K.S. MEHTA versus M/S MORGAN SECURITIES AND CREDITS PVT. LTD.

Citation: [2025] 4 S.C.R. 1 · Decided: 03-03-2025 · Supreme Court of India · Bench: B.V. NAGARATHNA · Disposal: Appeal(s) allowed

Judgment (excerpt)

[2025] 4 S.C.R. 1 : 2025 INSC 315
K.S. Mehta 
v. 
M/s Morgan Securities and Credits Pvt. Ltd.
(Criminal Appeal No. 1105 of 2025)
04 March 2025
[B.V. Nagarathna and Satish Chandra Sharma,* JJ.]
Issue for Consideration
Whether the High Court was justified in dismissing the petitions 
filed under Section 482 CrPC for quashing of criminal proceedings.
Headnotes†
Code of Criminal Procedure, 1973 — Whether the High Court 
is justified in dismissing the petitions sought for the quashing 
of criminal proceedings initiated against the Appellant(s) 
under Section 138 read with Section 141 of the Negotiable 
Instruments Act, 1881 — Correctness:
Held: The dispute stems from an Inter-Corporate Deposit (“ICD”) 
agreement executed between the accused company and the 
Respondent – Notedly, the Appellants were the Director of 
the company but neither attended the board meeting wherein 
the said transaction was approved, nor were they signatories 
to the agreement or any related financial instruments — The 
Appellant(s) directorship was non-executive and limited to 
corporate governance oversight in compliance with SEBI 
regulations — Subsequently, both the appellants resigned from 
the Company — It is a trite principle that non-executive and 
independent director(s) cannot be held liable under Section 138 
read with Section 141 of the NI Act unless specific allegations 
demonstrate their direct involvement in affairs of the company at 
the relevant time — The Appellant(s) neither issued nor signed the 
dishonored cheques nor had any role in their execution – There 
is no material on record to suggest that they were responsible for 
the issuance of the cheques in question — The mere fact that 
Appellant(s) attended board meetings does not suffice to impose 
financial liability on the Appellant(s), as such attendance does 
not automatically translate into control over financial operations – 
* Author
2
[2025] 4 S.C.R.
Digital Supreme Court Reports
Thus, the Appellant(s) cannot be held vicariously liable under 
Section 141 of the NI Act – Therefore, criminal proceedings 
against the Appellant(s) are quashed. [4, 10, 17, 18, 19]
List of Acts
Penal Code, 1860; Code of Criminal Procedure, 1973.
List of Keywords
Director’s liability under Section 141 of NI Act; Vicarious Liability; 
Non-Executive Director’s liability.
Case Arising From
CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No. 
1105 of 2025
From the Judgment and Order dated 28.11.2023 of the High Court 
of Delhi at New Delhi in CRLMC No. 1643 of 2019
With
Criminal Appeal Nos. 1106 and 1107 of 2025
Appearances for Parties
Advs. for the Appellant:
Siddharth Aggarwal, Vishwajit Singh, Sr. Advs., Suman Jyoti 
Khaitan, Vikas Kumar, Ayush Shrivastava, Ayush Kapur, Vihaan 
Kumar, Pankaj Singh, Ms. Praanshoo Goyal, Ms. Ridhima Singh.
Advs. for the Respondent:
Vikramjeet Banerjee, A.S.G., Mukesh Kumar Maroria, Annirudh 
Sharma Ii, B K Satija, Ms. Diksha Rai, Ms. Sakshi Kakkar,  
Ms. Satvika Thakur, Simran Mehta, Ms. Aruna Gupta, Ajay Pal Singh.
Judgment / Order of the Supreme Court
Judgment
Satish Chandra Sharma, J. 
1.	
Leave granted.
2.	
The present appeals arise from the common Impugned Judgment 
and Order dated 28.11.2023, passed by the High Court of Delhi at 
[2025] 4 S.C.R. 
3
K.S. Mehta v. M/s Morgan Securities and Credits Pvt. Ltd.
New Delhi (the “High Court”), whereby the High Court dismissed the 
petitions filed under Section 482 of the Code of Criminal Procedure, 
1973 (the “CrPC”). The petitions sought the quashing of criminal 
proceedings initiated against the Appellant(s) under Section 138 read 
with Section 141 of the Negotiable Instruments Act, 1881 (the “NI Act”).
BACKGROUND
3.	
The Appellant(s) K.S. Mehta, and Basant Kumar Goswami, were 
appointed as directors of M/s Blue Coast Hotels & Resorts Ltd. 
(Accused No. 1/Company) at different times. K.S. Mehta was 
appointed as an additional director on 29.06.2001, while Basant 
Kumar Goswami was appointed as a director on 16.04.1998. 
Appellant(s) were designated as non-executive director in compliance 
with clause 49 of the Listing Agreement prescribed by the Securities 
and Exchange Board of India (the “SEBI”). Their role was confined 
to governance oversight without any executive authority or financial 
decision-making power in the company.
4.	
The dispute stems from an Inter-Corporate Deposit (“ICD”) agreement 
dated 09.09.2002, executed between the accused company and the 
Respondent to avail a financial facility of ₹5

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