Former directors may be liable for criminal acts

In two recent cases, Suhas Bhand v State of Maharashtra & Anr and Amul Urdhwareshe v The State of Maharashtra & Anr, the division bench of Bombay High Court addressed the issue of how criminal proceedings should be initiated against company directors following their resignation.

The petitioners were directors at Enbee Infrastructure, which obtained a loan from the Housing and Urban Development Corporation (HUDCO) through a loan agreement dated 29 December 1999. After obtaining the loan from HUDCO, Enbee issued several post-dated cheques through its director and authorized signatory. Some of the cheques were dishonoured. HUDCO filed several complaints in the magistrate’s court under section 138/141 of the Negotiable Instruments Act,1881, alleging that some of Enbee’s directors were responsible for the dishonoured cheques.

The petitioners filed applications to quash the complaints against them, claiming they had resigned as directors of Enbee before the cheques were found to be dishonoured, and that as a result they were not liable under section 138 read with section 141 of the Negotiable Instruments Act. The petitioners each produced a certified copy of form number 32 issued by the registrar of companies (ROC) to prove they had resigned.

The update of court judgments is compiled by Bhasin & Co, Advocates, a corporate law firm based in New Delhi. The authors can be contacted at lbhasin@bhasinco.in or lbhasin@gmail.com. Readers should not act on the basis of this information without seeking professional legal advice.