Former directors escape cheque dishonour liability when resignation pre-dates issuance and they no longer control company affairs.

Former directors who had resigned and whose resignations were accepted before the cheques were issued could not be proceeded against under Section 138 of the Negotiable Instruments Act. The court noted that the later incorrect Form No. 32 entry did not create liability, as filing that form was the company's responsibility and the minute book showed acceptance of the resignations. Since the cheques were issued after the petitioners had ceased to be directors and were no longer in control of the company's affairs, vicarious criminal liability did not attach. The complaints and summoning orders were therefore liable to be quashed under Section 482 CrPC.

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Issues: Whether directors who had resigned from the company and whose resignations had been accepted before the cheques were issued could be proceeded against for offence under Section 138 of the Negotiable Instruments Act, 1881, and whether the complaints and summoning orders were liable to be quashed under Section 482 of the Code of Criminal Procedure, 1973.

Analysis: The resignations of the petitioners were found to have been tendered on 10.10.2011 and accepted by the Board on 18.11.2011. The later incorrect entry in Form No. 32 by the company secretary did not create liability on the petitioners, since the filing of the form was the company's statutory responsibility. The original minute book showed that the resignations had been accepted with effect from the date of submission, and the cheques in question were issued only on 21.06.2012, when the petitioners were no longer directors or concerned with the company's affairs. The principle applied was that a person who is not a director on the date of commission of the offence cannot be made vicariously liable for dishonour of cheques.

Conclusion: The petitioners were not liable for the cheque dishonour proceedings, and the complaints as well as the summoning orders were liable to be quashed.

Final Conclusion: Criminal process against former directors was held unsustainable because their resignation had taken effect before the issuance of the dishonoured cheques.

Ratio Decidendi: Vicarious liability under Section 138 of the Negotiable Instruments Act, 1881 cannot attach to a person who had ceased to be a director before the cheque was issued and who was not in control of the company's affairs at the time of the offence.

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