SC: Non-executive and independent company directors not liable for cheque's dishonour unless their direct involvement shown under Section 141 of NI Act

The Supreme Court in the case K.S Mehta Versus M/S Morgan Securities And Credits Pvt Ltd. observed and has reiterated that non-executive and independent directors of a company cannot be held vicariously liable for the company's obligations under the Negotiable Instruments Act, 1881, NI Act, unless their direct involvement in the company's financial transactions is established.

The court in the case held that the merely holding the position of the non-executive and independent director of the company would not make them liable for the company's default unless their active involvement is proved. Adding to it, the court stated that only directors are responsible for the day-to-day affairs and business operations of the company can be made liable for the company's default.

The court also observed that, 'The said court has consistently held that non-executive and independent director(s) cannot be held liable under Section 138 read with Section 141 of the NI Act unless specific allegations demonstrate their direct involvement in affairs of the company at the relevant time.'

The bench comprising of Justice BV Nagarathna and Justice SC Sharma was hearing the present matter.