HDFC Bank Ltd. v. State of Maharashtra | Date: May 24, 2025
In HDFC Bank Ltd. v. State of Maharashtra, the Supreme Court of India has ruled that a complainant is not required to narrate the specific administrative role of every company director when initiating proceedings under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881.
The verdict offers significant relief for complainants pursuing legal action in cheque dishonour cases, especially where the accused includes company directors. The ruling emphasizes that a general but sufficient averment that a person was in charge of the company’s affairs is enough at the initial stage.
The Case in Brief
The case originated from a complaint filed by HDFC Bank Ltd. against a private company, M/s R Square Shri Sai Baba Abhikaran Pvt. Ltd., and its directors, including Mrs. Ranjana Sharma, after a cheque issued by the company was dishonoured. Based on the complaint, a Magistrate took cognizance and issued a process against all the accused parties.
However, the Bombay High Court later quashed the criminal proceedings against Mrs. Sharma, reasoning that the complaint did not specifically spell out her role in managing the company’s day-to-day affairs.
Challenging this decision, HDFC Bank approached the Supreme Court through a Special Leave Petition.
What the Supreme Court Held
A bench of Justices Manoj Misra and K.V. Viswanathan examined whether the complaint needed to include exact details about Sharma’s role in the company. The Court firmly held that it is not necessary for the complaint to recite the specific duties or administrative acts of a director.
Justice K.V. Viswanathan, writing the judgment, stated:
“The complainant is only expected to know, in a general sense, who is in charge of the company’s affairs. The requirement is not to mechanically reproduce the language of the law as if reciting a mantra.”
In essence, the Court clarified that substantial compliance with Section 141 is sufficient. It is enough if the complaint states that the director was responsible for the conduct of the company’s business at the time the offence occurred.
In Sharma’s case, the complaint alleged she was “responsible for the day-to-day affairs, management, and working” of the company—an averment the Court held to be adequate.
Legal Precedents Considered
The ruling harmonizes a line of earlier decisions, offering clarity on a subject that had seen conflicting interpretations.
Some of the key precedents referred to include:
- S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla & Anr. (2005) 8 SCC 89: This case held that a director’s designation alone does not create liability. The complaint must aver that the person was in charge of the business.
- K.K. Ahuja v. V.K. Vora & Anr. (2009) 10 SCC 48: Here, the Court accepted that a general statement about a director’s responsibility suffices at the complaint stage.
- National Small Industries Corporation Ltd. v. Harmeet Singh Paintal (2010) 3 SCC 330: Emphasized that mere status as a director isn’t enough and that specific involvement must be pleaded, but the current bench interpreted this in harmony with other judgments.
- S.P. Mani & Mohan Dairy v. Snehalatha Elangovan (2022) 6 SCC 220: Reaffirmed that the complainant is not expected to allege facts that are exclusively within the accused’s knowledge.
Director Liability: Not Automatic, But Pleading Standards Are Reasonable
While the Court reinforced that there is no automatic or deemed liability just because someone is a director, it also underscored that complainants cannot be expected to know or prove internal administrative roles held by directors. Such information lies within the special knowledge of the company and its personnel and can be dealt with during trial.
Importantly, the Court observed that any defence, such as the claim that a director was not involved in the company’s operations, is a matter to be proved at the trial stage, not something to defeat the complaint at the outset.
“A complainant cannot be burdened with proving what only the company or its directors would know. The Magistrate’s task is to examine whether the complaint discloses sufficient grounds to proceed,”
the Court said.
Final Outcome
Setting aside the Bombay High Court’s decision, the Supreme Court restored the Magistrate’s order issuing process against Mrs. Ranjana Sharma. The appeal was allowed, making it clear that technicalities should not defeat genuine complaints, especially in cheque bounce matters where swift justice is the legislative intent.
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