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In a significant legal development, the Supreme Court of India delivered a landmark judgment in Criminal Appeal Nos. [Insert Case Numbers] of 2022, bringing clarity to the liability of directors who have resigned from their positions. The case involved former Directors of M/s MIEL e-Security Private Limited facing allegations under Section 138 of the Negotiable Instruments Act, 1881.

Background: The appellants, who had resigned in 2013 and 2014, were accused of wrongdoing related to dishonored cheques issued by the company. The legal dispute reached the apex court after the appellants challenged the complaint filed by the company.

Key Legal Points: The Supreme Court extensively analyzed Section 141 of the Negotiable Instruments Act and referred to legal precedents emphasizing the importance of proper averments in complaints before initiating criminal proceedings. The court highlighted that directors can be held liable only if their involvement is proven and if they were in charge of the company’s affairs at the time of the alleged offense.

Court’s Decision: The court observed that the complainant failed to establish the appellants’ complicity in the alleged offense. Notably, the appellants had resigned before the issuance of the cheques, a fact supported by Form 32. Consequently, the Supreme Court quashed all criminal proceedings against the appellants, emphasizing that they could not be held responsible for the conduct of business after their resignation.

Impact on Directors’ Liability: This judgment sets a precedent regarding the liability of directors who have resigned from their positions. The court’s emphasis on clear averments in complaints serves as a safeguard against vicarious liability for directors who have severed ties with the company.

Conclusion: The Supreme Court’s decision brings clarity to the legal landscape concerning the liability of directors after resignation. The ruling underscores the importance of establishing a director’s involvement in alleged offenses and provides a safeguard against unfounded criminal proceedings.

For more details, the full judgment can be accessed on the Supreme Court of India’s official website.


Name:- Darshika Upraity, LL.B. (2nd year student), Faculty Of Law, Agra College, Agra,INTERN UNDER LEGAL VIDHIYA

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