Yes, company directors can be held liable for cheque bounce in India, but only under certain legal conditions. Liability does not automatically extend to every director of the company.
Key points:
- Applicable law: Cheque bounce cases are governed by Section 138 of the Negotiable Instruments Act, 1881.
- Who can be held liable: Directors who were in charge of and responsible for the conduct of the company's business at the time the cheque was issued and dishonoured may be prosecuted.
- Managing and Whole-time Directors: These directors are generally presumed to be responsible for the company's day-to-day affairs, depending on the facts of the case.
- Other Directors: Independent or non-executive directors are not automatically liable merely because they hold the position of a director. Their involvement in the company's business must be established.
- Company's liability: The company is generally made an accused along with the responsible directors and officers.
- Defence available: A director may avoid liability by proving that the offence was committed without their knowledge or that they exercised due diligence to prevent it.
