Nominee director liability requires specific proof of connivance or bad faith before criminal process can issue.

A nominee director of a public sector bank cannot be exposed to prosecution for alleged Companies Act violations merely because he attended board meetings and approved financial statements. Vicarious liability is not automatic under Sections 128, 129, 447 and 448 of the Companies Act, 2013 unless the record shows specific material of individual culpability, such as connivance, bad faith, or conscious approval of a false or misleading statement. Section 16A of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 further protects nominated directors for acts done or omitted in good faith. In the absence of such averments, the complaint and investigation material are insufficient to justify summons.

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Issues: Whether a nominee director of a public sector bank could be proceeded against for alleged violations of the Companies Act merely because he participated in board meetings and approved financial statements, and whether the complaint and investigation material disclosed any specific allegation of connivance, bad faith, or knowledge of falsity sufficient to justify summons.

Analysis: The allegations against the petitioner arose solely from his position as a nominee director and his participation in board approval of financial statements. The statutory scheme of Sections 128, 129, 447 and 448 of the Companies Act, 2013 does not fasten vicarious liability on a director in the absence of specific material showing individual culpability, and Section 16A of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 protects a nominated director from liability for acts done or omitted in good faith. Liability under Section 448 also requires knowledge that the statement is false or that a material fact has been knowingly omitted. The complaint and the investigation report did not contain any specific averment that the petitioner was complicit, acted in bad faith, or knowingly approved false or misleading accounts. The summoning order proceeded on an assumption of connivance that was not supported by the record.

Conclusion: The petitioner could not be prosecuted on the basis of his status as a nominee director alone, and the material on record was insufficient to sustain the summoning order against him.

Final Conclusion: The impugned summons, insofar as they related to the petitioner, were unsustainable and were set aside, resulting in relief to the petitioner.

Ratio Decidendi: A nominee director cannot be subjected to criminal prosecution for company offences merely by reason of board participation unless the record discloses specific material of connivance, bad faith, or conscious approval of a false or misleading statement; at the summoning stage, the court must have such material before issuing process.

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