New Enroll in RBI Grade B New Batch - Starts on May 21

    Question

    Vicarious liability of the Director of Company for

    dishonor of Cheque has been laid down in which of the following cases?
    A S. R. Sunil & Co, vs. D. Srinivas Correct Answer Incorrect Answer
    B H.M.T. Watches Ltd. vs. M.A. Abrda Correct Answer Incorrect Answer
    C Krishna Text Port & Capital Markets vs. Ila A. Agarwal Correct Answer Incorrect Answer
    D Vinita S. Rao vs. Essen Corporate Services Correct Answer Incorrect Answer

    Solution

    In the case of Krishna Texport & Capital Markets Ltd. vs.Ila A. Agrawal & Ors[1]..The Honorable Supreme Court of India in its attempt to clarify the issues pertaining to Section 138 of the Act overruled the judgment of the Division Bench of Madras High Court in B. Raman & Ors. Vs. M/s. Shasun Chemicals and Drugs Ltd., wherein it was concluded by the Honorable High Court that the service of Notice as envisaged under Section 138 to all the Directors and persons concerned is a mandatory obligation before a complaint could be filed against any wrong committed on their part. Further, it was added by the Honorable High Court that a non- compliance of such a mandatory requisite would outlaw the legal proceedings of any kind against the Directors. The Honorable Supreme Court while deciding the question whether the notice under Section 138 of the Act is mandatorily required to be sent to the directors of a Company before a complaint could be filed against such directors along with the Company observed that the there is nothing in Section 138 of the NI Act which may even remotely suggest issuance of notice to anyone other than the drawer. The Honorable Supreme Court went through the interpretation of the Sections 138 and 141. While interpreting the Section 141 of the Act, the Supreme Court explained that plain reading of Section 141 of the Act provides that if the person committing an offence under Section 138 is a Company, every director of such Company who was in charge of and responsible for its affairs and who guided actions to that Company for conduct of its business shall also be deemed to be vicariously liable as company is a juristic entity. Section 141 of the Act does not provide any requirement to send notices separately to the directors.

    Practice Next