Resigned directors cannot face cheque dishonour prosecution when records show they left before the cheque was issued.

Criminal proceedings under Section 138 of the Negotiable Instruments Act were held unsustainable against directors who had resigned before the cheque was issued and were not signatories to it. The court treated Form 32 and other uncontroverted material as showing that the accused had ceased to be directors before the relevant transaction, so they were not persons in charge of the company's day-to-day affairs at the material time. On that basis, continuing the prosecution would serve no useful purpose and would amount to an abuse of process; the proceedings were quashed.

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Issues: Whether criminal proceedings under Section 138 of the Negotiable Instruments Act, 1881 could be sustained against directors who had resigned from the company before the cheque in question was issued and were not signatories to the cheque.

Analysis: The resignations were reflected in Form 32 and the material showed that the petitioners had ceased to be directors before the cheque was issued. In such circumstances, the principle applied is that liability for dishonour of a cheque lies against the company and the persons who were in charge of and responsible for its day-to-day affairs at the relevant time. Where uncontroverted and reliable documents show that the accused had already resigned before the relevant transaction, compelling them to face trial would serve no useful purpose and would amount to an abuse of process. The court applied its inherent jurisdiction to prevent continuation of proceedings against persons who were no longer connected with the company's affairs at the material time.

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

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