Former director prosecution needs specific allegations; vague complaints and a derivative look out circular cannot stand after quashing.

A former director who had resigned before the company began commercial operations could not be proceeded against for offences under Sections 447 and 448 of the Companies Act, 2013 on the basis of a bare, generalized complaint. The court noted that he was only a temporary first director, the complaint lacked specific allegations linking him to the alleged fraud during the relevant period, and earlier investigations had not found incriminating material against him. On that basis, the criminal proceedings were quashed. As the look out circular had no independent basis once the underlying prosecution was set aside, it was also quashed.

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Issues: (i) Whether a former director, who had resigned before the company commenced commercial operations and against whom earlier investigating agencies had found nothing incriminating, could be proceeded against for offences under Sections 447 and 448 of the Companies Act, 2013 on the basis of a bare and generalized complaint. (ii) Whether the look out circular issued against the petitioner could survive after the criminal proceedings against him were quashed.

Issue (i): Whether a former director, who had resigned before the company commenced commercial operations and against whom earlier investigating agencies had found nothing incriminating, could be proceeded against for offences under Sections 447 and 448 of the Companies Act, 2013 on the basis of a bare and generalized complaint.

Analysis: The material showed that the petitioner was only a temporary first director, had resigned long before the company started its commercial activities, and the complaint itself did not contain any specific allegation connecting him with the alleged fraudulent acts during the relevant period. Earlier investigations by two agencies had also excluded him from the array of accused. In such circumstances, criminal prosecution could not rest on vague attribution or merely on the fact that he had once been a director.

Conclusion: The prosecution against the petitioner was unsustainable and the proceedings were quashed.

Issue (ii): Whether the look out circular issued against the petitioner could survive after the criminal proceedings against him were quashed.

Analysis: The look out circular was founded on the very proceedings that had been initiated against the petitioner. Once the criminal case was found to be unsustainable and quashed, the consequential restraint on travel had no independent footing.

Conclusion: The look out circular was quashed.

Final Conclusion: The petitioner obtained complete relief, with the criminal case and the consequential travel restriction both set aside.

Ratio Decidendi: A former director cannot be subjected to criminal prosecution for company offences absent specific allegations connecting him to the offending conduct during the relevant period, particularly where prior investigations have not found material against him.

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