TaxTMI 
TaxTMI 
2020 (5) TMI 127
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.... He further contended that in the complaint, no specific allegation or averment has been made against the present petitioner and in the absence of any specific averment, the petitioner cannot be made vicariously responsible for the offence under Section 138 of N.I. Act. In support of his submissions, he has placed reliance on the decisions in National Small Industries Corporation Limited v. Harmeet Singh Paintal and Another reported as (2010) 3 SCC 330, Mannalal Chamaria and Another v. State of West Bengal and Another reported as (2014) 13 SCC 571, J.N. Bhatia & Others v. State & Another reported as (2007) 139 DLT 361 and Shashi Adlakha v. Housing Development Finance Corporation Ltd. reported as 2019 SCC OnLine Del 7160. 3. Per contra, learned counsel for the respondents contended that the present petition is filed after a lapse of four years from the passing of the summoning order and as such is only a delaying tactic. While referring to the Form 32 filed on record by the petitioner, he submitted that the petitioner was rather an 'Executive Director' in the category of 'Promoter'. He submitted that no specific averment is required to be made against an Executive Director. In supp....
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.... (a) the managing Director or Managing Directors; (b) the whole- time Director or whole- time Directors; (c) the manager; (d) the secretary; (e) any person in accordance with whose directions or instructions the Board of Directors of the company is accustomed to act; (f) any person charged by the Board with the responsibility of complying with that provision: Provided that the person so charged has given his consent in this behalf to the Board; (g) where any company does not have any of the officers specified in clauses (a) to (c), any Director or Directors who may be specified by the Board in this behalf or where no director is so specified, all the directors: Provided that where the Board exercises any power under clause (f) or clause (g), it shall, within thirty days of the exercise of such powers, file with the Registrar a return in the prescribed form." 11. Even as per Section 2(60) of the Companies Act, 2013, a 'Wholetime Director' remains an "officer who is in default" 12. The liability of Directors and other officers of the company for the offence punishable under Section 138 NI Act came up for consideration before the Supreme Court in K.K. Ahuja v. V.K. ....
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....words "person in charge of the business of the company" was considered by this Court in Girdhari Lal Gupta v. D.H. Mehta followed in State of Karnataka v. Pratap Chand and Katta Sujatha v. Fertilizers & Chemicals Travancore Ltd. This Court held that the words refer to a person who is in overall control of the day-to-day business of the company. This Court pointed out that a person may be a Director and thus belongs to the group of persons making the policy followed by the company, but yet may not be in charge of the business of the company; that a person may be a manager who is in charge of the business but may not be in overall charge of the business; and that a person may be an officer who may be in charge of only some part of the business. 23. Therefore, if a person does not meet the first requirement, that is, being a person who is responsible to the company for the conduct of the business of the company, neither the question of his meeting the second requirement (being a person in charge of the business of the company), nor the question of such person being liable under sub-section (1) of Section 141 arises. To put it differently, to be vicariously liable under sub-section (....
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....n referred to in clauses (e) and (f) of Section 5 of the Companies Act, an averment in the complaint that he was in charge of, and was responsible to the company, for the conduct of the business of the company is necessary to bring the case under Section 141(1) of the Act. No further averment would be necessary in the complaint, though some particulars will be desirable. They can also be made liable under Section 141(2) by making necessary averments relating to consent and connivance or negligence, in the complaint, to bring the matter under that sub-section. (iv) Other officers of a company cannot be made liable under sub-section (1) of Section 141. Other officers of a company can be made liable only under sub-section (2) of Section 141, by averring in the complaint their position and duties in the company and their role in regard to the issue and dishonour of the cheque, disclosing consent, connivance or negligence." 13. Later, in Gunmala Sales (P) Ltd. v. Anu Mehta reported as (2015) 1 SCC 103, the Supreme Court summarised its conclusions as under:- "34. We may summarise our conclusions as follows: 34.1. Once in a complaint filed under Section 138 read with Section 141 of....
