When a company issues a cheque that is dishonoured, the question of director liability is critical. Under Section 141 of the Negotiable Instruments Act 1881 (NI Act), not only the company but also every person who was responsible for the conduct of the company's business at the time of the offence can be prosecuted. TRW — Tahmidur Rahman Remura Wahid Law Associates advises both complainants (on how to prosecute directors) and accused directors (on how to defend against Section 141 liability).
Section 141 of the NI Act: Director Liability
Section 141 of the NI Act provides that if the person committing an offence under Section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. However, a person can escape liability under Section 141 if they can show that the offence was committed without their knowledge or that they exercised all due diligence to prevent the commission of the offence.
The Supreme Court of Bangladesh has interpreted Section 141 broadly, holding that directors who sign cheques on behalf of the company are personally liable for dishonour of those cheques.
Who Can Be Prosecuted Under Section 141
The following persons can be prosecuted under Section 141 in addition to the company itself. The director who signed the cheque. The managing director or CEO who was responsible for the company's financial affairs. Any director who was in charge of the company's business at the time of the offence. A nominee director who was actively involved in the company's affairs. A sleeping director who was not involved in the day-to-day business may be able to escape liability by showing that they had no knowledge of the cheque or that they exercised due diligence.
TRW advises complainants on which directors to include in the complaint and advises accused directors on the defences available under Section 141.
How Barrister Tahmidur Rahman Can Help
Barrister Tahmidur Rahman and TRW's cheque dishonour team handle company cheque cases and director liability matters. Contact TRW at https://tahmidurrahman.com/contact/.
Frequently Asked Questions
Q: Can a director be prosecuted if they did not sign the cheque?
A: Yes, if they were responsible for the conduct of the company's business at the time of the offence.
Q: Can a director escape liability by resigning before the cheque was presented?
A: If the director resigned before the cheque was issued, they may escape liability. If they resigned after the cheque was issued, they may still be liable.
Q: Can a foreign director of a Bangladesh company be prosecuted under Section 141?
A: Yes, if they were in charge of the company's business in Bangladesh at the time of the offence.
