Cheque Bounce Case: Are Former Directors Liable Under Section 138 of the Negotiable Instruments Act, 1881?

Introduction

Cheque bounce cases in India are governed by Section 138 of the Negotiable Instruments Act, 1881, which prescribes legal consequences for dishonoured cheques. In such cases, company directors are often named as accused parties. However, the question arises: Can a Former Director be held liable for cheque dishonour? 

This article explores the liability of Former Directors in cheque bounce cases, referencing landmark judgments and legal provisions.

What is a Cheque Bounce Case?

A cheque is said to have bounced when it is dishonoured due to reasons like insufficient funds, signature mismatch, account closure, or payment stopped by the drawer. Under Section 138 of the Negotiable Instruments Act, if a cheque issued by a company is dishonoured, the payee has the legal right to initiate proceedings against the company and its responsible officials.

 Can Former Directors Be Prosecuted in Cheque Bounce Cases?

 Former Directors Are NOT Liable If:

1.     The cheque was issued after their resignation.  

2.     Their resignation was duly accepted and recorded with the Registrar of Companies (ROC).  

3.     They had no role in issuing or signing the dishonoured cheque.  

4.     Form 32 (or DIR-12) was filed with the ROC, notifying the resignation.  

Landmark Judgments:  

Pankaj Anand Mudholkar vs State of Rajasthan – Rajasthan High Court ruled that directors cannot be prosecuted if they resigned before the issuance of a dishonoured cheque.  

Rajesh Viren Shah vs Redington (India) Limited – Supreme Court reaffirmed that directors cannot be held liable if they were not associated with the company when the cheque was issued.

 Former Directors Can Be Held Liable If:

1. The dishonoured cheque was signed by them before resignation.  

2. They were still listed as directors at the time of cheque issuance.  

3. Form 32 (DIR-12) was not filed with the ROC, making their resignation ineffective.  

4. They had knowledge of the cheque transaction or were directly involved in issuing it.  

Landmark Judgment:  

Pramod Shankar Dayal vs State of Jharkhand – Jharkhand High Court ruled that a former director who signed a cheque before resignation cannot escape liability if Form 32 was not filed.  

Steps to Defend a Former Director in a Cheque Bounce Case

If you are a former director and falsely implicated in a cheque dishonour case under Section 138, you can defend yourself using these legal arguments:

  Proof of resignation – Present resignation letter and board resolution approving resignation.  

  ROC filing records – Provide Form 32/DIR-12 to establish the date of resignation.  

  Lack of involvement – Demonstrate that the cheque was issued after resignation.  

  Absence of authorization – Prove that you had no role in company affairs when the cheque     was issued. 

What Should You Do If You Receive a Cheque Bounce Legal Notice?

If you receive a legal notice under Section 138 of the Negotiable Instruments Act for a dishonoured cheque, take the following steps:

  Verify the cheque details and reason for dishonour.  

  Check whether you were a director at the time of cheque issuance.  

  Gather evidence of resignation and ROC compliance.  

  Consult an expert cheque bounce lawyer for legal representation.  

If the allegations are false, you can file a quashing petition under Section 482 Cr.P.C. in the High Court.

Why Choose Us for Your Cheque Bounce Case?

We specialize in cheque bounce cases under Section 138 of the Negotiable Instruments Act and provide expert legal representation in courts across Delhi, including:

Rohini Court  

Tis Hazari Court  

Saket Court  

Dwarka Court  

Karkardooma Court  

Delhi High Court  

Our legal team ensures that falsely implicated directors are acquitted and protects businesses from fraudulent cheque bounce claims.

 Conclusion

The liability of Former Directors in cheque bounce cases depends on their role at the time of cheque issuance. If a cheque was issued after resignation and proper compliance with ROC filings was done, the Former Director cannot be prosecuted. However, if the cheque was signed before resignation or if ROC filings were not completed, the director may be held accountable.

If you are facing a cheque bounce case in Delhi, consult the best cheque bounce lawyer in Rohini Court, Tis Hazari Court, and other Delhi courts for expert legal advice and defense.

📞 Need legal assistance? Contact Advocate Akanksha Roy | Best Cheque Bounce Case Lawyer in Delhi today!