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....pon the facts and circumstances of each case. The High Court at that stage does not conduct a mini trial or roving inquiry, but nothing prevents it from taking unimpeachable evidence or totally acceptable circumstances into account which may lead it to conclude that no trial is necessary qua a particular Director. 35. We will examine the facts of the present case in the light of the above discussion. In this case, the High Court answered the first question raised before it in favour of the respondents. The High Court held that "in the complaint except the averments that the Directors were in charge of and responsible to the Company at the relevant time, nothing has been stated as to what part was played by them and how they were responsible regarding the finances of the Company, issuance of cheque and control over the funds of the Company". After so observing, the High Court quashed the proceedings as against the respondents. In view of this conclusion, the High Court did not go into the second question raised before it as to whether the Director, who has resigned can be prosecuted after his resignation has been accepted by the Board of Directors of the Company. Pertinently, in t....
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....icient or if some unimpeachable evidence has been brought on record which leads to the conclusion that the Director could never have been in charge of and responsible for the conduct of the business of the company at the relevant time. While the role of a Director in a company is ultimately a question of fact, and no fixed formula can be fixed for the same, the High Court must exercise its power under S. 482, Cr.P.C. when it is convinced, from the material on record, that allowing the proceedings to continue would be an abuse of process of the Court." 16. In the year 2012, the Reserve Bank of India issued a Master Circular no. RBI/2012-13/43 dated 02.07.2012 on "Willful Defaulters" with respect to reporting of names of Directors and the position regarding independent and nominee Directors. The said circular came to be challenged before a Division Bench of the Gujarat High Court in the case of Ionic Metalliks v. Union of India reported as 2014 SCC OnLine Guj 10066. The court while upholding the legality and validity of the circular, noted the categories of Directors under the Companies Act and the "Listing Agreement" prescribed by Securities and Exchange Board of India as under:- ....
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....ich the meetings of the Board are ordinarily held. Such Alternate Director will hold office until such period that the Original Director would have held his or her office. However, any provision for automatic re-appointment of retiring Directors applies to the Original Director and not to the Alternate Director. 5. 'Shadow' Director: A person, who is not appointed to the Board, but on whose directions the Board is accustomed to act, is liable as a Director of the company, unless he or she is giving advice in his or her professional capacity. Thus, such a 'shadow' Director may be treated as an 'officer in default' under the Companies Act. 6. De facto Director: Where a person who is not actually appointed as a Director, but acts as a Director and is held out by the company as such, such person is considered as a de facto Director. Unlike a 'shadow' Director, a de facto Director purports to act, and is seen to the outside world as acting, as a Director of the company. Such a de facto Director is liable as a Director under the Companies Act. 7. Rotational Directors: At least two-thirds of the Directors of a public company or of a private company su....
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....ho 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 Director (i.e, one who is employed by the company as such and has substantial powers of management over the affairs of the company subject to the superintendence, direction and control of the Board). In contrast, a non-executive Director is a Director who is neither a Whole-time Director nor a Managing Director. Clause 49 of the Agreement prescribes that the Board shall have an optimum combination of executive and non- executive Directors, with not less than fifty percent (50%) of the Board comprising non-executive Directors. Where the Chairman of the Board is a non-executive Director, at least one third of the Board should comprise independent Directors and in case he is an executive Director, at least half of the Board should comprise independent Directors. Where the non-executive Chairman is a promoter of the company or is related to any promoter or person occupying management positions at the Board level or at one level below the Board, at least one-half of the Board of the company shall consist of independent Directors. Inde....
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....isions referred are of no help to him. In Mannalal Chamaria & Anr. (Supra), the complainant filed a complaint against one Raj Kumar Chamaria, the Chairman of the concern. On his demise, the complainant impleaded the petitioners as accused. The Supreme Court while quashing the complaint observed that there were no specific or general allegations against the accused persons. In J.N. Bhatia (Supra), although the Court rejected the submission that at the time of issuance and dishonor of the cheque, the accused had initiated the process to resign from the company as its Director but quashed the complaint on the ground that no role was attributed to the accused of his being responsible to the accused company for the conduct of its business and day to day affairs. In Shashi Adlakha (Supra), the Court reiterated the principles for exercising the jurisdiction under Section 482 Cr.P.C., however, dismissed the petition holding that the no material of sterling and impeccable quality was placed on record to quash the complaint. 20. This Court is constrained to note that in the pleadings as well as oral submissions, it was stated that the petitioner was a non-Executive Director which was contra....