MPID & BUDS Acts | Director Liability Ceases Post-Resignation Absent Personal Misappropriation: Bombay HC Grants Bail

In a significant ruling on director liability, the Bombay High Court granted regular bail to a former director of J.S.V. Developers India Limited, holding that mere directorship during the period of alleged financial misappropriation does not automatically attract criminal liability under the Maharashtra Protection of Interest of Depositors (MPID) Act, 1999 or the Banning of Unregulated Deposit Schemes (BUDS) Act, 2019, absent proof of personal involvement in the offence.

Background & Facts

The Dispute

The applicant, Dinesh Hemraj Tembhare, a former director of J.S.V. Developers India Limited, sought regular bail in Crime No. 257/2019 registered at Police Station Karanja (Ghadge), District Wardha. The First Information Report (FIR) was lodged by Sou. Varsha Darokar, alleging that between 27.12.2011 and 03.08.2019, officials of J.S.V. Developers India Limited collected amounts towards Fixed Deposits and Recurring Deposits but failed to return the money upon maturity. The offences invoked included Sections 406 (criminal breach of trust), 409 (criminal breach of trust by public servant), 420 (cheating), 120-B (criminal conspiracy) read with Section 34 of the Indian Penal Code (IPC), 1860, Section 3 of the MPID Act, 1999, and Sections 21, 22, 23, 24, and 25 of the BUDS Act, 2019.

Key Facts

• The informant alleged that J.S.V. Developers India Limited collected deposits but failed to repay them upon maturity.
• The applicant was a director of the company from 2011 to 2015.
• During his tenure, the applicant purchased Gat No. 609 in the name of J.S.V. Developers India Limited.
• In 2015, the applicant ceased to be a director, and the plot was transferred to Sau. Sandhya Ishwar Ambedare, another director of the company.
• A notification under the MPID Act was issued on 08.02.2018, attaching properties including Gat No. 609.
• The plot was later sold, and the sale proceeds were deposited with the court by order dated 15.02.2021 passed by the Additional Sessions Judge, Bhandara.
• The FIR was registered in 2019, but the applicant was not summoned or arrested until 2025.

Procedural History

• 2019: FIR registered (Crime No. 257/2019).
• 08.02.2018: Notification under MPID Act issued.
• 15.02.2021: Additional Sessions Judge, Bhandara, absolved Gat No. 609 from attachment.
• 08.04.2026: Bombay High Court granted bail to co-accused Amit Kondadeo Choudhary in Criminal Application [B.A.] No. 343/2026.
• 29.04.2026: Present bail application (Criminal Application [B.A.] No. 490/2026) filed before the Bombay High Court.

The Parties' Positions

For the Applicant

The applicant contended that:

• He was a director only from 2011 to 2015 and had no role in the alleged misappropriation post-2015.
• The plot (Gat No. 609) was purchased in his official capacity as director and later transferred to another director.
• He had no personal benefit from the transaction and did not misappropriate any funds.
• The investigating agency failed to summon or arrest him for six years post-FIR, indicating lack of prima facie evidence.
• The co-accused Amit Choudhary, who was actively involved in collecting deposits, had already been granted bail by the same court.

For the Respondent/State

The State opposed the bail application, arguing:

• The applicant was a director during the period of alleged offences (2011-2015).
• Gat No. 609 was purchased during his tenure and was part of the MPID Act notification.
• The allegations were serious, involving large-scale financial fraud affecting multiple depositors.

Relief Sought

The applicant sought regular bail under Section 439 of the Code of Criminal Procedure (CrPC), subject to stringent conditions.

The Legal Issue

The central question was whether a former director of a company can be held criminally liable for offences under the MPID Act, 1999 and BUDS Act, 2019 for actions taken during their tenure, absent proof of personal misappropriation or continued involvement post-resignation.

Arguments Presented

For the Applicant

The applicant relied on the following legal contentions:

• Official Capacity: The purchase of Gat No. 609 was done in his official capacity as director, not for personal gain.
• No Misappropriation: There was no allegation of personal misappropriation of funds by the applicant.
• Cessation of Role: He ceased to be a director in 2015, four years before the FIR was lodged.
• Delay in Investigation: The investigating agency failed to summon or arrest him for six years, undermining the seriousness of the allegations.
• Precedent: The court had already granted bail to a co-accused (Amit Choudhary) on similar grounds.

