Resigned directors cannot be prosecuted for company-law defaults committed after their resignation, the Kerala HC held.

Former directors who had resigned before the alleged company-law defaults could not be fastened with criminal liability for later non-compliances under the Companies Act. The petitioners had ceased to be directors in August 2000, while the alleged failures relating to appointment of a whole-time company secretary, filing of financial statements and annual return, and appointment of a managing director were said to have occurred in 2003-2004; the Kerala HC held that, once the resignation was established and accepted in connected proceedings, prosecution for those subsequent defaults was not sustainable and the criminal proceedings were quashed.

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Issues: Whether former directors, who had resigned in August 2000, could be prosecuted for alleged non-compliances and offences under the Companies Act said to have occurred in 2003-2004.

Analysis: The petitions concerned complaints alleging violations relating to appointment of a whole-time company secretary, filing of balance-sheet and profit and loss account, filing of annual return, and appointment of a managing director. The Court noted that the petitioners had already resigned from the company long before the alleged defaults arose, and that this factual position had been accepted in earlier connected proceedings. Since the alleged contraventions were subsequent to the resignations, the petitioners could not be fastened with criminal liability for those later defaults.

Conclusion: The prosecution against the petitioners was not sustainable and the proceedings were quashed.

Ratio Decidendi: A resigned director cannot be prosecuted for company-law defaults committed after the resignation, once the resignation is established.

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