Director vicarious liability under SEBI law requires a specific pleading that the accused was in charge at the time of default.

Vicarious criminal liability of directors under section 27 of the SEBI Act arises only where the complaint specifically pleads and prima facie shows that the accused was in charge of and responsible for the company's business at the time of the offence. Here, the complaint did not allege that the former directors held that role when the relevant default occurred, and certified Form No. 32 records showed their resignation before the extended deadline. The court rejected the argument that this should await trial, because the resignation documents were official records and were not controverted. A continuing-offence theory was also unavailable because it was not pleaded. The complaint and summoning order were therefore liable to be quashed.

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Issues: Whether the criminal complaint and summoning order against former directors could be quashed when the complaint did not show that they were in charge of the company at the time of the alleged offence and the record showed resignation before the relevant default.

Analysis: Liability under section 27 of the Securities and Exchange Board of India Act, 1992 arises only if the person sought to be prosecuted was in charge of and responsible to the company for its business at the time the offence was committed. The complaint's own case indicated that the relevant non-compliance related to a deadline that stood extended till the end of December 2000, whereas the petitioners had placed on record certified copies of Form No. 32 showing resignation well before that date. The allegation that they were directors, without a factual assertion tying them to the commission of the offence at the relevant time, was insufficient. The contention that this was a matter for trial was rejected because the resignation documents were official records capable of verification and were not controverted. The suggested theory of a continuing offence was also rejected, as the complaint contained no such pleading.

Conclusion: The petitioners could not be subjected to prosecution under section 27 of the SEBI Act on the basis of the complaint as framed, and the complaint and summoning order were liable to be quashed in their favour.

Ratio Decidendi: Vicarious criminal liability of directors under section 27 of the SEBI Act can be invoked only on a specific pleading and prima facie showing that they were in charge of and responsible for the company at the time of commission of the offence; where undisputed official records show prior resignation and the complaint lacks such averment, quashing is justified.

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