New Delhi: The Supreme Court has partly allowed an appeal by a Chennai-based finance company, holding that where an office bearer of a society has signed the underlying financial documents giving rise to a dishonoured cheque, it constitutes sufficient foundational material to sustain prosecution under Section 141 of the Negotiable Instruments Act, 1881, and such a person cannot be placed on the same footing as one whose connection to the transaction is merely titular.
The Division Bench of Justice Prashant Kumar Mishra and Justice N.V. Anjaria set aside, in part, an order of the Madras High Court that had quashed cheque dishonour proceedings against all four respondents, who were office bearers of M/s Ravindra Bharathi Educational Society.
The quashing was upheld only in respect of respondent no. 3, whose name appeared nowhere in the transaction documents.
The appellant, M/s Mansi Finance (Chennai) Ltd., had advanced Rs. 4,50,00,000 to the Society in July 2018, documented through promissory notes and a Memorandum of Understanding carrying interest at 30% per annum. Towards discharge of the outstanding liability, the Society’s President issued a cheque for Rs. 5,12,61,500, which was dishonoured in November 2019 with the endorsement “Account Blocked.” After a statutory demand notice went unanswered, the appellant filed a complaint under Sections 138 and 141 of the NI Act before the Metropolitan Magistrate, Chennai, arraying the President as well as four office bearers — namely the Vice-President, Treasurer, Executive Member, and Manager — as accused.
The four respondents moved the Madras High Court under Section 482 of the Code of Criminal Procedure, 1973, contending that they were neither signatories to the cheque nor in charge of the day-to-day affairs of the Society, and that the complaint contained only omnibus averments. The High Court agreed and quashed the proceedings against all four, relying on the Supreme Court’s decisions in S.P. Mani and Mohan Dairy v. Dr. Snehalatha Elangovan, (2023) 10 SCC 685, and Ashok Shewakramani v. State of Andhra Pradesh, (2023) 8 SCC 473.
Before the Supreme Court, the core legal question was whether the High Court was justified in treating all four respondents identically. Surveying the governing precedents, the Court reiterated that Section 141 creates vicarious criminal liability and must be strictly construed: mere designation as a director or office bearer is insufficient, and the complaint must disclose how and in what manner the accused was responsible for the conduct of the business of the entity at the relevant time. These principles, settled in S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla, (2005) 8 SCC 89, and National Small Industries Corporation Ltd. v. Harmeet Singh Paintal, (2010) 3 SCC 330, were not in dispute. The Court added, however, drawing on HDFC Bank Ltd. v. State of Maharashtra, (2025) 9 SCC 653, that the complaint need not mechanically reproduce the language of Section 141 so long as its substance, read as a whole, discloses the factual basis for liability.
Applying this framework, the Court drew a clear distinction. The MoU was signed by respondent no. 1, the Vice-President. The dishonoured cheque was signed by respondent no. 2, the Treasurer. Promissory notes and allied payment documents bore the signatures of respondent nos. 1, 2, and 4. The Court held that this was not a matter of designation but of documented participation in the very transaction from which the dishonour arose, constituting prima facie material sufficient to justify continuation of the prosecution. Whether they were, in fact, in charge of the Society’s affairs was a question of evidence for the trial court and could not be foreclosed at the threshold stage of quashing.
Respondent no. 3, an Executive Member, stood on a different footing. No financial document in the record bore his signature or otherwise connected him to the transaction. The complaint, insofar as it pertained to him, rested entirely on his official status. The Court held this to be precisely the kind of omnibus allegation that does not satisfy Section 141, and upheld the High Court’s order quashing proceedings against him.
The appeal was accordingly partly allowed. The quashing order was set aside in respect of respondent nos. 1, 2, and 4, and the complaint before the Metropolitan Magistrate, Chennai, was restored against them. All contentions of the parties were left open for trial.
For the Appellant: Senior Counsel for M/s Mansi Finance (Chennai) Ltd.
For the Respondents: Counsel for M. Lalitha and Others
Case Title: M/s Mansi Finance (Chennai) Ltd. v. M. Lalitha and Others [Criminal Appeal No. 2849 of 2026, arising out of S.L.P. (Crl.) No. 13907 of 2024]