For the Respondent/State

The State countered with:

• Vicarious Liability: As a director during the relevant period, the applicant was vicariously liable for the company's actions.
• Attachment of Property: Gat No. 609 was attached under the MPID Act, indicating his involvement.
• Gravity of Offence: The allegations involved large-scale financial fraud, warranting denial of bail.

The Court's Analysis

The Court conducted a prima facie analysis of the applicant's role and the investigation's conduct:

1. Role of the Applicant: The Court noted that the applicant was a director only from 2011 to 2015 and that Gat No. 609 was purchased during this period. However, the plot was later transferred to another director (Sau. Sandhya Ishwar Ambedare) in 2015, and the applicant had no further involvement.

2. No Personal Misappropriation: The Court observed that there was no allegation of personal misappropriation by the applicant. The property was purchased in the name of the company, and the applicant derived no personal benefit.

3. Investigation Delay: The Court expressed surprise at the six-year delay in arresting the applicant, noting that the investigating agency had neither issued summons nor called him for questioning during this period. This delay weakened the State's case for denial of bail.

4. Precedent Application: The Court relied on its earlier order in Criminal Application [B.A.] No. 343/2026 (granting bail to Amit Choudhary), where similar observations were made about the delay in investigation and lack of prima facie evidence.

5. Prima Facie Findings: The Court held that the applicant's role was limited to his tenure as director, and there was no evidence to suggest his continued involvement in the alleged offences post-2015. The observations were confined to the bail application and would not influence the trial.

"It appears from the documents that, later on, he ceased to be the Director in the year 2015, and accordingly, the said plot was transferred to another Director... Under such circumstances, I find that, there is substance in the arguments advanced by the learned counsel for the applicant, as no amount of misappropriation has been received by him, so also, the applicant ceased to be the Director in the year 2015 itself."

The Verdict

The Bombay High Court allowed the bail application with the following directions:

1. The applicant was granted regular bail on furnishing a Personal Recognizance (P.R.) bond of Rs. 50,000 with two solvent sureties of the like amount.
2. The applicant was barred from entering the territorial jurisdiction where the informant resides until the completion of the trial.
3. The applicant was prohibited from tampering with evidence or influencing witnesses.
4. The applicant was required to provide his residential address and cell number to the police and not change his residence without prior intimation.
5. The applicant was directed to attend every trial date without fail. Non-compliance would entitle the State to seek cancellation of bail.
6. The Court clarified that its observations were prima facie and would not influence the trial court.

What This Means For Similar Cases

Directors Cannot Be Automatically Liable For Post-Tenure Offences

This judgment reinforces the principle that directors cannot be held criminally liable for offences committed by a company after their resignation, unless there is proof of personal involvement or misappropriation. Practitioners should note:

• Vicarious liability under statutes like the MPID Act and BUDS Act does not extend to former directors absent specific allegations.
• Official capacity is a valid defence if the director acted on behalf of the company and derived no personal benefit.

Delay in Investigation Weakens Prosecution's Case

The Court's observations on the six-year delay in arresting the applicant highlight a critical takeaway for law enforcement:

• Prompt investigation is essential to maintain the credibility of criminal proceedings.
• Failure to summon or arrest an accused for an extended period may lead to adverse inferences in bail applications.
• Courts may view undue delay as indicative of lack of prima facie evidence, favouring the accused in bail matters.

Property Attachment Does Not Imply Guilt

The judgment clarifies that attachment of property under the MPID Act does not, by itself, establish criminal liability:

• Attachment is a preventive measure, not conclusive proof of guilt.
• Transfer of property post-resignation may absolve the former director of liability if no personal misappropriation is proven.
• Notification under MPID Act must be supported by evidence linking the director to the alleged offence.

Practitioners should argue for bail in similar cases by emphasizing:

• Lack of personal involvement in the alleged offence.
• Cessation of role before the offence was committed.
• Delay in investigation as a factor favouring bail.
• Precedent of co-accused granted bail on similar grounds.