Supreme Court Quashes Cheque Bounce Case Against Director in Bharti Airtel Dispute
The Supreme Court of India has quashed the criminal proceedings against a director of Fibtel Telecom Solutions in a cheque bounce case filed by Bharti Airtel Limited. The case, Susela Padmavathy Amma vs. M/s Bharti Airtel Limited, revolved around dishonored cheques issued by Fibtel Telecom Solutions for outstanding telecom service dues.
The Supreme Court ruled that the accused director, a senior citizen, could not be held vicariously liable under Section 141 of the Negotiable Instruments Act, 1881 (N.I. Act) as she was neither in charge of daily operations nor the signatory of the dishonored cheques.
Background of the Case
Bharti Airtel Limited, a leading telecommunications company, provided telecom services to Fibtel Telecom Solutions, a telemarketing company registered with the Telecom Regulatory Authority of India (TRAI). The two companies had entered into a service agreement where Fibtel Telecom Solutions was required to pay Rs. 14,00,000 per month for the services.
The dispute arose when Bharti Airtel claimed that Fibtel Telecom Solutions owed Rs. 2,55,08,309 in outstanding dues and had issued five post-dated cheques as part of a repayment agreement.
Details of the Dishonored Cheques
| Cheque No. | Cheque Date | Amount | Returned On | Reason |
|---|---|---|---|---|
| 414199 | 25.06.2016 | Rs. 25,00,000 | 26.06.2016 | Payment stopped by drawer |
| 414196 | 31.08.2016 | Rs. 50,00,000 | 26.09.2016 | Payment stopped by drawer |
| 414204 | 31.08.2016 | Rs. 80,00,000 | 26.09.2016 | Payment stopped by drawer |
| 414195 | 31.07.2016 | Rs. 45,00,000 | 26.10.2016 | Payment stopped by drawer |
| 414205 | 30.09.2016 | Rs. 80,00,000 | 18.10.2016 | Payment stopped by drawer |
Legal Proceedings
1. Criminal Complaint Filed by Bharti Airtel
- Bharti Airtel filed two criminal complaints under Sections 138 and 142 of the N.I. Act before the Metropolitan Magistrate, Saidapet, Chennai.
- The complaints were registered as C.C. No. 3151 of 2017 and C.C. No. 3150 of 2017, naming Fibtel Telecom Solutions and its directors, including Susela Padmavathy Amma, as accused.
2. High Court Rejects Quashing Petition
- Susela Padmavathy Amma, a senior citizen and non-executive director, approached the Madras High Court under Section 482 of the CrPC seeking to quash the complaints.
- She argued that she was not responsible for the daily affairs of the company and was not the signatory of the cheques.
- The High Court dismissed her petition on April 26, 2022, and directed the trial court to expedite the proceedings.
3. Appeal to the Supreme Court
- Susela Padmavathy Amma challenged the High Court’s ruling in the Supreme Court, contending that she was wrongly implicated.
- On December 12, 2022, the Supreme Court issued a stay on the proceedings against her.
Supreme Court’s Key Observations
1. No Vicarious Liability Without Specific Role
“The appellant was not responsible for the day-to-day affairs of the company and was not a signatory to the dishonored cheques. Mere designation as a director is insufficient to establish liability under Section 141 of the N.I. Act.”
2. No Evidence of Active Involvement
- The Supreme Court referred to precedents, including S.M.S. Pharmaceuticals Ltd. vs. Neeta Bhalla (2005) and National Small Industries Corp. vs. Harmeet Singh Paintal (2010), to reinforce that liability requires evidence of active involvement in business affairs.
- The complaint did not establish that Susela Padmavathy Amma was managing financial transactions.
3. Importance of Corporate Role in Cheque Bounce Cases
“A director is not automatically liable for dishonored cheques unless there are clear allegations showing their control over financial decisions.”
4. Misuse of Criminal Law for Debt Recovery
- The Supreme Court cautioned against using cheque bounce cases as a tool for coercing debt recovery from individuals who are not directly responsible.
- It held that civil remedies should be pursued for financial disputes rather than criminal prosecution.
Final Verdict
The Supreme Court quashed the criminal proceedings against Susela Padmavathy Amma and ruled:
“The proceedings in C.C. Nos. 3151 and 3150 of 2017 pending before the Metropolitan Magistrate, Saidapet, Chennai, are quashed as against the appellant.”
Conclusion
This judgment reaffirms important legal principles:
- Vicarious liability must be proven – Merely being a director does not make one liable for dishonored cheques.
- Protection for non-executive directors – Directors not involved in daily management cannot be dragged into criminal cases.
- Debt recovery must follow civil procedures – Criminal law should not be misused to recover unpaid dues.
This ruling provides relief to non-executive directors facing wrongful prosecution and ensures that cheque bounce cases are not weaponized against individuals lacking financial control.
Petitioner Name: Susela Padmavathy Amma.Respondent Name: M/s Bharti Airtel Limited.Judgment By: Justice B.R. Gavai, Justice Sandeep Mehta.Place Of Incident: Chennai, Tamil Nadu.Judgment Date: 15-03-2024.
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