For fastening vicarious liability under Section 141 NI Act, the complaint must disclose specific factual foundation linking each accused to the underlying transaction; mere designation as an office bearer is insufficient.

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Facts

M/s Mansi Finance (Chennai) Ltd. advanced loans aggregating Rs.4.5 crores to M/s Ravindra Bharathi Educational Society between July 2018 and July 2018 for development and business purposes of the educational institution. Promissory notes were executed acknowledging the borrowings, and a Memorandum of Understanding dated 31.07.2018 formalised the repayment arrangement. Paras 3–6.

Towards discharge of the liability, cheque dated 18.11.2019 for Rs.5,12,61,500/- was issued by the Society through its President. The cheque was dishonoured on 19.11.2019 with the endorsement “Account Blocked”. Statutory notice under S.138 Negotiable Instruments Act, 1881 was issued, but payment was not made. Paras 7–9.

The appellant instituted a complaint under Ss.138 and 141 Negotiable Instruments Act, 1881 against the Society and its office bearers, including the present respondents who were Vice-President, Treasurer, Executive Member, and Manager respectively. The High Court quashed proceedings against respondent Nos.1–4 under S.482 CrPC, holding that the complaint contained only omnibus allegations without specific averments establishing vicarious liability. 

Issues Framed

Whether the complaint disclosed sufficient foundational averments and material to sustain prosecution of the respondents under S.141 Negotiable Instruments Act, 1881 for dishonour of cheque issued by the Society. (Paras 25–33)

Court’s Reasoning

(a) The Court reiterated that S.141 Negotiable Instruments Act, 1881 creates vicarious criminal liability and therefore must be strictly construed. Relying upon S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and National Small Industries Corporation Ltd. v. Harmeet Singh Paintal, the Court held that a complaint must specifically disclose how and in what manner the accused was responsible for conduct of the business of the company or society. (Paras 27–28)

(b) The Court observed that the complaint must be read as a whole and not in isolated fragments. It relied upon HDFC Bank Ltd. v. State of Maharashtra and S.P. Mani and Mohan Dairy v. Dr. Snehalatha Elangovan to hold that exact reproduction of statutory language is unnecessary if the factual foundation for liability is otherwise disclosed. (Paras 29–32)

(c) Applying these principles, the Court distinguished between the respondents. Respondent Nos.1 (Vice-President), 2 (Treasurer), and 4 (Manager) had signed or participated in antecedent financial documents including the MoU, promissory notes, and allied payment documents forming the substratum of the liability. Paras 34–36. The Court held that these materials prima facie connected them with the underlying transaction and furnished sufficient foundational facts for prosecution.

(d) In contrast, respondent No.3, an Executive Member, was implicated only through a general assertion regarding his official status in the Society. No document bore his signature or connected him with the transaction. Paras 37–39. The Court held that “there is no deemed liability merely by virtue of holding an office or position in the company or society.” 

(e) The Court further held that at the stage of quashing under S.482 CrPC, the Court is not required to appreciate evidence or determine truthfulness of allegations. Existence of foundational material alone is sufficient to sustain prosecution. (Paras 41–42)

Held

The Supreme Court partly allowed the appeal. The High Court’s quashing order was set aside insofar as respondent Nos.1, 2, and 4 were concerned, and the complaint proceedings against them were restored. However, quashing of proceedings against respondent No.3 was upheld for lack of specific factual foundation connecting him to the transaction. 

Ratio

For prosecution under S.141 Negotiable Instruments Act, 1881, the complaint must disclose specific factual material connecting each accused with the underlying transaction and conduct of the entity’s affairs; mere designation or omnibus assertions are insufficient to fasten vicarious criminal liability. 

Case Details

Citation: 2026 INSC 550
Decided on: 26 May 2026
Case Title: M/s Mansi Finance (Chennai) Ltd. v. M. Lalitha and Others
Court: Supreme Court of India
Bench: Prashant Kumar Mishra, J.; N.V. Anjaria, J.