaint's language describing their role is otherwise general.

Official source (sci.gov.in)View Judgment (PDF)

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