Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2025 Supreme(SC) 2075

SUPREME COURT OF INDIA
ARAVIND KUMAR, N.V. ANJARIA, JJ.
Bharat Mittal – Appellant
Versus
State Of Rajasthan And Ors. – Respondents
Criminal Appeal No. of 2025 (@ Special Leave Petition (Crl.) No. 12327 of 2025)
Decided On : 18-12-2025

Advocates appeared:
For the Petitioner(s): Mr. Raghnenth Basant, Sr. Adv. Mr. Manisha Kaushik, Adv. Mr. Satya Kam Sharma, AOR Ms. Yashpriya Sahran, Adv. Ms. Hima Bharatwaj, Adv.
For the Respondent(s): Mr. Anand Varma, AOR Mr. Ayush Gupta, Adv.

Directors may be held liable under Section 148 of the NI Act despite company liquidation, but deposit conditions depend on individual case circumstances, considering the definition of 'drawer'.

Headnote:(A) Negotiable Instruments Act, 1881 - Sections 138, 141, and 148 - Conviction of director of a company for cheque dishonor without company being convicted due to winding-up - Court examines applicability of deposit condition in appeal against personal conviction. (Paras 2-4)

(B) Vicarious liability - The court affirms that prosecution against a director can proceed if the company cannot be prosecuted due to legal impediments, but a strict interpretation of 'drawer' limits liability only to the company. (Paras 11-19)

(C) Appellate deposit - Section 148 - The Appellate Court may impose a deposit condition unless exceptional circumstances warrant exemption for directors convicted under Section 138. (Paras 20-22)

Facts of the case:
The Appellant, a director of an accused company, was convicted for issuing a dishonored cheque. The company was under winding-up before the trial. The Appellant was sentenced and required to deposit compensation as a condition of appeal, which he contested on multiple grounds including prior financial recoveries and personal hardships. (Paras 3.1-4.4)

Findings of Court:
The court concluded the deposit condition could apply based on the proper evaluation of the circumstances present in instances where companies are non-existent or legally impeded. (Paras 71-74)

Issues: Whether personal liability under Section 148 can be imposed on directors if the company itself cannot be prosecuted.

Ratio Decidendi: The court clarified that while generally the deposit requirement under Section 148 is mandatory, exceptions may arise based on individual case circumstances and the identity of the drawer in legal terms.

Result: Referring the matter for larger bench deliberation to resolve conflicts in interpretation of applicable laws. (Paras 74-75)

Judgement Key Points

Certainly. Based on the provided legal document, here are the key legal points:

Liability of Directors and Company: Directors may be held liable under Section 148 of the Negotiable Instruments Act (NI Act) even after the company has been wound up or is legally impeded, but the liability depends on the specific circumstances and the legal definition of the 'drawer' of the cheque (!) (!) .
Vicarious Liability and Responsibility: The law establishes that vicarious liability for offences under Section 138 of the NI Act can extend to persons in charge of and responsible for the conduct of the company's business at the relevant time, including directors, but only if they were in charge and responsible for the conduct of the company's affairs (!) (!) .
Prosecution and Legal Impediments: Proceedings against a company may be hindered due to legal impediments such as winding-up or insolvency, but this does not automatically absolve individuals who were in charge at the time of the offence from liability, provided they had a responsible role (!) (!) .
Interpretation of 'Drawer': The term 'drawer' in the NI Act is to be interpreted strictly as the person or entity whose bank account is the source of the cheque. An authorized signatory or director who signs on behalf of the company does not automatically become the 'drawer' unless explicitly proven to be the person who issued the cheque in a manner that makes them the 'drawer' under law (!) (!) (!) .
Legal Position on Deposit Conditions: The appellate court has the discretion, in exceptional circumstances, to exempt a convicted individual from the statutory deposit under Section 148, but this discretion is limited and must be exercised considering the legislative intent and the facts of each case (!) (!) (!) .
Legislative Intent and Purposive Interpretation: The amendments to the NI Act, including Sections 143A and 148, aim to facilitate speedy resolution of cheque dishonor cases, discourage delay tactics, and ensure effective enforcement of financial liabilities. The interpretation of these provisions should align with their remedial and compensatory purpose, rather than a narrow, literal reading that undermines their effectiveness (!) (!) (!) (!) .
Distinction Between Sections 143A and 148: Section 143A deals with interim compensation during trial, while Section 148 pertains to post-conv

