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of <h1>High Court Reverses Discharge Decision in RBI Case, Emphasizes Director Responsibility</h1> The High Court overturned the Trial Court's decision to discharge respondents 3 and 4 in a case involving the Reserve Bank of India. The High Court found ... Penalties - Offences by companies Issues Involved:1. Legality of the discharge of respondents 3 and 4 by the Trial Court.2. Responsibility and liability of directors under Section 58C of the RBI Act.3. Applicability of criminal proceedings during winding-up proceedings under the Companies Act.Issue-wise Detailed Analysis:1. Legality of the discharge of respondents 3 and 4 by the Trial Court:The High Court of Karnataka addressed the legality of the Trial Court's order discharging respondents 3 and 4 from the case. The petitioner, Reserve Bank of India (RBI), argued that the Company Law Board had ordered the 1st respondent company to repay deposits, which it failed to do. Consequently, the RBI filed a complaint under Section 58C(1), read with Sections 45QA, 58B, and 58C of the RBI Act. The Trial Court, after taking cognizance, registered the complaint and summoned the respondents. However, it discharged respondents 3 and 4, stating they were not necessary parties. The High Court found this discharge to be erroneous and illegal, noting that the complaint specifically averred the responsibility of respondents 3 and 4 in the conduct of the company's business.2. Responsibility and liability of directors under Section 58C of the RBI Act:The High Court examined the provisions of the RBI Act, particularly Section 58C, which states that every person in charge of and responsible for the conduct of the company's business at the time of contravention shall be deemed guilty of the contravention. The Court noted that the complaint and evidence indicated that respondents 3 and 4 were directors responsible for the company's business. Therefore, their discharge by the Trial Court was deemed inappropriate. The Court emphasized that respondents 3 and 4 could not be absolved solely because other directors were not prosecuted. It directed the petitioner to ascertain and take action against all directors responsible for the company's business.3. Applicability of criminal proceedings during winding-up proceedings under the Companies Act:The High Court also addressed the argument that criminal proceedings should not proceed due to the initiation of winding-up proceedings. The Court clarified that Section 446 of the Companies Act, which restricts the initiation of civil suits or legal proceedings during winding-up, does not apply to criminal prosecutions. The Court cited a Division Bench decision of the Delhi High Court in D.K. Kapur v. RBI, which held that criminal prosecutions for violations of legal provisions are not barred by winding-up proceedings. Therefore, the argument that the winding-up proceedings should stay the criminal prosecution was rejected.Conclusion:The High Court allowed the revisions, setting aside the Trial Court's order discharging respondents 3 and 4. It directed the Trial Court to pass orders in accordance with the law, considering the averments against respondents 3 and 4 regarding their responsibility for the conduct of the company's business. The Court also instructed the petitioner to take action against other directors responsible for the company's business.
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