Director Liability under Section 141 NI Act: Supreme Court Clarifies Requirement of Specific Averments in Saroj Pandey v. Govt. of NCT of Delhi

Introduction

Can a director of a company be held criminally liable for a dishonoured cheque solely because they signed a Board Resolution, or does the law require a more substantial link to the day-to-day operations of the business? In the case of Saroj Pandey v. Govt. of NCT of Delhi (2026)¹, the Supreme Court of India addressed this question through a Division Bench comprising Justice Sanjay Karol and Justice Augustine George Masih. In the judgment delivered on April 7, 2026, the Court answered with a definitive no, clarifying that merely holding the position of a director or signing formal board documents does not satisfy the “vicarious liability” requirements under Section 141 of the Negotiable Instruments Act, 1881. The Court emphasized that for a director to be prosecuted, there must be a specific averment in the complaint proving they were “in charge of” and “responsible to” the company for the conduct of its business at the time the offence was committed.

The dispute began when the accused company, Projtech Engineering Private Limited, issued three cheques on April 20, 2021, totaling 50 lacs (15, 20, and 15 lacs respectively) as payment for iron and steel supplies. Despite assurances of funds, the cheques were returned unpaid due to signature differences and unauthorized alterations. Following a legal notice sent via speed post on May 18, 2021, criminal proceedings were initiated on June 25, 2021, leading the Metropolitan Magistrate to issue summons on September 23, 2021. The appellant, Saroj Pandey, challenged these summons, but her pleas were rejected by both the Sessions Court and the Delhi High Court on August 7, 2025, on the grounds that her signature on a Board Resolution was sufficient evidence of her involvement in the company’s daily management.

In reversing these lower court decisions, the Supreme Court relied on a robust legal rationale centered on the “specific averment” rule, supported by an extensive history of precedents. Citing the landmark three-judge bench decision in S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla², the Court reiterated that there is no “deemed liability” for directors; liability only arises if the complaint explicitly states the director’s active role in business conduct. This was further reinforced by references to N. Vijay Kumar v. Vishwanath Rao N.³ and Gunmala Sales (P) Ltd. v. Anu Mehta⁴, where the Court noted that while a Magistrate may initially issue process based on basic averments, the High Court has the inherent power to quash such proceedings if there is “unimpeachable” evidence that the director was not involved. The Court also invoked Hitesh Verma v. Health Care at Home (India) (P) Ltd.⁵ and K.S. Mehta v. Morgan Securities & Credits (P) Ltd.⁶ to emphasize that the lack of direct allegations in the complaint is a fatal flaw.

Furthermore, the Court corrected a procedural misconception regarding the High Court’s jurisdiction. It clarified that the dismissal of a prior revision petition under Section 397 of the CrPC does not bar the High Court from exercising its inherent powers under Section 482 to prevent a miscarriage of justice. Referencing the foundational principles in Madhu Limaye v. State of Maharashtra⁷ and V.C Shukla v. State through CBI⁸, the Bench affirmed the paramount power of continuous superintendence. This position was solidified by citing Krishnan v. Krishnaveni⁹, Dhariwal Tobacco Products Ltd. v. State of Maharashtra¹⁰, and Prabhu Chawla v. State of Rajasthan¹¹, along with historical guideposts like R.P. Kapur v. State of Punjab¹² and Som Mittal v. Govt. of Karnataka¹³. The Court even looked to civil procedure analogies in Surya Dev Rai v. Ram Chander Rai¹⁴ and further criminal law safeguards in Puran v. Rambilas¹⁵ and Kailash Verma v. Punjab State Civil Supplies Corpn.¹⁶ to validate the availability of inherent powers.

Conclusion

The Supreme Court’s judgment serves as a vital safeguard against “arm-twisting tactics” in commercial litigation. By quashing the proceedings against Saroj Pandey, the Court reinforced that criminal liability is personal and must be rooted in actual conduct rather than mere corporate titles. This ruling ensures that the rigors of a criminal trial are reserved only for those who truly direct the specific actions leading to an offence, preserving the distinction between general corporate oversight and active operational responsibility.

Citations

1. Saroj Pandey v. Govt. of NCT of Delhi & Ors., 2026 INSC 294 ↩︎
2. S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla, (2005) 8 SCC 89 ↩︎
3. N. Vijay Kumar v. Vishwanath Rao N., 2025 INSC 338 (or 2024 SCC OnLine SC 5305) ↩︎
4. Gunmala Sales (P) Ltd. v. Anu Mehta, (2015) 1 SCC 103 ↩︎
5. Hitesh Verma v. Health Care at Home (India) (P) Ltd., 2025 LiveLaw (SC) 176 ↩︎
6. K.S. Mehta v. Morgan Securities & Credits (P) Ltd., 2023 DHC 8628 ↩︎
7. Madhu Limaye v. State of Maharashtra, (1977) 4 SCC 551 ↩︎
8. V.C. Shukla v. State through CBI, 1980 Supp SCC 92 ↩︎
9. Krishnan v. Krishnaveni, (1997) 4 SCC 241 ↩︎
10. Dhariwal Tobacco Products Ltd. v. State of Maharashtra, (2009) 2 SCC 370 ↩︎
11. Prabhu Chawla v. State of Rajasthan, (2016) 16 SCC 30 ↩︎
12. R.P. Kapur v. State of Punjab 1960 AIR 862 ↩︎
13. Som Mittal v. Govt. of Karnataka, (2008) 3 SCC 574 ↩︎
14. Surya Dev Rai v. Ram Chander Rai, (2003) 6 SCC 675 ↩︎
15. Puran v. Rambilas, (2001) 6 SCC 338 ↩︎
16. Kailash Verma v. Punjab State Civil Supplies Corpn., (2005) 2 SCC 571 ↩︎

Expositor(s): Adv. Archana Shukla