Dissolved Company Liable Under PMLA and IPC; Director Can Represent It Under Section 305 Cr.P.C.

The HC held that a dissolved company remains liable for its obligations and can be prosecuted under PMLA and IPC provisions by following the procedure under Section 305 Cr.P.C. Restoration of the company may be sought for prosecution; if not possible, a director or authorized representative can be made an accused to represent the company. The Court upheld the prosecution's action of naming the director as the representative of the dissolved company, rejecting the petition to remove him. The order of the Special Court refusing to remove the accused as the company's representative was confirmed, and the petition was dismissed.

---

---

ISSUES:

Whether a dissolved company can be prosecuted for offences committed during its existence.Whether a director or authorized representative can be compelled to represent a dissolved company in criminal proceedings.The applicability and interpretation of Section 305 of the Code of Criminal Procedure, 1973, regarding representation of companies in criminal trials.The effect of Sections 248 and 250 of the Companies Act, 2013, on the prosecution and liabilities of dissolved companies.The scope and application of Section 70 of the Prevention of Money-Laundering Act, 2002 (PMLA Act) concerning offences by companies and their officers.The procedural lacuna regarding prosecution of dissolved companies and the need for legislative intervention.The relevance of judicial precedents on vicarious liability of directors and partners in criminal prosecutions when the company or firm is not prosecuted.

RULINGS / HOLDINGS:

A dissolved company can be prosecuted for offences committed during its existence by restoring its status or by prosecuting the persons who were in charge at the time of the offence, as "liability ... shall continue and may be enforced as if the company had not been dissolved."The prosecution cannot compel a director or authorized representative to represent a dissolved company; however, in the absence of specific legislative provisions, appointing a director as representative is justified "in the interest of justice."Section 305 of Cr.P.C. applies only to companies in existence that can appoint representatives; it does not expressly provide for prosecution of dissolved companies.Section 248(7) of the Companies Act, 2013, clarifies that liabilities of dissolved companies and their officers continue and can be enforced post-dissolution.Section 70 of the PMLA Act deems every person in charge of a company at the time of contravention and the company itself guilty of offences, without distinction between existing or dissolved companies.In the absence of specific procedural provisions to prosecute dissolved companies, the prosecution may seek restoration of the company or proceed against responsible individuals; legislative amendment is necessary to address this lacuna.Judicial precedents confirm that vicarious liability of directors or partners arises only when the company or firm is also prosecuted; partners can be liable jointly and severally with the firm, but a company cannot be prosecuted without being impleaded as an accused.

RATIONALE:

The Court applied Sections 248 and 250 of the Companies Act, 2013, establishing that dissolution does not extinguish corporate liabilities or the capacity to enforce them.Section 305 of Cr.P.C. was interpreted as procedural guidance applicable only to existing companies for appointing representatives in criminal trials.The Court relied on Section 70 of the PMLA Act, which imposes criminal liability on companies and persons in charge without limiting applicability to existing companies.Precedents from the Supreme Court clarified that directors' vicarious liability depends on prosecution of the company itself, emphasizing the necessity to arraign the company as an accused to hold officers liable.The Court recognized a procedural gap in prosecuting dissolved companies and recommended legislative intervention to amend procedural laws, including the Cr.P.C. and special statutes, to explicitly address prosecution of dissolved or struck-off companies.The Court noted that until such legislative provisions are enacted, prosecution may restore dissolved companies to the register or proceed against individuals responsible for the company's conduct to ensure accountability.The decision aligns with corporate criminal liability doctrines, including the doctrine of attribution, which holds companies liable for acts of persons in positions of authority, and ensures that dissolution does not provide impunity for offences committed during corporate existence.

---