LI Network
Published on: October 29, 2023 at 11:48 IST
The Telangana High Court has clarified that an Executive Director of a company cannot evade proceedings under the Negotiable Instruments Act (NI Act) simply because their name is not listed in the Registrar of Company Affairs (ROC) records.
Justice E.V. Venugopal emphasized that ROC records do not authenticate the role of Directors. He rejected the contention that not being an authorized signatory in the ROC records shielded the Executive Director from NI Act proceedings, stating that such an argument lacked merit in the absence of any provision in the NI Act to that effect.
Furthermore, the Court noted that ROC records are primarily concerned with the provisions of the Companies Act and do not encompass the business transactions of legal entities, particularly in relation to the NI Act.
The case in question involved proceedings under the NI Act initiated by M/s Gangadhar Oil Refinery India Limited against M/s. Bheema Cements Limited and its executives, including the Executive Director. The oil refinery claimed that the accused were vicariously liable under the NI Act for issuing dishonored cheques.
The petitioner, an accused in the case, argued that his name was not listed as an authorized signatory in the ROC records, and thus, he could not be held liable for the dishonored cheque. However, the Court found that he had been actively involved in the company’s affairs and, as such, could not evade liability under the NI Act.
The Court also allowed the petitioner to present his argument in the trial before the Lower Court, should he wish to dispute his role as an Executive Director.
