Vicarious liability of former directors cannot survive when undisputed records show resignation before the alleged statutory default

Undisputed material showing that former directors had resigned years before the alleged Companies Act default defeated any prima facie basis for vicarious liability for later acts of non-compliance. The prior regulatory record had already noted that no action was required against them because they were no longer directors, and that finding was later reaffirmed. On those facts, continuation of the criminal complaint and related proceedings was treated as harassment and an abuse of process, and the prosecution against the petitioners was liable to be quashed.

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Issues: Whether criminal complaint and related proceedings under the Companies Act could continue against former directors who had resigned long before the alleged defaults and against whom prior regulatory findings had already exonerated them.

Analysis: The petitioners had resigned as directors in 1995 and 1998, whereas the alleged default under Section 12 of the Companies Act, 2013 related to 2014. The record also showed that the regulatory authority had earlier examined the same status and recorded that, since they were no longer directors, no action was required against them; that position was reaffirmed later. In such circumstances, the materials relied upon by the petitioners were of sterling quality and clearly negatived any vicarious liability for defaults said to have occurred after their resignation. Continuing the prosecution would therefore amount to harassment and an abuse of process.

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

Ratio Decidendi: Where undisputed material shows that an accused had ceased to be a director long before the alleged statutory default, and the accusation concerns later defaults, inherent jurisdiction may be exercised to quash the prosecution because no prima facie liability survives and continuation of proceedings would be an abuse of process.

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