Former director liability in cheating cases requires specific allegations of dishonest intent and role in company business.

Criminal proceedings for cheating and offences under the Prize Chits and Money Circulation Schemes (Banning) Act could not be sustained against a former director who had resigned before the alleged offence period and against whom the complaint and FIR contained no specific allegation. The Court noted that Form No. 32 reflected the resignation, and there was no averment of active participation, deception, or dishonest or fraudulent intention attributable to the accused. It reaffirmed that cheating requires dishonest intention at the time of inducement, and that vicarious criminal liability cannot be inferred merely from past association with a company in the absence of allegations that the person was in charge of or responsible for its business during the relevant period.

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Issues: Whether criminal proceedings for cheating and for offences under the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 could be sustained against a former director who had resigned before the alleged period of offence and against whom the complaint/FIR contained no specific allegation.

Analysis: The appellant had ceased to be a director before the alleged offences occurred, and the record showed that Form No. 32 had been filed reflecting the resignation. The complaint and FIR did not contain any specific averment of active participation, deception, or dishonest or fraudulent intention attributable to the appellant. For an offence of cheating, the essential element is dishonest or fraudulent intention at the time of inducement, and mere later failure or corporate default is insufficient. The Court also noted that there is no automatic vicarious liability under the Indian Penal Code merely because a person was once associated with the company, and such liability could not be inferred in the absence of allegations that the appellant was in charge of or responsible for the business when the alleged offence was committed. The complainant had also withdrawn the allegations and stated that the appellant's name had been inadvertently included.

Conclusion: The criminal proceedings against the appellant could not be sustained and were liable to be quashed.

Ratio Decidendi: In the absence of specific allegations showing the accused's dishonest or fraudulent intention, active participation, or responsibility for the conduct of the company's business during the relevant period, criminal proceedings for cheating cannot be maintained against a former director who had resigned before the alleged offence.

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