Table of Content
1. factual background of the case. (Para 2 , 3)
2. arguments presented by both parties. (Para 6 , 7)
3. court's observations and analysis of relevant laws. (Para 8 , 9 , 10 , 11 , 12 , 13 , 14 , 15 , 16 , 20 , 21 , 22 , 23 , 24 , 30 , 34 , 36 , 54 , 62)
4. ratio decidendi and key legal conclusions. (Para 39 , 40 , 48 , 50 , 55 , 71 , 74)
5. final conclusions directing further proceedings. (Para 72 , 75)

JUDGMENT :

ARAVIND KUMAR, J.

1. Leave granted.

2. The important question that arises before this Court in the present case is: “When a director of an accused company is convicted under Section 138 of the Negotiable Instruments Act (hereinafter referred to as ‘the NI Act’), without the company itself being convicted due to some existing ‘legal snag’ - such as winding up, liquidation, or any similar scenario-can the appellate court, while hearing the appeal filed by the director challenging his conviction and sentence, impose a condition of depositing 20% of the amount as prescribed under Section 148 of the Act?” This question assumes significance in the present context, given the large number of litigations arising under of the NI Act. To properly address the complexity of this issue and appreciate the existing legal position that guides us in determining the mandate in such cases, it is necessary to first examine the facts of the present case, which falls within this category.

BRIEF FACTS:

3. The Respondent No. 2/ Steel Authority of India (hereinafter referred to as the SAIL/Complainant) had entered into a Memorandum of Understanding (MOU) dated: 17.04.2012 with Respondent No. 3/ Shiv Mahima Ispat Private Limited (hereinafter referred to as the Accused Company) for the supply of Steel. During the financial year 2012–13, the accused company ordered 208.01 metric tonnes of HR (Hot Rolled) coils, which were dispatched from the complainant’s Bokaro Steel Plant to Kanakpura Railway Siding, Jaipur District on 25.12.2012 and 26.12.2012 through multiple invoices.

3.1. Payment was to be made by the accused on receipt of the goods. Accused No. 1 company issued a cheque dated: 03.01.2013 for the supplied coils for a sum of Rs. 4,82,72,269/- to the complainant company, the cheque issued by the accused company was said to be signed by Accused No.2/Appellant (hereinafter referred to as the Appellant) who was the director of the Accused No. 1 company. However, on depositing the cheque amount before the concerned bank, the cheque was returned with an endorsement “Exceeds Arrangement”.

3.2. After complying with the requirements under Section 138 of the Act, the complainant filed a complaint¹[Regular Criminal Case No. 2919/2013] on 20.02.2013 before the Trial Court²[Court of Senior Judicial Magistrate, N. I. Act Matter. No.01, Jaipur Metropolitan City – II] against Respondent No. 3, Shiv Mahima Ispat Private Limited, arraying the company as Accused No. 1. The appellant herein was arrayed as Accused No. 2, while Shankar Lal Mittal, Basanti Devi, Mukta Mittal, and Sunil Mittal were arraigned as Accused Nos. 3 to 6 on the ground that they were directors of the company.

3.3. In the meanwhile, the Complainant Company also filed a Company Petition³[S. B. Company Petition No. 9/2013] before the High Court⁴[High Court of Rajasthan, Jaipur Bench] seeking winding up of the Accused Company under Section 433(e) and (f), 434 and 439 of the COMPANIES ACT , 1956 on 21.03.2013.

3.4. The Trial Court took cognizance of the criminal complaint and summoned the accused persons on 20.08.2013. This order of summoning was challenged by Accused Nos. 1 to 6 before the Sessions Court⁵[Court of Additional District and Sessions Judge – 18, Jaipur Metropolitan City] by filing a revision petition⁶[Criminal Revision Petition No. 08/2014] under Section 397 of the Code of Criminal Procedure (hereinafter referred to as Cr.P.C.). The Sessions Court, by order dated 12.05.2014, partly allowed the revision and quashed the summons qua Accused Nos. 3 to 6 on the ground that