You got a section 138 notice because a cheque signed by your company bounced, but you only sit on the board as a non-executive, independent or nominee director. Are you liable? Usually no, unless the complaint shows you were actually in charge of running the company when the cheque was issued. Mere directorship is not enough. The Supreme Court confirmed this in 2025.
The whole question turns on what you actually did, not the label on your business card.
You are usually NOT liable when:
You CAN be made liable when:
The difference is control. A bounced-cheque case is a criminal case, and criminal liability cannot be pinned on a person just because their name appears in company records.
When a company commits a cheque-bounce offence under section 138 of the Negotiable Instruments Act, 1881, the company itself is the offender. Section 141 then extends that liability to certain people.
Section 141(1) says that a person can be prosecuted only if, at the time the offence was committed, that person was in charge of, and was responsible to the company for the conduct of its business. Both limbs must be satisfied. The word used is “and”, so being a director alone does not do it.
Section 141(2) adds a second route. A director, manager, secretary or other officer can be prosecuted if the offence happened with their consent or connivance, or is attributable to their neglect.
The Supreme Court has read these words strictly for two decades. In S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla (2005) 8 SCC 89, the Court held that the complaint must specifically state how and in what capacity the director was responsible. In National Small Industries Corporation Ltd. v. Harmeet Singh Paintal (2010) 3 SCC 330, it ruled that a bald statement copying the words of the section, without facts, is not enough to drag a director into a criminal trial.
So the law has always been: penal vicarious liability is the exception, and it must be clearly pleaded.
In K.S. Mehta v. M/s Morgan Securities and Credits Pvt. Ltd. (2025), neutral citation 2025 INSC 315, reported as [2025] 4 SCR 1, the Supreme Court quashed cheque-bounce proceedings against two non-executive directors.
The case arose from an inter-corporate deposit. The borrowing company issued two post-dated cheques of ₹50 lakh each in repayment, and both bounced for want of funds. The lender prosecuted not only the company but also two directors who were non-executive and independent. These directors argued that they never ran the company, never handled its finances and never signed the cheques.
The Court, with Justices B.V. Nagarathna and Satish Chandra Sharma, agreed. It held that a non-executive or independent director, whose role is limited to governance oversight, cannot be made vicariously liable under section 141 unless the complaint contains specific, clear averments showing the director was in charge of and responsible for the conduct of the business. The Court stressed that mere directorship, attendance at board meetings, or a name on the company filings is not enough.
Just three weeks earlier, on 13 February 2025, the same bench had said the same thing in Kamalkishor Shrigopal Taparia v. India Ener-Gen Private Limited (2025), neutral citation 2025 INSC 223. There too, a non-executive director with no financial role was let off because the complaint did not show his active involvement.
Together, these 2025 rulings make the position firm: the label “director” does not equal automatic guilt for a bounced company cheque.
A lawyer should review your papers before you reply. The strength of your defence depends on the exact wording of the complaint and your documented role.
Yes. If you personally signed the dishonoured cheque, you can be prosecuted under section 138 as the signatory, separate from the section 141 question of being in charge of the business. The K.S. Mehta protection mainly helps directors who did not sign and did not run the company.
Generally you stand on the same footing as a non-executive director. A nominee director who only attends board meetings and has no role in daily operations cannot be held liable unless the complaint shows actual control or that the offence happened due to your consent, connivance or neglect.
No. After S.M.S. Pharmaceuticals and Harmeet Singh Paintal, a complaint that only repeats the words of section 141 without stating what you actually did is defective. Courts have quashed many such cases against non-executive directors on this exact ground.
Often yes. If the complaint on its face shows no specific role, you can move the High Court for quashing under section 482 BNSS, 2023. In K.S. Mehta the Supreme Court itself quashed the proceedings. But quashing is decided case by case, so legal advice on your specific complaint is essential.
If you had already resigned and the resignation was filed with the Registrar of Companies (Form DIR-12) before the cheque was issued or dishonoured, you have a strong defence, because you were not a director “at the time the offence was committed”. Keep the ROC filing as proof.
If you have received a cheque-bounce notice, act within the 15-day window and do not stay silent. Use the AI RTI Drafter if you need to seek records from a public authority, and read more on the homepage for related guides on consumer and financial disputes. For a deeper understanding of how to assert your rights, see The RTI Playbook.
This article explains the law in general terms and is not a substitute for advice from a lawyer on your own case.
Reviewed by Dr. Shrawan Kumar Pathak.