Offences by Companies and Firms: Liability of Directors and Partners (Section 141)

Most cheques in commerce are drawn by companies and firms, not individuals. A company cannot be imprisoned, and its directors are not drawers of its cheques. Section 141 therefore extends criminal liability to the persons who were in charge of and responsible for the conduct of the company's business. The section has produced a detailed body of case law on who may be prosecuted, what the complaint must say, and the position of non-executive directors and partners.

1. The Section

Section 141(1), Negotiable Instruments Act, 1881

If the person committing an offence under section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:

Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence:

Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter.

Section 141(2): any director, manager, secretary or other officer with whose consent or connivance, or due to whose neglect, the offence was committed is also guilty.
Explanation: "company" means any body corporate and includes a firm or other association of individuals; "director", in relation to a firm, means a partner.

2. The Company Must Be Arraigned

📖 Aneeta Hada v. Godfather Travels and Tours (Supreme Court, three judges, 2012)

Held: Liability under Section 141 is vicarious: it arises because the company has committed the offence. The company must therefore be arraigned as an accused; directors cannot be prosecuted alone. The words "as well as the company" make the company's prosecution a condition precedent, except where the company cannot be prosecuted for a legal reason.

3. Who Is "in Charge of and Responsible"

📖 S.M.S. Pharmaceuticals v. Neeta Bhalla (Supreme Court, three judges, 2005)

Held: The complaint must specifically aver that the accused was in charge of and responsible for the conduct of the company's business at the relevant time. Merely being a director is not enough. A managing director or joint managing director is, by virtue of office, in charge of the business, and the signatory of the cheque is liable under Section 141(2).

Specific role: for other directors, the complaint must show how they were in charge of and responsible for the business (National Small Industries Corporation v. Harmeet Singh Paintal, 2010).
Non-executive and independent directors: they are not ordinarily responsible for day-to-day affairs and cannot be prosecuted without specific averments of their role (Pooja Ravinder Devidasani v. State of Maharashtra, 2014; Sunita Palita v. Panchami Stone Quarry, 2022; K.S. Mehta v. Morgan Securities and Credits, 2025).
Signing resolutions is not enough: signing board resolutions on policy matters does not show involvement in day-to-day management (Saroj Pandey v. Government of NCT of Delhi, 2026). A bare designation as an office bearer is likewise insufficient (Parsharvanath Weld Wires v. State of Chhattisgarh, 2026).
Relevant time: the person must have been in charge when the offence was committed, that is, when the 15-day period expired. A director who resigned earlier, as shown by reliable documents such as company records, is not liable.
Quashing: the High Court may quash proceedings against a director where unimpeachable material shows he was not in charge, but disputed questions of fact are for trial.

4. Partnership Firms

📖 Dhanasingh Prabhu v. Chandrasekar (Supreme Court, 2025)

Held: A partnership firm is only a compendious name for its partners and has no legal personality separate from them. Partners are jointly and severally liable, not merely vicariously. A complaint against the partners is maintainable even if the firm was not arraigned or separately served with notice; notice to the partners is notice to the firm, and the firm may be added later. Aneeta Hada was distinguished as applying to companies.

5. Authorised Signatories and Other Bodies

Signatory as drawer: in K. Ranganayakulu v. State of Telangana (Supreme Court, 2026), the treasurer of an NGO who was authorised to sign all its instruments, and on whom a memorandum of understanding cast responsibility for payment, was treated as the drawer and his conviction upheld.
Societies and trusts: registered societies and other associations fall within the Explanation; those in charge of their business may be prosecuted under Section 141.
Government nominees: directors nominated by virtue of government or public financial corporation office are exempt (second proviso).
Insolvency: where a company is under an insolvency moratorium, proceedings against the company may be stayed, while directors may still be proceeded against (Topic 53).

⚠ Key point

Where the drawer is a company (including a firm or association), every person in charge of and responsible for its business when the offence was committed, as well as the company, is deemed guilty, subject to the defences of no knowledge or due diligence and the exemption for government nominee directors (Section 141(1)); officers by whose consent, connivance or neglect the offence occurred are also liable (Section 141(2)). The company must be arraigned (Aneeta Hada, 2012), and the complaint must specifically aver each director's role, except for managing directors and signatories (S.M.S. Pharmaceuticals, 2005). Non-executive and independent directors are not liable without specific averments (Pooja Devidasani; Sunita Palita; K.S. Mehta; Saroj Pandey, 2026). Partners may be prosecuted even if the firm is not arraigned (Dhanasingh Prabhu, 2025).

6. Related Topics and Provisions

Agents and legal representatives (Topic 16)
Ingredients of the offence (Topic 42)
IBC moratorium and Section 138 (Topic 53)
Landmark judgments (Topic 59)