Delhi HC Limits Liability Of Non-Executive Directors Under Negotiable Instruments Act

The Delhi High Court has quashed criminal proceedings against Praveen Singh, a Non-Executive Director, in a cheque dishonour case, clarifying the scope of liability under the Negotiable Instruments Act, 1881.

The case involved three cheques totalling Rs 36.27 crore issued by Vitoba Realtors Pvt. Ltd. to repay a Rs 35 crore loan from Religare Finvest Pvt. Ltd., which were returned unpaid. Singh approached the High Court under Section 482 of the Cr.P.C., stating she had no role in daily operations, did not sign the cheques, and did not execute loan documents. The Court observed that Non-Executive Directors perform governance roles and are not involved in routine management. It emphasised that vicarious criminal liability under Sections 138 and 141 of the NI Act requires clear allegations of responsibility. Since the complaint lacked such particulars, the Court set aside the summoning order, limiting the director’s liability.

The Court also emphasised that merely reproducing statutory language in complaints is insufficient to establish liability. Legal experts say this ruling reinforces protections for Directors who are not involved in day-to-day business decisions.