TaxTMI 
TaxTMI 
2017 (3) TMI 624
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....C. 3325/2016 & Crl.M.As. 14099/2016, 18058/2016, CRL.M.C. 3326/2016 & Crl.M.A. 14101/2016, CRL.M.C. 3327/2016 & Crl.M.As. 14103/2016, 18059/2016, CRL.M.C. 3328/2016 & Crl.M.As. 14105/2016, 18060/2016, CRL.M.C. 3329/2016 & Crl.M.As. 14107/2016, 18061/2016, CRL.M.C. 3330/2016 & Crl.M.A. 14109/2016, CRL.M.C. 3331/2016 & Crl.M.As. 14111/2016, 18065/2016, CRL.M.C. 3332/2016 & Crl.M.A. 14113/2016, CRL.M.C. 3333/2016 & Crl.M.A. 14116/2016, CRL.M.C. 3334/2016 & Crl.M.As. 14118/2016, 18072/2016, CRL.M.C. 3335/2016 & Crl.M.A. 14120/2016, MUKTA GUPTA, J. (ORAL) 1. Petitioner by way of Crl.M.C.Nos. 3303/2016, 3310/2016, 3312/2016, 3314/2016, 3317/2016, 3318/2016, 3319/2016, 3320/2016, 3321/2016, 3323/2016, 3324/2016, 3325/2016, 3327/2016, 3328/2016, 3329/2016, 3331/2016 and 3334/2016 challenges the order dated 9th May, 2016 summoning him for offence punishable under Sections 138 read with 142 of the Negotiable Instruments Act (in short the NI Act) in Criminal Complaint cases Nos. 6/1/16, 18/1/16, 20/1/16, 19/1/16, 21/1/16, 12/1/16, 11/1/16, 14/1/16, 8/1/16, 13/1/16, 10/1/16, 15/1/16, 9/1/16, 17/1/116, 16/1/16, 7/1/16, 22/1/16 and seeks quashing of complaints as well. By way of Crl.M.C.Nos. ....
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....usly liable. 5. The vicarious liability in case of a company or firm under Section 141, NI Act would arise if a person is in charge and responsible for the conduct of the business of the company or the firm. The Hon'ble Supreme Court in S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla, (2005) 8 SCC 89, held as under: "10. While analysing Section 141 of the Act, it will be seen that it operates in cases where an offence under Section 138 is committed by a company. The key words which occur in the section are 'every person'. These are general words and take every person connected with a company within their sweep. Therefore, these words have been rightly qualified by use of the words-'Who, at the time the offence was committed, was in charge of, and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence, etc' What is required is that the persons who are sought to be made criminally liable under Section 141 should be, at the time the offence was committed, in charge of and responsible to the company for the conduct of the business of the company. Every person connected with the company shall ....
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....verments which bring the case within Section 141, he would issue the process. We have seen that merely being described as a director in a company is not sufficient to satisfy the requirement of Section 141. Even a non-director can be liable under Section 141 of the Act. The averments in the complaint would also serve the purpose that the person sought to be made liable would know what is the case which is alleged against him. This will enable him to meet the case at the trial." 6. Further in K.K. Ahuja v. V.K. Vora (2009) 10 SCC 48 Supreme Court summarizing the legal position qua the vicarious liability of the officers of a company held: "27. The position under Section 141 of the Negotiable Instruments Act, 1881 can be summarized thus- (i) If the accused is the Managing Director or a Joint Managing Director, it is not necessary to make an averment in the complaint that he is in charge of, and is responsible to the company, for the conduct of the business of the company. It is sufficient if an averment is made that the accused was the Managing Director or Joint Managing Director at the relevant time. This is because the prefix Managing to the word Director makes it clear that the....
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.... to them by the banks/FIs and responsibility for reporting correct information and also accuracy of facts and figures rests with the concerned banks and financial institutions. Therefore, banks and financial institutions should take immediate steps to update their records and ensure that the names of current directors are reported. In addition to reporting the names of current directors, it is necessary to furnish information about directors who were associated with the company at the time the account was classified as defaulter, to put the other banks and financial institutions on guard. Banks and FIs may also ensure the facts about directors, wherever possible, by cross-checking with Registrar of Companies. 5.2. Position regarding Independent and Nominee directors Professional Directors who associate with companies for their expert knowledge act as independent directors. Such independent directors apart from receiving director's remuneration do not have any material pecuniary relationship or transactions with the company, its promoters, its management or its subsidiaries, which in the judgment of Board may affect their independent judgment. As a guiding principle of disclosu....
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.... in the annual general meeting ("AGM"). 2. Casual vacancies: Where a Director appointed at the AGM vacates office before his or her term of office expires in the normal course, the resulting vacancy may, subject to the Articles, be filled by the Board. Such person so appointed shall hold office up to the time which the Director who vacated office would have held office if he or she had not so vacated such office. 3. Additional Directors: If the Articles specifically so provide or enable, the Board has the discretion, where it feels it necessary and expedient, to appoint Additional Directors who will hold office until the next AGM. However, the number of Directors and Additional Directors together shall not exceed the maximum strength fixed in the Articles for the Board. 4. Alternate Director: If so authorized by the Articles or by a resolution passed by the company in general meeting, the Board may appoint an Alternate Director to act for a Director ("Original Director"), who is absent for whatever reason for a minimum period of three months from the State in which the meetings of the Board are ordinarily held. Such Alternate Director will hold office until such period that the ....
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....in question, the fiduciary duties involved and whether such nominee Director is to be regarded as being in control or in charge of the company and its activities. This determination ultimately turns on the specific facts and circumstances involved in each case. B. Classification under the Listing Agreement The Securities Contracts (Regulation) Act, 1956, read with the rules and regulations made thereunder, requires every company desirous of listing its shares on a recognized Indian stock exchange, to execute a listing agreement ("Agreement") with such Indian stock exchange. This Agreement is in a standard format (prescribed by the Securities Exchange Board of India ("SEBI")), as amended by SEBI from time to time. The Agreement provides for the following further categories of Directors: Categories under Listing Agreement 1. Executive Director; 2. Non-executive Director; and 3. Independent Director. Executive and non-executive Directors An Executive Director can be either a Whole-time Director of the company (i.e, one who devotes his whole time of working hours to the company and has a significant personal interest in the company as his source of income), or a Managing Direct....
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....sted in, or lent money to, the company are also treated as independent Directors." 10. The Companies Act, 2013 recognizes different categories of directors and creates a distinction in the status of independent and nominee directors. Section 2(47) defines an independent director as one referred to in sub section 6 of section 149. 11. Section 149 sub-section 6 of the Companies Act 2013 prescribes the qualification of an independent director as under: "149. Company to Have Board of Directors (1)....... (6) An independent director in relation to a company, means a director other than a managing director or a whole-time director or a nominee director,-- (a) who, in the opinion of the Board, is a person of integrity and possesses relevant expertise and experience; (b) (i) who is or was not a promoter of the company or its holding, subsidiary or associate company; (ii) who is not related to promoters or directors in the company, its holding, subsidiary or associate company." 12. A Nominee Director has been defined under the Explanation to subsection (7) of Section 149 as: "Explanation: For the purposes of this section, "nominee director" means a director nominated by any financ....