The Madras High Court has ruled that the dissolution or winding up of a company does not terminate the personal criminal liability of its directors or natural persons. Dismissing the criminal original petitions filed by the directors of M/s. Synergy Financial Exchange Limited (SFEL), Justice G.K. Ilanthiraiyan held that while the corporate entity itself may be dissolved, the natural persons who ran its affairs cannot escape prosecution for their personal acts of fraud and misappropriation. The Court rejected the pleas of the company’s founder, S. Venkatraman, and an associate, P. Rajarathinam, seeking to quash a 21-year-old cheating case investigated by the Central Bureau of Investigation (CBI).
Background of the Case
The case originates from criminal complaints registered during 1999 with the Central Crime Branch, Chennai. In one instance, a defacto complainant had a matured deposit of Rs. 30,00,000 during the years 1997–1998 in a fixed deposit scheme with SFEL, for which post-dated cheques issued by the company were subsequently dishonoured. The complainant alleged that the company and its directors acted evasively regarding repayments. In another instance, another victim, P.S.B. Rajan, and his family invested Rs. 9.25 lakhs in SFEL’s fixed deposit schemes, which the promoters failed to repay after luring the public to invest through repeated advertisements.
Following a winding-up petition (CP.No.322 of 1999) filed by depositors Raghuraman and Sita, the High Court ordered SFEL to wind up and directed the police to register cases and proceed with the investigation. Consequently, the Central Bureau of Investigation (CBI), Economic Offences Wing (EOW), Chennai, registered cases RC.5(E)/2001 and RC.6(E)/2001 on December 19, 2001.
Upon completing the investigation, the CBI filed a combined charge sheet on May 14, 2004, against nine accused persons. S. Venkatraman was arrayed as the first accused (A1), while P. Rajarathinam, who was declared a proclaimed offender and had a Red Corner Notice issued against him, was arrayed as the fifth accused (A5) in a split-up case (CC.No.1387 of 2006).
Arguments of the Parties
The petitioner in Crl.OP.No.8077 of 2025, S. Venkatraman (A1), argued that the company, SFEL, was not arrayed as an accused in the CBI’s final report. He contended that under the Indian Penal Code (IPC), there is no provision to punish directors by way of vicarious liability for offenses committed by a company without making the company itself an accused. In support of his contentions, his counsel relied on the Supreme Court judgment in S.K. Alagh Vs. State of Uttar Pradesh and Others (2008) and the Madras High Court judgment in B. Jagadeesh and others Vs. The Deputy Superintendent of Police, EOW-II, Namakkal (2011), which held that vicarious liability cannot be fastened on directors for IPC offences in the absence of explicit statutory provisions.
The petitioner in Crl.OP.No.1190 of 2026, P. Rajarathinam (A5), argued that his firm, M/s. P. Rajarathinam Associates, entered into a memorandum of understanding (MoU) dated February 26, 1999, to take over SFEL. However, he contended that he was not a personal signatory to the MoU, and therefore, the liabilities arising from the agreement could not be fastened upon him.
The Special Public Prosecutor representing the CBI, Mr. B. Mohan, strongly opposed both petitions. He argued that the accused persons were full-time directors and authorized signatories who mobilized deposits worth Rs. 14.73 crores from the public by publishing advertisements promising interest rates of 18% to 24% per annum. The CBI alleged that Venkatraman and other accused persons floated a sister concern (the ninth accused) and systematically diverted public deposits to their personal bank accounts and to the sister concern, siphoning off the funds and causing a fiscal crisis.
For P. Rajarathinam (A5), the prosecution detailed that under the take-over memorandum, his firm explicitly undertook to protect and care for all SFEL investors. Instead, he collected outstanding money from the company’s debtors to the tune of Rs. 23.04 lakhs and misappropriated it for his personal use and other associate companies. The CBI further noted that Rajarathinam had been absconding in England for years, with a Non-Bailable Warrant (NBW) and a Red Corner Notice still active against him.
The Court’s Analysis
Addressing S. Venkatraman’s contention regarding the omission of the company as an accused, the High Court observed that SFEL had already been ordered to wind up by the court, and its properties were in the hands of the Official Liquidator.
Justice Ilanthiraiyan relied on the three-judge bench decision of the Supreme Court in Ajay Kumar Radheyshyam Goenka Vs. Tourism Finance Corporation of India Limited (2023), which dealt with the effect of corporate dissolution on natural persons. The High Court highlighted the Supreme Court’s observation:
“What is dissolved is only the company, not the personal penal liability of the accused…”
The Court noted that when a company faces a legal impediment to being prosecuted due to dissolution, the legal maxim Lex Non Cogit Ad Impossibilia is attracted. Quoting the Supreme Court’s analysis:
“In such a situation the Latin maxim Lex Non Cogit Ad Impossibilia is attracted which means law does not compel a man to do which he cannot possibly perform.”
Furthermore, the Court pointed out that Venkatraman was not being prosecuted merely due to his status as a director, but due to his active, personal role in the conspiracy and fraud. The High Court observed:
“Therefore though the company is not arrayed as accused since it was already wound up, the petitioner and other Directors under their personal capacity can be prosecuted for the aforementioned offences.”
Regarding P. Rajarathinam (A5), the Court found that despite the Division Bench of the High Court keeping his arrest warrant in abeyance in 2005 on the condition that he appear before the investigative authorities and the trial court, he had failed to do so. With an active Non-Bailable Warrant and a Red Corner Notice pending, and given the specific allegations of him diverting Rs. 23.04 lakhs of investors’ money, the Court ruled he was not entitled to any relief under Section 528 of the Bharatiya Nagarik Suraksha Sanhita (BNSS).
On the limits of its quashing jurisdiction under Section 482 of the Cr.P.C., the Court cited three key Supreme Court rulings:
- Devendra Prasad Singh Vs. State of Bihar & Anr. (2019), which established that High Courts cannot appreciate witness statements to find inconsistencies at the quashing stage.
- Central Bureau of Investigation Vs. Arvind Khanna (2019), which held that High Courts cannot record findings on disputed facts, which must be tested during trial.
- M. Jayanthi Vs. K.R. Meenakshi & anr (2019), which emphasized that the court must only examine whether the allegations in the complaint form the basis of the ingredients constituting the alleged offences.
The Decision
Concluding that there were clear, prima facie allegations against both petitioners in their personal capacities, the High Court found no grounds to quash the proceedings. Justice Ilanthiraiyan dismissed both criminal original petitions and closed all connected miscellaneous petitions, clearing the path for the trial to proceed.
Case Details:
Case Title: S. Venkatraman Vs. Additional Superintendent of Police
Case No.: Crl.O.P.Nos.8077 of 2025 & 1190 of 2026
Bench: Justice G.K. Ilanthiraiyan
Date: 01.07.2026
