The Supreme Court has ruled that directors or individuals in charge of a company cannot be prosecuted for cheque bounce cases under the Negotiable Instruments Act, 1881, unless the company itself is arraigned as an accused.

Highlighting the principle of corporate liability, the Court stated that a company, as the principal offender in such cases, must first be held accountable before liability can extend to its directors or officers.

This decision stemmed from an appeal by Bijoy Kumar Moni against the Calcutta High Court’s judgment, which overturned the conviction of Paresh Manna, a director of Shilabati Hospital Pvt. Ltd., under Section 138 of the NI Act. The cheque, drawn on Standard Chartered Bank, Calcutta, for ₹8,45,000, was dishonoured in 2006. Although the trial court and sessions court had convicted Manna, sentencing him to one year in prison, the High Court reasoned that his liability could not be established without implicating the company.

The Supreme Court bench, comprising Justices J.B. Pardiwala and R. Mahadevan, upheld the High Court’s decision, explaining that corporate entities operate through their agents, but their liability as the primary offender must first be determined. The judgment ensures that individuals are not unjustly prosecuted without establishing the company’s culpability, maintaining a balance between accountability and legal protection for individuals under Section 138. Dismissing the appeal, the Apex Court reaffirmed the statutory intent and principles of corporate liability enshrined in the Act.