Demystifying Vicarious Liability Of Directors For An Offence Under The Negotiable Instruments Act, 1881

Introduction

In a recent judgment in the matter of Susela Padmavathy Amma vs. Bharti Airtel Limitedⁱ, the Hon'ble Supreme Court ("Court"), quashed a criminal complaint filed against one of the directors of a company for the offence punishable under section 138 read with section 142 of the Negotiable Instruments Act, 1881 ("NI Act"). The Court held that the vicarious liability of a director for an offence committed by a company under the NI Act arises if at the time of commission of an offence the director was in-charge of the company and responsible for the conduct of business of the company.

Factual Background

Fibtel Telecom Solutions (India) Private Limited ("Fibtel" or "Company"), approached Bharti Airtel Limited ("Respondent") to obtain telecom resources for the purpose of transactional communication. Susela Padmavathy Amma ("Appellant") was one of the director of Fibtel. According to the Respondent, Fibtel failed to make payments for the services