Director not liable for all wrongs in a Company: SC

A director of a firm cannot be held liable for the wrongs committed by his company unless it is proved that he was involved in the irregularities, the Supreme Court has held. This court has repeatedly held that in case of a director, complaint should specifically spell out how and in what manner the director was in charge of or was responsible to the accused company for conduct of its business and mere bald statement that he or she was in-charge of and was responsible to the company for conduct of its business is not sufficient, a bench of justices P Sathasivam and Jasti Chelameswar said. The court passed the order while quashing criminal proceedings against a former director of Apparel Export Promotion Council in a cheque bounce case. The bench also held that a former director cannot be prosecuted in a case of bouncing of a cheque if it has been issued by the company after he ceased to be on its board member. The court set aside the Delhi High Court order which had dismissed the plea of the director for quashing the criminal proceedings. The counsel for the petitioner had pleaded that the director had ceased to be part of the company on the date when the cheque was issued by the firm and that the appelant could not be held liable for it getting dishonoured. We are unable to accept the reasoning of the high court and we are satisfied that the appellant has made out a case for quashing the criminal proceedings, the bench said, adding that it was established that the petitioner had resigned from the company as a director in 1998 while the cheque had been issued by it in 2004.

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