Director liability for non-compliance with binding repayment orders survives if prima facie material exists at the quashing stage.

A director inducted after a Company Law Board repayment order was not automatically relieved from liability for alleged non-compliance. The Madras HC held that a later-appointed director assumes responsibility to ensure existing binding orders against the company are complied with, and that questions whether he was in charge of the business or had resigned to avoid compliance are matters for evidence. Because the complaint disclosed prima facie material of possible liability, the proceedings were not quashed and were permitted to continue.

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Issues: Whether criminal proceedings for alleged non-compliance with the Company Law Board order could be quashed against a director who was inducted after the order and later resigned, in the context of offences under the Reserve Bank of India Act, 1934.

Analysis: The complaint was based on failure to comply with the Company Law Board directions requiring repayment of deposits, and the order itself indicated that the company and its directors were liable for compliance and for the penal consequences of default. The Court held that later induction as a director did not by itself absolve responsibility, and that a person who becomes a director assumes responsibility to see that the existing orders against the company are complied with. Whether the petitioner was in charge of and responsible for the conduct of the business, or had resigned to avoid compliance, was treated as a matter for evidence and not for quashing at the threshold. The existence of prima facie material was sufficient to permit the prosecution to continue.

Conclusion: The quash petition was rejected and the criminal proceedings against the petitioner were allowed to continue.

Ratio Decidendi: At the stage of quashing, where the complaint discloses prima facie material that a director may be liable for non-compliance with a binding order, questions as to his actual responsibility or motive are matters of evidence and do not warrant interference.

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