Director liability under company offence provisions fails where resignation predates the alleged default and the record is undisputed.

Criminal liability of a company director under the deeming provision for offences by companies requires material showing that the person was in charge of and responsible for the company's business when the offence was committed. Where certified records showed that the accused had ceased to be a director before the alleged default, and the complainant itself admitted the resignation, the factual foundation for prosecuting that person as a responsible director was absent. On that undisputed record, the Delhi HC treated continuation of the complaint as an abuse of process and held that the proceedings could be quashed in exercise of inherent jurisdiction without a trial.

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Issues: Whether criminal proceedings under the SEBI Act could be quashed under the inherent jurisdiction when the accused had ceased to be a director before the alleged default and the complaint itself contained an admission to that effect.

Analysis: The complaint proceeded on the basis that directors were liable for the company's default under the deeming provision governing offences by companies. The material placed on record included certified copies of Form 32 showing that the petitioner had ceased to be a director on 1.9.1998, well before the relevant default and the filing of the complaint. The complainant also admitted in its reply that the petitioner had resigned from the directorship in 1998. In these circumstances, the essential foundation for fastening liability on the petitioner as a director in charge of the company's business at the relevant time was absent. The Court held that continuing the proceedings would amount to an abuse of process and that the matter could be decided on the admitted and undisputed record without insisting on a trial.

Conclusion: The proceedings against the petitioner were liable to be quashed and the petitioner succeeded.

Final Conclusion: The Court exercised its inherent jurisdiction to terminate the criminal complaint and the related order against the petitioner on the ground that no prima facie liability could attach to a person who had already ceased to be a director before the relevant default.

Ratio Decidendi: For fastening liability on a director under the deeming provision for company offences, it must be shown that the person was in charge of and responsible for the company's business at the time of the commission of the offence; where the record conclusively shows otherwise, criminal proceedings may be quashed to prevent abuse of process.

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